To Our Clients, Colleagues and Friends:
· P M I lost $274 million for the quarter, but the good news is that the company wrote off the final $103 million in FGIC, and the carrying value of the holding is now zero. We think things will start looking better in a quarter or two.
· Ever wonder what happens when banks fail? Well, here’s a pretty good summary: Over the weekend, the OCC shut down ANB Bank and cut a deal with Pulaski Bank to take it over.
(a) Pulaski took over $213 million in FDIC-insured deposits (i.e. those under $100,000) and paid a minuscule 1.091% premium for them, (b) they assume only $2 million in loans, and (c) for the difference in loans that they didn’t take, they got cash. This was all done over the weekend, with the branches closing Friday as ANB and opening on Monday as Pulaski branches. What a sweet deal for Pulaski, getting all those deposits and no nasty loans, just cash.
· Ten years ago today, Frank Sinatra died. We happened to be walking along Columbus Avenue on the Upper West Side of New York that evening, and it was the eeriest thing. Every bar, every restaurant, every boutique had its doors and windows open, and every single one was tuned to the same station playing his songs. We walked for what seemed like miles listening to his music pour out onto the sidewalks. We wonder if young people ever play his music for that last, slow dance of the evening.
· Michael Jackson’s Neverland Ranch just missed a foreclosure auction last week. The Ranch was bought at the last minute by Colony Capital for $20 million, whoever they are. Interestingly, the lender was Fortress Investment Group. We wonder what rate they charged.
· At the Bank of America, California & Florida account for 40% of home equity balances, and these two states alone were responsible for 52% of 1st quarter delinquencies & 62% of net charge offs. Having said that, charge offs were surprisingly low. Smart bank that they are, they say that they like HELOCS and will start growing them once things settle down. We like that. We think the BofA is a great bank.
· Are you possibly reading this at breakfast? Here’s what Winston Churchill had to say about the morning meal. “ My wife and I tried to have breakfast together once forty years ago, and it was so disagreeable, we decided to never try it again.” Funny.
· Travel-tip: Many years ago there was a rock band called the Mothers of Invention, with a scraggly leader named Frank Zappa. While they received only brief fame in the U.S. , they apparently caught someone’s attention in Lithuania . The capital, Vilnius , like most East Europeans capitals, has very few public statues. The reasons is that until 1991 or so, most were statues of Leni