To Our Clients, Colleagues and Friends,  

• Covenant School beat Dallas Academy 100-0 in a basketball game last week.  The winning coach was fired, presumably for being unsportsmanlike.
• Now that Bank of America owns Merrill Lynch, let’s look at comparable compensation levels.  The average Merrill employees earned $247,000 last year v. $75,500 at the BofA. We realize that banks tend to have lots of lower-paid employees (like tellers), but it does point to the cultural differences that must be smoothed out.  We don’t know if this is true, but several decades ago, Wells Fargo Bank employees complained about the Well Fargo Mortgage Co. employees making so much more than they were.   As the story went, the Wells people at the bank finally decided to move the mortgage company out of San Francisco and up to Santa Rosa , and hour away. This way, the mortgage company people would be out of sight.

• We just read that the U.S. has 6,165 Catholic elementary schools, and 1,213 secondary ones. From everything we know about the parochial schools in America , rarely have so few done so much with so little.  Anyone studying what ails the American education systems should learn abut parochial schools to see a system that works very effectively.

• Perhaps the best predictor of the end of the Economic Crisis will be when the number of foreclosed homes owned by banks and investors starts to drop dramatically. Currently, banks and investors (i.e. FNMA, etc.) own 845,000 homes.  Barclay’s predicts this will peak at 1.3 million in mid-2010.  We hope the number doesn’t go that high.  Regardless, at some point bargain hunters will enter the market in growing numbers, and more normal times will be on their way back.
• Gee, we haven’t heard from them lately.  FNMA and Freddie Mac have just asked for another $51 billion from the Treasury to cover losses in their loans portfolios.
  Aren’t you getting a bit tired of poorly run companies rushing to Washington all the time begging for more money?
• Poor Burt Reynolds.  The actor had his Florida home on the market for $15 million – but has now had to drop the price to $8.9 million.
• Baseball uber-analyst Bill James came up with a statistical model to rate players.  His system gave points for average, runs, runs batted in, power, defense, base running, arm strength and accuracy, and a whole lot of other metrics.  He then ran everyone who’d ever played baseball since 1880 through it.  It turns out that the greatest all-around baseball player was none other than The Say Hey Kid, Willie Mays. Is anyone really surprised?
• Don’t despair if you’re having a hard time getting a warehouse line.  If you’re consistently profitable, have solid capital and good liquidity, the odds are very good that we can find you a line. There have been a few new entrants in to market, but it’s still largely the same tried and true lenders who provide the bulk of warehouse lines.
• Changing times:  Two years ago, the banks that had us do FOCIS Audits all paid our fee themselves.  Now, they have the warehouse line borrower or prospective borrower pay for it.  Smart of them.
• We used to keep a sort of Diary, and were just looking at it when we stumbled on the entry for March 4, 1979:  “15.5% mortgage rates;  17.5% prime rate;  18.2% inflation rate.”  Little did we know that mortgage rates would climb to 19% and prime would reach 22%.
• And finally, some philosophy from none other than Little Orphan Annie:  “You’re never fully dressed without a smile.”

See you sometime next week.  Take care.

                                                               *     *

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