Via New York Magazine, comes this amusing collection of bad forecasts for the 2008 year: • Jon Birger, senior writer, Smart investors should buy [Merrill Lynch] stock before everyone else comes to their senses.” Merrill’s shares plummeted 77 percent. • Elaine Garzarelli, president of Garzarelli Capital, Buy some of the most beaten-down stocks, including those of giant financial institutions such as Lehman Brothers, Bear Stearns, and Merrill Lynch. As of January 1, none of these firms will still exist. • Sarah Ketterer, CEO of Causeway Capital Management, “Fannie Mae and Freddie Mac have been pummeled. Our stress-test analysis indicates those stocks are at bargain basement prices.” Fannie and Freddie had lost 90 percent of their value. • Jon Birger, senior writer, in Our bet is that in a stormy market investors will gravitate toward, GE, the ultimate blue chip. GE’s stock price tumbled 55%, and it’s on the verge of losing its triple-A credit rating. • Archie MacAllaster, chairman of MacAllaster Pitfield MacKay in “Bank of America will [not cut its dividend], I think they’ll raise it this year. My target price for the stock is $55.” BofA share price now hovers around $14, and it has slashed its dividend in half. • James J. Cramer, “Future of Business” “Goldman Sachs… finishes the year at $300 a share. Not a prediction — an inevitability.” Goldman Sachs’ share price was $78, and the firm announced its first quarterly loss — $2.2 billion. Yes, the 2008 investment guides were HILARIOUS — but what makes you think the 2009 guides will be any different. > Previously : RealMoney.com Contributor 6/7/2005 1:05 PM EDT http://www.thestreet.com/_tscana/comment/barryritholtz/10226887.html (December 2008) http://www.ritholtz.com/blog/2008/12/worst-predictions-for-2008/ Source : By: Daily Intel New York, 12/22/08 at 6:01 PM http://nymag.com/daily/intel/2008/12/2008_investment_guides_are_hil.html

Tom Lindmark submits: This is pretty rich with irony. Fannie Mae (FNM) seems to be standing in the way of the FDIC’s sale of IndyMac (IDMCQ.PK) to a group of private investors. As reported by , Fannie presented the FDIC with a bill for $1 billion shortly after it seized IndyMac. The bill was for representations and warranties violations that the bank allegedly made on loans it sold to Fannie Mae. The FDIC apparently offered to settle for $100 million but Fannie is standing pat and the issue has become a sticking point in the negotiations.

One day after the treasury (taxpayers) injected $6 billion into the failing auto industry . General Motors Corp and its GMAC funding affiliate launched programs on Tuesday to lure U.S. car and truck buyers back into showrooms as the largest U.S. automaker tries to revive its sagging fortunes. GM began offering zero-percent financing on some models, and GMAC resumed lending to a wider range of potential customers, after the government said it will inject billions of dollars to help ensure that both survive. Through January 5, GM will offer zero percent to 4.9 percent financing on loans of up to five years on some 2008 model-year vehicles, and 3.9 to 5.9 percent on some 2009 vehicles. Many of the vehicles also carry cash discounts of $500 to $4,250. GMAC, meanwhile, will extend loans to retail buyers with credit scores, known as FICO, of 621 or higher. In October, it had restricted loans to borrowers with scores of 700 or higher. Many analysts consider borrowers with credit scores of 620 or lower to be "subprime." The median U.S. credit score is 723, according to Fair Isaac Corp's myFICO unit. "The bottom line is much better access to funding," said Mark LaNeve, GM's vice president for North American sales, on a conference call with reporters. He said GMAC may now be able to fund 75 to 80 percent of new vehicle purchases, up from 40 percent since October. The bottom line is more taxpayer risk. Of course GM will proclaim those are "prime" loans because they are 1 FICO point above the minimum. This is the lipstick on a pig play once again. Elephant In the Room I discussed the bailout yesterday in . Today the Treasury upped the taxpayer ante by offering subprime auto loans with our money. But only so many cars will be sold, period. And with the massive overcapacity issue, and near-subprime lending, taxpayers are further at risk. Kevin Depew on Minyanville discusses this situation today in . Ordinarily, when a business/industry fails from...

NEW YORK (Reuters) - U.S. loan issuance in 2008 tumbled 55 percent to $764 billion, the lowest volume since 1994, as the global credit crunch choked off lending to American businesses, according to data from Reuters Loan Pricing Corp.

From the NY Times: With nearly one in six homes worth less than the mortgage owed on it, according to Moody’s Economy.com, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. “We used to fight about who gets to keep the house,” said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. “Now we fight about who gets stuck with the dead cow.” I know a couple with this problem - no one wants the house.

A useful piece at the Wall Street Journal discusses the poor prospects for the US banking industry, which will in aggregate post a fourth quarter loss despite heroic interventions by the Fed and Treasury. The article makes much of recent and almost-certain-to-get-worse bank credit losses as the economy continues to deteriorate. Commercial real estate vacancies, particularly of retail space, are starting to mount. Construction loans were an important business for local and regional banks; a high proportion almost assuredly no longer look viable. And we of course have the grim outlook for credit cards and ongoing weakness in housing. But the credit losses are masking a second problem: banks' earnings engine in broken. As many have noted, as long as they are taking losses, they are not terribly keen to extend new credit. But more serious is the fact that banks had shifted their business model to be more depended on fee income, and much of that was related to the securitization of real estate. Pending changes in credit card rules will dampen down some of the non-interest charges banks could formerly extract. Similarly, a world where the Federal government has become the 800 pound gorilla provider of mortgage credit offers far fewer fee opportunities to banks (and that's even before considering that transaction volumes are down too). And as we (and others) have complained, "Where's my bailout?" maybe it's time we also start on the less catchy but no less important, "Where's the good bank/bad bank?" Until the dud assets are recognized, sold off, and banks recapitalized or liquidated, the industry will have a heavy millstone around its neck. From the : Banks and savings institutions in the U.S. appear headed for their first overall quarterly loss since 1990, as troubled loans pile up faster than the federal government's unprecedented efforts to aid the battered industry.... "The earnings power for this industry has absolutely...

The Financial Accounting Standards Board and the International Accounting Standards Board announce a high-powered advisory group to consider financial reporting issues arising from the turmoil gripping markets around the world.

There may have been worse years for banking than 2008, but it is hard to think of one. As the industry heads into 2009, banks are facing not only a long struggle to...

recently published a new article from journalist Mary Elizabeth Hurn that explores how financial services companies are marketing to worried retirees. As many retirees have seen their savings plunge along with 401(k)s, companies addressing them (ie reverse mortgage lenders) need to careful when communicating with this demographic. “They’re way beyond skeptical,” says Jack Wallace, solutions leader at Acxiom, which works with numerous top banks and insurance providers. “Maybe ‘panicked’ is a better word. Some of these retirees have watched their 401(k)s plummet as much as 40%. That’s just head-spinning.” “Historically we, as an industry, have done ourselves a disservice in terms of how we speak to our customers,” says Mark Kirby, head of corporate advertising for ING. “We’ve used terms that are very internal and not consumer-friendly. [Retirement] is tough stuff. It’s a complicated, complex category, so we want to break it down and make it simpler.” Barbara Goodstein, CMO and chief innovation officer for AXA Equitable, agrees. Part of being able to reach your customer, she says, is knowing exactly who they are and what they’re looking for. “Retirees spend 10 hours a week on the Web. They’re information-hungry and Internet-savvy,” she explains. As an example of what companies are doing to market to retirees, Hurn shows an example of the direct mail campaign that MetLife used in the first quarter of 2008 that sent a letter explaining reverse mortgages to consumers. After generating leads, MetLife sent a follow up letter along with a brochure which straightforwardly answered questions a consumer might have. The letter included the name and direct phone number of a consultant who could answer any further questions. There is some other good information from the article, definitely worth the read. Technorati Tags: ,,,,,,

Here’s an update on the Detroit Housing situation: -226 homes for sale at $1,000 or under; -21 homes for sale at $1,00 or under; -4 homes for sale at $1. via This caught the eye of regular TBP reader Byno, who asks (”What’s the catch?”): Great investment opportunity with this 5 bdrm brick colonial featuring hrdwd flrs, 3.5 baths, full bsmt, garage & lots of potential. Needs some TLC. Bank Owned. Property sold in as-is condition. Buyer to sign ACR with City of Detroit prior to closing. Earnest Money Deposit to be held by listing broker and be certified or cashier’s funds. Mortgage approval or proof of funds required. I figured out the catch — if you buy it, you own a house in Detroit! > via > Previously : (August 13th, 2008) http://www.ritholtz.com/blog/2008/08/detroit-houses-1/ (February 27th, 2008) http://www.ritholtz.com/blog/2008/02/detroit-housing-0/

REITs Lower After SL Green Cuts Dividend

There is a piece I regard as truly odd in the Wall Street Journal tonight. Either much of what I have read about investment bank bankruptcies is wrong, or something peculiar is at what used to be the house of Lehman. A Wall Street Journal article, "," comments at length on a report by Alvarez & Marsal for the Lehman board of directors: As much as $75 billion of Lehman Brothers Holdings Inc. value was destroyed by the unplanned and chaotic form of the firm's bankruptcy filing in September, according to an internal analysis by the company's restructuring advisers. A less-hurried Chapter 11 bankruptcy filing likely would have preserved tens of billions of dollars of value...An orderly filing would have enabled Lehman to sell some assets outside of federal bankruptcy-court protection, and would have given it time to try to unwind its derivatives portfolio in a way that might have preserved value, the study says. Based on what I had read (and perhaps misinterpreted) at the time of the Bear collapse and the Lehman bankruptcy failing, I had the very strong impression that Chapter 11 simply was not a viable option for a securities firm failure (at least a large one with extensive trading operations). If this is indeed correct, then it begs the question of why the board would engage a consulting firm to spend three months developing a report on a fictive premise (presumably to avoid liability). Let us review the facts of the case. When Lehman was on the ropes, most commentators assumed that the fundraisings the firm was attempting to get done (the abortive foray with the Korean Development Bank, the sale of the asset management operations) would raise $10 billion, perhaps more, and allow the firm to kick the can down the road at least a couple of quarters. Bearish sorts like yours truly did not see that as a long-term solution, but a lot can happen in six months. But when Lehman failed, the losses were (very crudely speaking) an order of magnitude greater...

submits: The Federal Reserve is running out of conventional monetary policy and bond market options. Thus, the time for unconventional policies may be at hand. The Fed has cut the federal funds rate and its short-term lending rate to banks to near zero, but those moves have done little to unlock credit markets. Traditional mortgage money and business loans remain too scarce because regional banks - the arteries and capillaries of our credit system - remain short of loanable funds.

As a supervisor at a Washington Mutual mortgage processing center, John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu, as his bank was known, was all about saying yes. ... “I’d lie if I said every piece of documentation was properly signed and dated,” said Mr. Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest — all involving drugs. While Mr. Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said. “In our world, it was tolerated,” said Sherri Zaback, who worked for Mr. Parsons and recalls seeing drug paraphernalia on his desk. “Everybody said, ‘He gets the job done.’ ” ... Interviews with two dozen former employees, mortgage brokers, real estate agents and appraisers reveal the relentless pressure to churn out loans that produced such results. ... During Mr. Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients. WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors. ... “I never had a clue about the amount of off-the-cliff activity that was going on at Washington Mutual...

From the NY Times: Nearly $5 billion in development projects in New York City have been delayed or canceled because of the economic crisis, an extraordinary body blow to an industry that last year provided 130,000 unionized jobs, according to numbers tracked by a local trade group. ... The long-term impact is potentially immense, experts said. Construction generated more than $30 billion in economic activity in New York last year, said Louis J. Coletti, the chief executive of the Building Trades Employers’ Association. The $5 billion in canceled or delayed projects tracked by Mr. Coletti’s association include all types of construction: luxury high-rise buildings, office renovations for major banks and new hospital wings. Mr. Coletti’s association, which represents 27 contractor groups, is talking to the trade unions about accepting wage cuts or freezes. So far there is no deal. Not surprisingly, unemployment in the construction industry is soaring: in October, it was up by more than 50 percent from the same period last year, labor statistics show. More bad CRE news ...

Talk about unintended consequences. The following is significant insight from the street level. This is especially important for those of you thinking that these low mortgage rates will lead housing and the consumer to the Promised Land. Everyone wants to refinance right now - that’s a fact. Home owners and loan officers around the nation have not been this exited in years over the low rates. The media are actually quoting mortgage rates non-stop, which is a complete story in and of itself. Loan officers and banks are very busy taking loan applications, as reflected in the faulty MBA loan application survey data (Mr Mortgage story out next week). Loan approval times at some banks is at three to four weeks making for a two month start to finish. Fall-out will be extreme over the near-term as brokers and borrowers switch banks three and four times trying to get the lowest rate available. Trying to hedge this chaotic mess is a mortgage secondary marketing manager’s worst nightmare and can lead to significant losses. Along side of being one of the biggest consumer ‘bait and switches’ of all time , this drop in rates should set the stage for a significant leg-up in mortgage loan defaults and leg down in house values and consumer / homeowner sentiment. In my opinion, the government artificially pushing rates down this quickly not only will cost the originators plenty but quickens the pace at which the Alt-A, Jumbo Prime, and ‘Prime’ implosions could begin in earnest. Please note that 4.5% never really existed unless the borrower wanted to pay thousands of dollars to buy that rate through points, which is rare. For a perfect borrower with a 740 credit score, 80% loan to value and no second mortgage attached the lowest that rates got were roughly 4.875%. Since then they are hovering around 5.25% to 5.50%. This, from 6% before rates took their dive. I am not a believer that rates can sustain these low levels without .gov permanently ‘fixing’ them somehow. Left up to the mortgage...

By Teri Buhl, with contributions from IEHI Staff. Teri Buhl is an investigative journalist covering Wall Street who writes for the New York Post. The FDIC’s most expensive bank failure, IndyMac, is slated to land in the hands of a private equity firm. The winner is New York–based Dune Capital Management, founded by two ex-Goldman partners. Dune’s Co-CEO Dan Niedich was known as the "dean" at Goldman of investing the firm's capital in real estate. Chairman and Co-CEO Steve Mnuchin comes from a family of Goldman bankers. The firm was seeded in 2004 by legendary hedge fund trader George Soros. A sale price for the transaction could not be determined. Dune Capital has recently been cleared for a bank charter. In principle this means the firm could qualify for TARP funds. The Treasury began issuing special expedited bank charters to private equity groups on November 21st, 2008. Rumors swirled the market this month around who the natural bidder for the toxic bank would be, with Bloomberg reporting this week that PNC Financial Services Group and U.S. Bancorp were a likely fit, but the media didn’t envision a “winner take all” outcome to take shape in the form of a private equity firm. Executives inside of IndyMac’s Pasadena office where told Tuesday a deal to sell the whole bank had been made, final contracts were being negotiated, and an announcement would come in the next couple of days. Assets for sale include: $6 billion in retail deposits, 33 California branches, a near-$200 billion loan servicing portfolio and platform, $16 billion in mortgage loans, and its reverse mortgage company Financial Freedom that holds a mortgage book worth $22 billion. A slew of bids came in by the extended deadline of December 15th, but only for the failed bank's individual parts. Bidders fought over hot assets such as its loan servicing portion or the reverse mortgage company. According to an executive inside of IndyMac who was involved in the deal-making, serious players...

From the Miami Herald: Recent drops in interest rates have homeowners rushing to call local banks and mortgage lenders about refinancing. Loan applications are pouring in. Yet, South Florida homeowners are mostly getting a big fat ''No!'' from the bank when they ask to refinance. The chief reason: Falling home values mean they owe more than their homes are worth. ... In South Florida, four in 10 homeowners who bought or refinanced over the past five years owe more on their home than it is worth, according to sales and mortgage data analyzed by Zillow.com ... Many of them chose adjustable-rate loans and other expensive mortgages because that was the only way they could afford the payments. ... ''This is only putting people who are in a good position in a better position,'' [Justin Miller, a broker with Resource Mortgage Group in Plantation] said. ... Before LaPenta begins processing an application, he said he makes sure customers are aware of the essential criteria needed to refinance: 20 percent equity in the property, a homestead exemption, a credit score of 700 or higher, a mortgage debt-to-income ratio of no more than 45 percent and the ability to fully document income and assets. This is a key point - these lower rates don't help underwater homeowners. Also, I think the 45% debt-to-gross income ratio is a little higher than most lenders will allow now.

submits: In a world where an AIG offsite meeting can cause a public uproar, it's interesting that so few people seem to care very much about the sums of money being to Fannie Mae's directors. , of course is one of them: Keep in mind that this is a newspaper that is absolutely apoplectic over autoworkers getting $27 an hour. If we assume that the board members on average will devote 500 hours a year to their board duties, this puts their pay rate at $320 an hour.