mortgage

The end of Lehman culture?

Jim Kim — Wed, 17 Sep 2008 13:43:14 -0400

TheDeal.com is a bit mystified, as are we, that some investment banking employees of Lehman Brothers are actually unhappy with the news that Barclays will buy their firm. In their view, the cultural fit is not a good one. All I can say is that I'm impressed with the cultic level of loyalty some Lehman-ites have demonstrated. Some wanted to buy more stock as the ship sank to demonstrate their faith. They really, truly thought the firm would survive the crisis. Of course, there are others selling their office furniture on eBay. Hey, people still have to eat. Mortgages have to be paid. In the end, I'm not sure the Lehman culture was any different than the others. But for what it's worth, here's a parting memo from a Lehman manager posted by the New York Times' DealBook.

For more:
- here's the item from TheDeal.com

Related Article:
Jamie Dimon visits Bear Stearns

Merrill Lynch wants to rebuild in mortgages

Jim Kim — Fri, 12 Sep 2008 11:09:34 -0400

Merrill Lynch, in some ways, was the poster child for banks that pushed foolishly into the subprime-backed securitization game. In hindsight, the deal to buy First Franklin--remember that?--was a disaster. But which would be worse: to exit the game all together, or retool in an appropriate way? Most would choose the latter. Merrill Lynch, as noted, has brought on Michael Nierenberg, from JPMorgan, to run its mortgage and securitization business, which signals its intention to remain relevant in the market. At this point, it's unclear exactly what shape that market will take. Mortgage-backed deals are hardly dead, though they might not drive growth the way they used to. The thought recently has been that if the GSEs stumble, the private sector will be handed an opportunity, IDD notes. So Merrill is looking prescient right now.

For more:
- here's the IDD article

Wachovia turnaround underway?

Jim Kim — Tue, 12 Aug 2008 08:08:23 -0400

The pressure is on for Robert Steel, the new CEO of Wachovia, who has raised the number of jobs the bank will cut. The AP reports that in a quarterly SEC filing, the bank says it expects to eliminate 11,350 positions, including 6,950 active employees and 4,400 open positions. That's about 600 more than previously planned. All will be in the mortgage area. Wachovia estimates that all cost-cutting steps will boost Tier 1 capital by more than $5 billion by the end of 2009. A lot is riding on the state of the real-estate economy. If the situation improves measurably, Wachovia would certainly benefit. To be seen as a pure play-like winner, it would need to clear up all the regulatory issues. The latest is that its municipal derivatives group is under investigation.

For more:
- here's the AP article

SPOTLIGHT: Morgan Stanley axes top analysts

Fri, 16 May 2008 06:59:52 -0400

Financial News Online reports that as part of Morgan Stanley's latest layoffs, several highly regarded stock analysts have been let go. The list includes the likes of health analyst Christine Arnold, mortgage analyst Kenneth Posner and oil analyst Doug Terreson. Article

ALSO NOTED: Merrill Lynch changes stock rating system; Merrill Lynch, Citigroup execs look to former colleagues for talent; and

Thu, 15 May 2008 06:59:50 -0400

Company News:
> Freddie beats expectations. Article
> More on the Clear Channel agreement. Article
> ING reports big drop in earnings. Article
> Merrill Lynch changes stock rating system. Video
> Len Dykstra is bullish on Morgan Stanley. Article
> Merrill Lynch, Citigroup look to former employers for talent. Article
> RBC announces writedowns. Article

Industry News:
> Foreclosures surge in April. Article
> Investors want banks to take back mortgages. Article
> Mortgage weakness takes a regional flavor. Article

Regulatory News:
> More on ex-UBS banker indictment. Article
> Three ex-SEC chiefs endorse Obama. Article

And Finally... You know you're about to get canned when ... Article

Should Bank of America walk away from Countrywide?

Tue, 06 May 2008 06:59:54 -0400

MarketWatch notes that Countrywide is a bad position. Basically, its debts exceed its assets. Negative equity, of course, doesn't exactly speak well for the mortgage giant's future. Of immediate concern is the deal that Bank of America has struck. As Countrywide's loan problems mount and its stock tumbles, many analysts say the deal will have to be renegotiated. Friedman Billings Ramsey analyst Paul Miller holds that Bank of America should walk away. At a minimum, it may have to make some huge changes, like lower the price and perhaps require Countrywide bondholders to swallow more of the expected losses from loan write downs. This is getting tricky for Ken Lewis, who seemed to have bet the farm on the deal. It may be better for him to take his lumps now by giving up.

For more:
- here's the MarketWatch article

C&L: Executive Moves

Wed, 30 Apr 2008 06:59:51 -0400

> Wachovia taps Jim Kimball regional president for Northern California
> Rob Ebert tapped as head of equity sales at Deutsche Bank
> Dan Sparks to step down as mortgage chief at Goldman Sachs
> JP Morgan Chase offers Jeffrey Mayer
> Merrill Lynch names Thomas Montag head of global sales and trading
> Atanas Bostandjiev and Antonio Esteves join Goldman Sachs from Merrill
> Chris Armstrong to retire from TD Ameritrade
> Norman Mineta named adviser at Credit Suisse

Can everyone be wrong?

Wed, 23 Apr 2008 06:59:59 -0400

Back when the subprime crisis had not fully bloomed, there were a few brave souls who were convinced--absolutely!--that the mortgage edice was about to crash. You can imagine the pitch meetings. They were likely derided as delusional. You can almost hear the argument: "So you mean to tell us that everyone is wrong? That this entire industry built up by the likes of Merrill Lynch and Lehman Brothers and Bear Stearns is all a house of cards?"

We all know the rest of the story. Now we see something else at work: the entire buyside seems to be rushing into distressed credit. Every brand name private equity firm is busy launching distressed credit funds. Hedge fund are even angling in. So is the herd headed toward a cliff again? Maybe, maybe not. Consider leveraged loans. Banks pretty much had to offload them for balance sheet purposes. But are any issuers set to default? Not likely. Some leveraged-up firms may suffer to be sure, but it's more likely that most will find a way.

Then again, we've heard that before.

- Jim

Wachovia raising $7 billion

Mon, 14 Apr 2008 06:59:56 -0400

Wachovia, aiming in part to blunt the effects of its first quarter loss, says it will raise $7 billion to shore up its capital position. It appears it will issue some common and some preferred convertible stock. This comes on top of a move earlier this year to raise more than $8 billion. The company has said recently that it was in fine shape, but the first-quarter loss wasn't expected, with many believing that the mortgage crisis is the main culprit. You have to wonder if executives aren't kicking themselves over their purchase of mortgage high-flier Golden West, which specialized in interest-only loans, at the height of the bubble. Commercial real estate now looms as another challenge, the New York Times notes.

For more:
- here's the New York Times background

Are Alt-As next to blow up?

Wed, 02 Apr 2008 07:59:56 -0400

The Financial Times notes that the many rumors that UBS had sold its entire portfolio of Alt-A related bonds to Pimco may well have been true, given the big UBS writedown this week. Some think the sale valued the bonds at around 70 cents on the dollar. So far, Alt-A-backed securities have held up fairly well, especially in light of what has happened to its nefarious cousin, subprime-backed bonds. But some think all of that is bound to change. I'm not so sure that all of those people with decent credit scores who took on added debt for vacation and rental homes won't default the same way subprime borrowers did. Maybe not to the same degree, at least.

For more:
- here's the Financial Times article

Related Articles:
Subprime delinquencies still rising. Article
Street growing ever more bearish on Citigroup. Article
Just how will banks reduce mortgage exposures? Article