To Our Clients, Colleagues and Friends:   

· As of yesterday, the Bank of America has not confirmed that it will stand behind the Countrywide bonds. We’re dying of curiosity to see how this plays out.  What’s going on there? 

· It’s still not too late to register for the Western Secondary Marking Conference next week in San Francisco .  Go to www.cmnba.com for details.

· This is probably being way too simplistic, but the BofA appears to most observers to be overpaying for Countrywide.  That is, they haven’t renegotiated the price to reflect deterioration in the value of the company or the mortgage industry.  So wouldn’t this imply that at some point after closing, the BofA might have to write down the value of their acquisition?  Isn’t that basic accounting?  Does this mean a massive write-down for the Bank of America sometime within the first year after the deal closes?    

· Today is actress and model Pamela Anderson’s 51^st birthday.  Has anyone else noticed that she’s prettier at 51 than she was at 21?  Has anyone noticed how true that is with lots of women? 

· So far this year, Keefe, Bruyette estimates that $181 billion in capital has been raised for financial companies.  In total, 54 banks & thrifts have conducted 73 capital raises, accounting for nearly $110 billion or 61% of the $181 billion in capital raised for financials in 2008. The rest?  The other $71 billion was raised by specialty finance companies, and yes, that term includes mortgage companies.  In some ways, it’s never been  easier to raise capital, also never so expensive.

· During the dot.com boom, polls showed that people assumed that stocks went up 25-30% a year.  More recently, people are assuming stocks are a good way to lose money. The real answer is that since the end of WWII, stocks have increased 9.1% a year, or 13% when you include dividends.  Now you know.

· We wrote last week about consolidating all passwords into a single one.  Boy, did that get a response.  A few wrote that this was a bad idea from a security standpoint, but many wrote in about various tools that let you manage multiple passwords. 

· Oscar Wilde was, along with everything else, quite an optimist. One of his lesser known lines was his statement, after being released from prison, that “Two men look out the same prison bars, but one sees mud and the other sees the stars.”  His most famous line was probably when he came to visit the United States .  When he was asked by the Customs officer if he had anything to declare he responded, “Only my genius.”  Funny guy.

· Ronald Reagan used to say of the Soviets “Trust, but verify.”    The Romans used to say Nil credam et omnia cavebo, which translates into Believe nothing and guard against everything. Both would look good on a big sign back in your internal audit or quality control department.

· The Western Secondary Marketing  Conference in San Francisco is only a week away.  We have a few openings in our schedule if you’d like to get together.  Let us know.   

· And here’s bit of useless trivia about the Conference. It was  once put on by the California Savings & Loan League, and when all the S&Ls disappeared  in the late 80’s and early 90’s, so did their trade association.  We don’t know any of the details, but apparently they sold the rights to the name of the conference to the California Mortgage Bankers Association.   

· Speaking of the demise of the California S&L industry, do you remember these names:  Great Western (Probably the best-run one), Home Savings (Ahmanson), American Savings, Imperial, Gibraltar), Nationwide, Citizens, Home Fed, Great American, Lincoln Savings (John McCain: uh, oh), Homestead , Cal Fed, Glen Fed, and finally, State Savings (perhaps the worst of the bunch).  If you’re under a certain age, you’ve never heard of them.  But over a certain age, you remember these institutions as having dominated mortgage lending and single family construction lending for decades.   

· National Mortgage News had a table showing market share for the first quarter of 2008.  The top 25 originators had 84% of the total market.   Remember when the mortgage industry was considered highly fragmented?  Times have changed.  A lot.

· Okay, here’s something we still don’t fully understand.  When “they” calculate stuff like market share and volume, who  gets credit for the origination on a 3^rd (or 4^th) party loan?  Take a loan that is originated by a broker (1) who places it with a wholesaler (2) who closes the loan and sells it to a larger correspondent entity (3)?   

Garrett, Watts & Co.  -  Joe Garrett and Corky Watts