To Our Clients, Colleagues and Friends:   

· A big report just came out on French bank Societe Generale’s 4.9 billion fraud/trading loss early this year.  Not surprisingly, the thrust was that there was a lack of internal controls.  This is precisely the sort of thing the “C” in our FOCIS Risk Audit looks at – the “C” standing for Controls and corporate governance.  See the attached brief article entitled Can One of Your Employees Kill Your Company?  ( Ask Joe Garrett for a copy)  We wrote this few years ago. Most people think it could never happen to them, but that’s a fatal conceit.  Rogue employees will always exist and, in the right circumstances, they will blow up companies.

· We also read the Inspector General’s report on the failure of Net Bank. The main criticism was the lack of a coherent plan, as the company flailed about, trying different lending programs based on wrong assumptions, never really executing on anything, and unable to control costs.  What struck us was their lack of focus on a single, well-thought out business plan.

· Here’s one of those oddities:  Freddie Mac’s retained portfolio of mortgages is $737 billion, and FNMA’s is $728 billion.  Kind of interesting that after all these years, they’re so close in size.

· N.J.-based Freedom Bank opened for business in April after raising $13 million from 250 investors.  That’s not such a big deal.  What impressed us was that the bank brought in $12 million in deposits during its first month of operation.  Bringing in core deposits is how you build value in as bank, not typically from the loans.

· In a move that was both smart and inevitable, Provident Funding owner Craig Pica has filed an application to buy a $44 million savings & loan in Colorado . While being regulated has its moments, it’s worth every single bit of aggravation. 

With so much talk about the housing bubble, we thought it might be interesting to walk down the memory lane of the tech bubble of ten years ago.  Here are six stories that still give us the heebie jeebies:</p