Interesting story. Thanks for the link; check back with us and let us know how it turns out.

Thanks for the update, I just got back into the office. I heard there’s something going on with Fannie Mae looking for foreign investors.

Also, here’s a link to a Marketwatch article on Countrywide:

Countrywide probe may be game changer
Commentary: FBI gives Bank of America a ‘get out of deal free’ card

“Getting the FBI to do your due diligence doesn’t seem like a particularly great business strategy. One is left wondering whether the folks who put this deal together spent any more time looking inside Countrywide than the folks who bought all those collateralized debt obligations spent looking inside them.

From the point of view of the G-men, Countrywide looks like a pretty good fall guy for the subprime mortgage mess. Playing “pin the blame on the lender” is a no-brainer for any ambitious law enforcement official or prosecutor type.

But the subprime mortgage and credit crisis is much broader than previous scandals, such as the Enron debacle.

And it clearly involves government policy failings as well as corporate ineptitude or malfeasance.

So, while Countrywide may very well become the poster child for the debt crisis, that alone won’t solve the problems that got us here.”

http://www.marketwatch.com/News/Story/Story.aspx?guid={0D8468B0-B2DF-44AD-8531-D4F516F080D4}&siteid=nbs

The biggest headlines surrounding margin calls this morning is of course Thornburg and Carlyle. Thornburg owes about $610MM and Carlyle more than $400MM.

The even scarier thing is lenders are requiring bigger haircuts for Treasury and Agency securities too, things that were considered basically riskless. I’m kinda shocked they’re asking haircuts on Treasuries, but then again I’m not surprised given price volatility. In a typical Repo transaction the haircut on Treasuries is zero. Now, they’re asking for .25-3% depending on the tenure.

While the additional haircut requirements for total Treasury/Agency Repo outstanding probably will be mininal ($100-$200MM), the greater impact will be felt by Private Label Repos (corporate AAA ABS debt) where the haircuts have ballooned from 3% to 15% in some cases. Which means for every $1BN of outstanding Private Label ABS Repo there could be an additional $120MM in margin calls required! Price volatility could add another $10-30MM.

I’ll look into it on Monday unless you already know.

Yeah, they could have waited till bankruptcy, but that would have given others the opportunity to bid on the assets. The $2BN convertible injection doesn’t give BofA front row seats to the auction. JP and Citi had also been wanting to expand to the West for a long time and BofA was well aware of that when it made the acquisition. Keep in mind that at the time of the announcement it looked like a decent buy based on stock price. In hindsight they may have payed a little too much, but who could have known?

Re #6

SO TRUE, Ameriquest got out with most of its ill-gotten profits intact.

I don’t know how much shady dealings they will find w/ FSL (CW’s esrtwhile subprime division), but there is at least one key distinction that must be made between CW practices and Ameriquest’s.

If a customer called Ameriquest with the highest possible qualifications (and a gullible personality), they would leave with a subprime loan. They did not OFFER any prime loans. Ameriquest did this intentionally, so that they could not technically be charged with predatory lending (loosely defined as putting a customer in a worse loan than they qualified for). Since they did not offer prime loans, and did not broker loans, they could claim that they did offer the borrower the best loan available.

The federal government did NOTHING while this was happening, possibly because the owner of Ameriquest and his family were huge contributors to Bush’s elections (2nd only to Enron). It was only the efforts of 49 state’s attorney generals that managed to get this stopped. In hind sight, that may have HELPED Ameriquest avoid the current train wreck.

CW/FSL had fairly stringent procedures to ensure that borrowers that would qualify for a prime conventional loan (but not FHA or VA) would not get subprime loans.

I’m sure the system FSL/CW was not perfect, but it certainly saved some folks from sub-prime loans.

I gathered this interesting factoid about CW’s pending liabilities: 80% of the option arms were submitted with little or no income documentation. To be fair, many of those were for folks with high credit scores, low LTV or both, but many were not.

http://money.cnn.com/news/newsfeeds/articles/apwire/cf41aca1465643647a26cf8ab5ae0cc3.htm?section=money_topstories

Here’s the story.

The problem is that they could have taken that part, and the other good pieces, in bankruptcy. They had given them $2b which would have put them in the front of the line if CFC had gone under. It made no sense to take on all of their liabilities with even more investment money when they were already in a position to get the best scraps.

Venture to guess how many billions in margin calls are coming our way over the next few weeks?