DOW down 223 points in 1st hour of trading

NEW -> Contingent Buyer Assistance Program
<p>I think the banks are dragging this out because that's the best they can do. If they make a few billion more each quarter on non toxic stuff, that is that many more billions to later write off.</p>

<p>Far from a bail out, as far as I can see, it isn't on the radar screen of most of the politicians. I take that back, none of the politicians are seeing this as the devastating event that it shortly will be.</p>
 
LawyerLiz<em>





If they make a few billion more each quarter on non toxic stuff, that is that many more billions to later write off.


</em>They could mark these ABS down to 10 cents on the dollar and still make money on them. The problem, as I have understood it, is that banks use their balance sheets as leverage. So the more assets they have that are performing and they can value highly the more leverage they can use. Thus, if they have to mark them to market they can not be as leverage and since they are already leveraged they will have to sell performing assets so that they meet those covenants....get it?...lol probably made no sense.





Regional Banks will be hit or miss. Graphix has made mention of a few banks that are primarily located on the West Coast that made big bets on Subprime and Second Lien Mortgages. I think one of them was Union Bank...but don't quote me on that I might be dead wrong.


<em>


</em>
 
<p>Downey Savings is an absolute hell-storm waiting to happen. I believe their "allowance for bad debts" is less than 2% of their outstanding loan balances. First Federal of California is much like Downey. Almost every single friggin' loan they originated was negatively amortizing. There were broker shops that lived of sending neg am loans to First Federal.</p>

<p>I actually think Union Bank of California is much more conservative in the first mortgage market. Remember although 2nd lienholders are ass-out when it comes to being paid off, 2nd trust deeds were written with higher underwriting standards. Even when sub prime loans were being written they were ALL first trust deeds. A sub prime first mortgage is more likely to be delinquent than a prime 2nd mortgage.</p>
 
<p>The DSL chart is looking a little sick. Closed at $ 31.95. I smell Toxic Waste a bubbling. Notice the Volume take off just as New Century imploded back in March. This and WAMU are on the top of the stack of dead bodies the maket sniffed today. </p>

<p><img height="288" alt="Downey Financial Corp. (DSL)" width="512" border="0" src="http://chart.finance.yahoo.com/c/1y/d/dsl" /></p>
 
<p>All you financial, wall street, and mortgage experts. . .tell me what this Cuomo's lawsuit really means.</p>

<p><a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aApaqmqRELpI&refer=home">www.bloomberg.com/apps/news</a></p>

<p>Cramer is all over Cuomo in that he believe that the suit will shut down the mortgage business.</p>

<p><a href="http://www.cnbc.com/id/21671871">www.cnbc.com/id/21671871</a></p>

<p> </p>
 
lol....it will go down again. Morgan Stanley just reported and so did AIG and both disappointed WS. How much is another guess it might be helped out slightly if Ford has something good to report.
 
<p>Hah.</p>

<p>I drive a Ford, but I haven't heard anything good about their money making abilities for years. The Ford dealership was doing a mite poorly when I took my car in a few weeks ago. Like houses---no sales</p>
 
Ford might be getting a bounce just because they have finally come to terms with their labor agreement and they actually turned a profit last qtr which was much sooner than even Mullay had predicted.
 
<p>Andrew Cuomo</p>

<p>The son of former NY Governor Mario Cuomo. He is playing some heavy politics and its going to work as far as getting his name in the paper. Here is a good link from Friday <a href="http://www.baltimoresun.com/business/realestate/bal-bz.appraise02nov02,0,7080584.story">http://www.baltimoresun.com/business/realestate/bal-bz.appraise02nov02,0,7080584.story</a>. Looks like "The Appraiser, The Title Company and WAMU" all were in bed together and pushed the paper over to Freddy & Fanny. So now he has sued to get all the E-mails and documents from all parties. So basically what has been going on all along is just going to make the market more stressed by airing all that laundry in public. The pressure to inflate values as the market collapsed is driven by the need of these firms to produce NUMBERS. Now the Mortgage market needs to play by the rules ? Oh for gods sake. Who said there were rules in the mortgage business ? </p>

<p>The issue is that this is going to open the can of worms back to Freddy and Fanny. Once they get all theirToxicity in the open it gets real messy. </p>

<p> </p>
 
The mortgage market will recover. It's just a matter of who. The weak hands who lent without doing their due diligence will be forced to close shop and the exotic financial instruments that fueled this run up will be available to the select few people they were created to serve.



I'm keeping my eye currently on Indymac. I had thought about buying a few shares until I read their 2006 annual report. They have the majority of the Alt-A mortgages and a good portion of their growth was attributed to the size and volume of the number of loans (concentrated in California). Currently, they've almost dipped below $10. Although Alt-A is a step above the subprime, an economic catastrophe ruins the chance of Indymac collecting on the loans that they gave out. I'm keeping an eye on this one and would consider putting money in if it got to firesale prices. Management has been, in my opinion, frank and candor about the situation (http://theimbreport.com/?p=46) and they deserve a second look.



Cuomo isn't much of a threat compared to the bill that is going around in Congress imho (http://biz.yahoo.com/ap/071107/risky_mortgages_bankruptcy.html?.v=2). I feel the door has already been shut and this just sheds more light on the mortgage business's future. But my question is for Cuomo is why now? Why not three years ago? Why were standards not enforced when it was clear that the housing run up was unnatural? I applaud the vigilance of the authorities who jumped in after the CA wildfires to prevent people from scamming or robbing victims of the wildfires.
 
Cramer ... I am not sure what to say. I can not in good conscience ascribe what he did today as ignorance. Cramer knows who killed the financials today and it wasn't Giselle or Cuomo. It was the Chinese official who said the Chinese Central Bank would be diversifying into stronger currencies.<p>


But, there isn't a darn thing anybody in this country can do about China. The damage has already been done, much by Cramer's buddies at GS. But, he won't dare say it is GS, BSC, or JPM's doing.
 
Awgee, here is a prediction on China. Within one week, another senior official will make a statement that counters what was said last night. There are a couple of reasons I believe this to be true. One cultural, and the other financial.





On the cultural side, it has been my observation that Chinese people frequently say things that are deeply offensive to Westerners. Whether it is related to culture, translation, or English as a second language, you see it quite often. This isn't the first time that some Chinese official has spoken of pulling out of dollar denominated investments. Every time something similar has happened in the past, another announcement has followed in days from a higher ranking official that offsets the initial announcements. Similarly, occasionally you will read of some ranking member of the Chinese military making statements about nuclear weapons or ICBMs and the impact they can have on various regions in the US. Within days, there will always be an announcement that overrides the initial announcement and attempts to perform damage control. On a more personal level, I am a computer geek and am involved in design of computerized components of major weapons systems. One member of my team is a brilliant scientist who immigrated from China about 15 years ago. While he is technically very astute, I find myself always having to jump in and perform damage control when he sends out messages that ruffle the feathers of everyone around us.





On the financial/technical side, I am sure that you have heard Fleckenstein question who will stop in front of the freight train if China ever did decide that dollar divestiture is in their best interest.





Basically we have an arrangement with the Chinese. We give them toxic paper in return for their toxic toys. It's essentially a Prisoner's Dilemma. Both sides benefit if no one makes a move. And though there is a theoretical "first movers" advantage for one side to break status quo, the size of the problem is such that China would do themselves irreparable harm if they tried to distance themselves from the dollar.





While I still believe that the direction of the dollar is down (who could argue with Giselle?), I think that it will be more orderly than others believe. I also recognize that the forces of capitalism are such that dollar depreciation will set the stage for future dollar demand as the price of goods and services produced in the US become more competitive and we stop exporting dollars for toxic toys.
 
WINEX - Whatever the Chicoms are saying, they are already diversifying out of tresuries and doing it quickly. they are much less dependent on us than your typical US egocentric American thinks. They are exporting to the world and consuming internally. The debtor is a slave to the lender.
 
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