To Our Clients, Colleagues and Friends,   

• We heard a ridiculous discussion on who’s the best player in baseball today. How can people argue over that?  Isn’t it clear that no one comes close to Albert Pujols? It also seems he’s following in the footsteps of the great Stan Musial as a wonderfully decent person.   St. Louis fans are lucky to be watching him.

• Whatever happened to regional banking?  In Texas , J.P Morgan, BofA, and Wells Fargo have 2,040 branches and control slightly over 46% of all deposits there.  Texas has tons of banks, but the big non-Texas banks seem to really dominate.  By the way, those 2,040 branches represent almost one of three branches in the Lone Start State .
• We’ve heard from a few more companies who have obtained warehouse lines from local community banks.  The people at these companies are big heroes, working on this for months and months, educating their banks, not taking no for an answer.  Smaller community banks can’t offer everything that the national WH lenders offer, but it’s a solution, even if imperfect and only temporary.
• Have you ever done something that you were really proud of, something that was just perfect?  When F. Scott Fitzgerald sent in his draft of The Great Gatsby to his publisher, he enclosed a little note. “I think I have written just about the perfect novel.”  He had, and he knew it!  As Muhammad Ali once said, “It ain’t bragging if you go ahead and do it.”
• Dan Bayer reminds us that sound Disaster Recovery plans should mandate that the backup site be at least 100 miles away from the corporate offices.  He’s right!
• A few years ago investor Kirk Kerkorian owned $14.9 billion in MGM stock. Today, it’s worth $900 million.  Bummer, huh? We remember when he bought billions of GM stock when it was about $27.  Does anyone remember whether he sold it or kept it? Julius Caesar said Gloria fugit (“Glory is fleeting”) and isn’t it amazing how this recession has altered so many reputations. 
• When someone mentioned Caesar’s quote to Napoleon, he responded with “Yes, glory might be fleeting, but obscurity is forever.”  What a great comeback.
• We talk to more and more people who are thinking of getting FNMA approved so they can take advantage of their pricing and keep the servicing.  Kind of like the old days when mortgage bankers who sold to FNMA were required keep an amount of servicing that was in some way proportional to their loan sales.
• We helped Bay Equity in San Francisco get started in May of last year.  And now, not even a year later, they closed $104 in million March with very healthy profits. They also raised $1.2 million in subordinated debt to help qualify for increased WH lines.  Unlike most mortgage companies, they have outside Directors and regular, formal Board meetings. Management is excellent, but we’ve been to several of their Board meetings and the outside Directors make a huge difference. 
• Having outside Directors is an interesting thing.  We’ve seen many companies do just fine without them.  But when we see companies with outside Board members, almost all seem to do better than they otherwise would.
• Does the presence of outside Board members guaranty success or against failure?  They didn’t seem to matter at New Century or Wamu and many others that went under.  Indy Mac had an All-Star Board, but we all know what happened in the end.  The role of Directors is, to us, endless interesting.  Our own view is that while industry knowledge is important in a Board member, even more important is his or her temperament.  Perhaps the key element is the ability to say, ”Wait one minute there.  What you’re proposing just doesn’t make sense.”  Another way to put it is their ability to stand up to charismatic CEO’s.
• Everyone knows about TARP money, but few know about TLGP (Temporary Liquidity Guarantee Program).  This program allows banks to issue bonds that are insured by the FDIC, thus, essentially, giving them Triple-A ratings.  We’ve seen that Goldman Sachs, now a bank-holding company. has been raising money under this program at 2%.  What would they be paying if they didn’t have the FDIC behind them?  Maybe 6%? Or 7%?  Maybe more?
• We just finished reading Fail Safe, a short book (278 pages) we highly recommend.  It’s about how one wing of bombers accidentally attacks the Soviet Union with tactical nuclear weapons.  Although the book was written over 50 years ago, there’s nothing about it that’s dated.  One of the great page-turners of all time.

We just watched Last Action Hero, by Arnold Schwarzenegger.  You can debate all day long how he’s been as governor, but you have to admit that his movies are entertaining.  In this one more than any others, he makes great fun of himself.  For real insight into his personality, rent Pumping Iron, a documentary about him in his 20’s when he was a professional body builder.  It’s very interesting to see how he psyches out his competitors, and how he says with certainty that he’ll run for President some day.  By the way, you know those bumpers stickers that say ”My kid is in the honor roll” which spawned bumper stickers that say “My kid can bet up your kid”?  We saw one recently that said ”My governor can beat up your governor.”

See you later this week.

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

“Helping mortgage lenders increase revenues, control costs, and better manage risk.”