To Our Clients, Colleagues and Friends,

• Okay, so Chase is out of wholesale.  (1) They have no more wholesale division, (2) they won’t buy loans from correspondents who got their loans from brokers, and (3) Chase’s warehouse lending division apparently won’t issue lines to mortgage bankers who do more than a small amount of third party business.  As we started saying 6-9 months ago, wholesale may not go away entirely, but there’s clearly a trend against it.  We hope you’re working hard on building your retail business.
• If we had to guess, we’d say that yes, a year or three from now there will still be some sort of wholesale.  But brokers will have significant net worth requirements, they’ll have some kind of buy-back responsibility, and there will be all sorts of barriers to entry, for the brokers and the bankers. That’s our guess.
• If you measure company size by their market cap, we were curious how many of the top ten world-wide were American.  The answer is five, and we found it so interesting that we’ll run the whole table here.  All numbers are in billions.

Of the next ten biggest, four were American.

• The Chicago Tribune (owner of the L.A. Times) is in bankruptcy, the Seattle Post-Intelligencer may not survive the month, and newspapers across the land are barely staying alive.  But the New York Times will be forever, right?  Well, think again.  They have $1.0 billion of debt on their books, $400 million of which comes due over the next five months, and only $46 million of cash reserves.

• It’s always fun to compare Presidents by certain metrics.  Now that Bush  has finished his eight years, the following numbers were just compiled for how the Dow Jones Industrial Index did on average each year for him and a few others:        

One thing to remember, though:  Correlation is not causation.

• Everyone knows one or two of Satchel Paige’s six rules of life, but every so often, it’s worth reading them all:  (1) Avoid fried foods cause they anger up the blood,  (2) If your stomach disputes you,  lay down and pacify it with cool thoughts,  (3) Keep the juices flowing by jangling around lightly as you move,  (4)  Go very light on vices such as carrying  on in society.  The social  ramble just ain’t restful.  (5) Avoid running at all times,  and (6),  Don’t look back. Someone might be gainin’ on you.  This all must have helped, as he was pitching in the Major Leagues at age 48.

• The Chase wholesale channel generated volume of $5.9 billion in the third quarter, down from $9.1 billion in the second quarter, but still  representing 16% of their overall volume. That’s a decent amount of business, but the  real issue, as you know, is that their losses in wholesale were more than 3X worse than in their retail or correspondent channel.  Like the fable, it looks like brokers had a goose that laid golden eggs, but the bad guys in the group got greedy, committed too much fraud, and eventually killed this gold creating goose.

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Did you know that we’ve had 12 Presidents who owned slaves, eight of them while serving in the White House? The year before the two of us were born, blacks couldn’t play in major league baseball. Until we were seven (Brown v. Topeka Board of Education) it was completely legal to segregate black and white children in schools. Until we were in our Sophomore years in high school, it was perfectly legal to refuse service to black people at hotels and restaurants.  And until our Junior years in high school, almost no blacks were allowed to vote in most Southern states.

As we said recently, someone from 1948 and even 1958, if they could travel through time to 2009, they’d be amazed at Condi Rice and Colin Powell and most of the progress made in the era of Civil Rights.   So with only days to go before Obama’s inauguration, we should all say a prayer or have moment of silence to remind ourselves of what a great nation and great people we are, never perfect, but always seeking to do things better.  God bless America and God bless our new President.

Joe Garrett and Corky Watts  -  Garrett, Watts & Co.    -  510-469-8633