Kevin Depew of MV notes that Capital One Financial was closing their GreenPoint Mortgage division and laying off 1,900.
With tongue firmly in cheek, Kevin also notes that Capital One Financial is being renamed Capital 0.75 Financial.
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Source:
Five Things You Need to Know: Foreclosures Nearly Double; Capital .75 Financial
Kevin Depew
Minyanville, Aug 21, 2007 12:36 pm
http://tinyurl.com/2eh6rk
Capital One shuts wholesale mortgage unit
Credit card giant cutting 1,900 jobs; to take $860 million charge
Alistair Barr
MarketWatch, 8:51 PM ET Aug 20, 2007
http://tinyurl.com/2buegd
.75th comment!
..and that’s BEFORE they start recognizing what will most likely be a significant increase in credit card defaults
Is Becky really Quick? Or is all this Buffett talk just hooey from down on the farm?
And CFC to be renamed ‘Capital Zero Financial Corporation,’ so as to properly reflect its capital position subsequent to asset repricings.
CAPITAL ZERO FINANCIAL CORPORATION
(A Federal Reserve Company)
That’s 21 for the month of August, a new record.
http://pbp.typepad.com/economy/
Looks like the barbarians finally sacked Rome.
Oh and I though CFC stood for “Can’t Finance Crap”
dont talk low about CFC….they are doing great….their share price is trading 10% higher
And Cramer responds:
“BOOYAH!!!!! IT’S A STEAL AT ANYTHING UNDER 1.25!!!
The staggering thing is they paid at least $2billion for this business only two years ago as part of the Greenpoint aquisition. $2billion is their estimate btw so it was probably more. I see they are going to take a write down of around $860 million but this is clearly a huge underestimate of the value that’s been lost.
We did it before and we can do it again,
and we can do it again, and we can do it
again!
We got ’em going the subprime way and people are buying homes!
We did it before, we’ll do it again!
For those of you old enough to remember, this was the Chrysler TV ad jingle (substitute Chrysler for subprime and cars for homes) from ‘part two’ of the 1980-1982 ‘double-dip’ recession(s).
My bet is that the ‘powers that are’ (just hate the phrase ‘powers that be’) will soon enough be changing their minds regarding subprime and Atl-A lending, suddenly realizing that lending money to those with no intention of repayment is a good thing. Especially since it is the only way ‘out’ of this f’ed up situation. Just wait…probably will start around May 08 under some new nonsense nomenclature…. ‘America First Loans’ or something similar.
Always good to get ‘America’ into the name.
Good stuff from the FT:
“He told me that the “real money” (US insurance companies, pension funds, etc) accounts had stopped purchasing mezzanine tranches of US Subprime debt in late 2003 and that they needed a mechanism that could enable them to “mark up” these loans, package them opaquely, and EXPORT THE NEWLY PACKAGED RISK TO UNWITTING BUYERS IN ASIA AND CENTRAL EUROPE!!!! He told me with a straight face that these CDOs were the only way to get rid of the riskiest tranches of Subprime debt.”
“This will go down as one of the biggest financial illusions the world has EVER seen… I predict that these tranches of mezzanine CDOs will fetch bids of around 10 cents on the dollar. The ensuing HORROR SHOW will be worth the price of admission and some popcorn. Consequently, when I hear people like Kudlow on CNBC tell their viewers that the Subprime problem is “contained”, I can hardly bear to watch.”
The business of America is … debt.
On the housing issue…
I’ve been hearing a ton of radio commercials for “Homeowner LLC’s” (Arizona). Does anyone have a clue why these LLC’s are taking off? Is it so they (banks) cannot repo the casa?
A friend of mine recently bought a house (2 mo. ago)… for the record, he wouldn’t listen to me… during the purchase of the home, he received a government GRANT of 12k on a 230k home that need not be repaid as long as he lives there for a min. of 2 years. He was actually one of the first home buyers here to qualify (many requirements) and receive this grant from the new program (fund) which, apparently has a limited number of $ for new home buyers… Taxpayers are now helping keep the house prices up – sweet. I guess Uncle Sam is injecting money from many angles…
Greenpoint was no tiny mortgage company — $36 billion in originations in 2006. That comes on the heels of American Home Mortgage’s bankruptcy ($58.9 billion in loans last year) … Aegis Mortgage ($17 billion) … and of course, the mega-casualty from earlier this year, New Century Financial (almost $60 billion). Much smaller companies like HomeBanc ($5.1 billion in 2006) have also fallen. Add it all up and you’re looking at lending capacity on the order of $150 billion to $200 billion disappearing. That’s going to leave a mark on the housing market (though the surviving lenders will pick up some of that volume).
Greenpoint, AHM, Aegis, New Century were mostly if not all subprime. Homebanc focuses on Apaper — borrowers with excellent credit. Homebanc’s failure is scary.
KirkH — “This will go down as one of the biggest financial illusions the world has EVER seen… I predict that these tranches of mezzanine CDOs will fetch bids of around 10 cents on the dollar”
Actually, the subprime losses would have ended up as a footnote if it weren’t for the idiotic leverage that newbie hedge funds employed in buying this crap. The bids collapsed only (mainly) because of forced margin selling into a vacume of bids.
So the illusion is the hedge fund “non correlated” returns…what a crock.
I blame the Prime Brokers for allowing this massive (read: toxic) leverage…what a stupid bet.
What’s in yurrrrr wallet!
Forgot to add that First Magnus just filed for bankruptcy. That’s the company that said it would cease making new loans several days ago. Total volume last year: about $30 billion, per Bloomberg.
I was just watching the beginning of Kudlow a while ago. I hope CNBC gives the fill in gig to someone else besides Harwood. He is god awful. Why does he even bother with the “Keeping America Great” schtick? He should leave it to Kudlow.
I have a question for the board, and hope to get some discussion:
If the FED drops rates precipitously, (like 2-3 full basis points), over the next 6 months, then 3 questions
1. Will that help refinance exploding ARMs?
2. If the dollar drops any more, will foreign banks continue the game of “dont care how much we lose holding dollars!”
3. Can/Will the FED itself just start buying the worthless paper no one wants, and if they do, is the concept of money really finished?
My 2 cents:
1. only a drop in rates AND relaxed lending requirements can save the foreclosure wave to come.
2. Yes indeed, no matter how much the dollar falls foreign countries, mainly Japan and China will eat the loss and do nothing
3. I believe the FED will have no choice but to buy all the crap out there, a buyer of last resort if you will, and yes money at that point stops making any sense.
The sad thing is this is all gonna blow over and no really major damage will be done. Its kind of like being in “The Matrix”, its not real, you know it, but you cant do anything about it!
Discuss
Countrywide always supported by active rumor mill. it’s typically BAC as the rumored buyer whenever they’re in trubble, but now mill has to go to the big guy Mr Buffett as it’s clear BAC rumor no longer has legs. Mozilo Gorilla must pull > $500 MM out of this pig or it really hasnt been worth the effort. now Buffett has $50 B cash, which looks to me like a cash position of 30%, in other words, a conservative guy looking for bargains. why would anyone think Countrywide a bargain? its model is now broken. irreparably. instead of letting the market find its legs at lower levels, FRB and Wall St now demanding that smart guys w cash who didnt fall for this market must now step up and make whole the plungers. wont work.
Jerry… Working all your your questions would require taking a few vacation days.
—
I don’t see how lower long rates wouldn’t help ARM mortgagees bridge to 15-year or 30-year fixed mortgages, but the Fed doesn’t control long rates. Lower long rates might save marginal credit mortgagees who could qualify for them, but many can’t afford the loans they took out even at much lower rates, because they were free-riding in hopes that market moves would be profitable for them. In cases where their equity has been clocked, they may not have enough equity now to get the fixed at any rate.
All the rest of your questions have so much current mythology attached to them that I certainly don’t feel I can contribute anything to your discussion. You already seem to have concrete notions about them yourself.
T-bill yields plummeting, Libor U Index spiking, Deutsche Bank actually utilizing the discount window, it’s been awful quiet over at the big money center bank world. In fact very quiet at the major investment banks and dealers. Don’t suppose there’s any chance a gag order was issued. Nah, am sure that wouldn’t happen.
The Fed could drop rates if necessary but it has to be a well advertised move, no surprises out of a emergency meeting.
Why, carry trade. Can you imagine the damage done after institutions and individuals scramble to get out of carry financed USD positions (equity, commodities, bonds and all its derivatives)?
They will change the bias first (to allow orderly deleverage), then a sequence of small cuts.
Unless hell breaks loose first, then they can cut at will.
This is normal evolution – natural selection, or the survival of the fittest.
Green Point Mortgage was/is a bad money-losing business. Capital One got rid of it, so they can concentrate on their profitable core business.
According to the Small Business Administration, two-thirds of new businesses survive for at least two years, and only 44 percent survive at least four years.
Over the last few years (2003-2006), there has been an exponential increase in the number of new businesses like Green Point Mortgage and the explosion of new hedge funds.
It is normal for 44% of these new businesses not to survive.
Why do people get a panic attack and hit a sell button every time they hear about one of these normal businesses failures? Like for any new business, it is normal for 44% of the hedge funds to go belly up. It is normal for 44% of companies like Green Point Mortgage not to survive.
The sky is not falling. This is absolutely normal and expected free market evolution.
I meant: It is normal for 56% of these new businesses not to survive. (44% to survive)
Had an epiphany while watching Kudlow today. The gray haired perma-bull who hangs out on Wall st., forget his name, said “Capitalism is a Religion! It only works when people believe in it.”
I thought: “No, leverage is a religion”. Capitalism still works when people lose faith but over leveraged credit bubbles end when investors lose faith.
This guy is an evangelist for a religion that doesn’t exist. I suddenly understood why the media shamelessly pushes the bull case even in the face of overwhelming evidence: They truly believe that without their Tinkerbell/Pollyannic brainwashing, capitalism would collapse. The Hedgies and Fed have them drinking the Kool-Aid.
I’m just imagining Bernanke calling up Kudlow at home:
“Hello?”
“Hi Larry it’s Ben… Look, with great power comes great responsibility. You are a very powerful and handsome man. The fate of capitalism rests with you and your show on CNBC. If your viewers lose faith in the system, capitalism will collapse and the socialists will arrive at your mansion with burning torches and unanswerable questions. Capiche?”
LK: “Wow, that sounds reasonable, and you’re right, I am terribly handsome, I’ve seen Bartaromo checking me out… OK, deal. I’ll spread the word to my co-workers.”
Rutters
Aug 21, 2007
Orion Galaxy
Interstellar starship XPJ-2732 has reported today the collapse of the last known hedge fund to hold positions in the U.S. subprime mortgage market. The failing today of the Zeegoft colony’s Quark Quants on planet Druedanizan brings the intergallactic number of bankrupt hedge funds, banks, savings and loans, money market funds, and thrifts to 629,294,035,203.
When reached for comment, U.S. Treasury chief Henry Paulson stated, “See, I told you it was contained.”
The latest info I can find on Fannie Mae seems to say they were at about $720 billion in June. If their cap is $727 billion, then how can they not already be tapped out? Are they actually buying anything? Or are all these companies that are restricting their loans to “conforming” just counting on the portfolio cap being lifted?