To Our Clients, Colleagues and Friends, 

• The new standards for ordering appraisals go into effect on May 1^st, barely two months away.  Are you ready for them?

• The U.S. government has purchased $45 billion in preferred stock from the Bank of America.  Interestingly, the BofA’s market cap is down to $25 billion.  Or look at Citigroup, which has also received $45 billion from the Treasury.  Citigroup’s market cap is about $14 billion.  From the perspective of the shareholders of both institutions, they should be glad these preferred shares can’t be converted into common one a one-for-one basis.  If that were the case, the U.S. government would own about three quarters of Citi and two-thirds of the BofA.

• Have you seen the Nixon/Frost movie?  Frank Langella did a terrific job of capturing Nixon’s personality, but didn’t he sometimes look more like Leonid Brezhnev than the former President?
• We were in Columbus, Ohio earlier this week doing a FOCIS Audit for a warehouse lender client. It’s a nice city with great people, but boy, was it cold.  Down around 17-18 degrees in the evening.  We need to find some clients in Hawaii or the Caribbean.
• Speaking of the Nixon movie, we were thinking of how different Nixon and Reagan were.  If you saw the movie, you’ll remember Nixon’s late night call to David Frost, filled with anger and resentment against the elites who supposedly snubbed him in college and for the rest of his life.  Can you possibly imagine Reagan saying such things?  Whether you loved him or hated him, Reagan seemed not to have an ounce of resentment in him.  Nixon felt like the poor kid among the wealthier snobs in college. But Reagan came from an even poorer background, yet he talked fondly of his days in college.  When we think of Nixon, we think of his brilliance and his intellectual side, but we also think of words like dour, angry, bitter and resentful.  When we think of Reagan, words like sunny and optimistic come to mind.  It’s unimaginable to think of Reagan having an enemies list like Nixon had. 
• Almost 40 years ago, one of us very briefly dated a very obscure singer named Mimi Farina.  She had a few decent albums, but her real claim to fame was simply being Joan Baez’s younger sister.  Mimi once wrote on a paper napkin, You can’t decide how to die.  You can only decide how to live.  We carried that in our wallet for years and years, till it finally fell apart.  But isn’t that a great philosophy? She probably developed that from being married to Richard Farina when she was something like 18-19.  His novel Been down do long it looks like up to me had just been published, and the very day the book was released, he died in a motorcycle accident.  Mimi was a widow at age 21.   
• By the way, Mimi died some number of years ago, at only 56.  We lost touch with her, but she lived a full life and started something called Bread and Roses, an organization to bring musicians to perform for shut-ins like the aged, the sick, the institutionalized, and so on.  She seemed to have lived out that philosophy she wrote on that napkin many years ago.
• We were hired recently to do due diligence on a commercial banks loan portfolio.  Rather than flying to visit the bank, they sent their entire loan portfolio to us on a teeny, tiny flash drive. Every single document in their loan files was on one flash drive!  We shouldn’t be amazed, but we still are. 
• We were asked the other day what we thought was the biggest change in mortgage banking over the past 25 years. Our view is that back then, even the smallest mortgage company kept its servicing. Now, almost none do. The great thing about servicing was that the company had a fairly predictable and steady stream of cash earnings, regardless of what their loan volume was.
• We’re a bit surprised more banks haven’t entered the Warehouse Lending business lately.  Absent unusual credit losses, it’s highly profitable business line, and while we realize capital is scarce, it generates a higher ROE than a number of other areas the banks are in.
• It was 45 years ago exactly, February 25 1964, that a young Cassius Clay whipped Sonny Liston in Miami to become the new Heavyweight Champion of the World, back when that title meant a great deal.  If you’re trying to think of the dominant personalities in sports over the last hundred years, you have to have Ali at the very top of your list.  If you’re too young to remember what he was like, you really missed out on something and someone magical.
• Here’s some shocking news.  Since June 30, Harvard’s endowment has lost over $8 billion in value. 
• More shocking news:  The once-famed Philadelphia Inquirer has filed for Bankruptcy, as has the Minneapolis Star Tribune.  The owners of the San Francisco Chronicle have threatened to shut down this paper if it can’t stem the losses within the next three months.  We used to think newspapers would be viable for another 3-5 years, but their demise is speeding up.

See you soon, and if we can scare up something to write about, we might even get another one these Reports out over the weekend.  When people tell us how much they enjoy reading them we tell them we really enjoy writing them.

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