To Our Clients, Colleagues and Friends,

• Regulators hate brokered CDs, but in the past month, one-year CDs were paying only 50-65 bps.  Sure, they’re not core deposits, but it’s still pretty cheap money.
• We have a fair number of friends who are now working for the FDIC resolution division that deals with failed banks.  If you’re out of work, there are worse ways to make a living.  The compensation seems pretty good, they pay all hotel and travel expenses, and you can probably get another year or two of work till things are resolved.
• You think you have a lot of employees to manage? Here are the numbers at the nation’s biggest bank holding companies, all rounded

A few others: BB&T 28,000, SunTrust 28,000, GMAC 21,000, Comerica 9,497, First Horizon 5,971, Sterling (Spokane) 2,590, Umpqua 1,821, WestAmerica 1,153, and Western Alliance 1,076.

• Gov. Schwarzenegger delivered a seven line message in a veto last week.  As people discovered, the first letter of each line spells out an impolite two word phrase that starts with F and end with the letter U. The governor’s people say this is a total coincidence, but a mathematician calculated that the odds are 1.1 trillion to one of that happening by accident.  Arnold ’s a pretty blunt guy, and if he wanted to say F___ You to the bill’s sponsor, he’d probably just grab him in the hallway and tell him to his face.
• We saw a condo project in Phoenix recently that seems to have gone full cycle.  (1) It was an apartment building, (2) then it was converted into condos, and (3) now it’s about 99% non-owner-occupied. In a way, it’s gone full circle back to being an apartment building.  If you buy a unit there all cash, you can get a good cash-on-cash return, but how will you sell it 4-5 years from now? What bank would lend on a condo project 100% filled by renters?  Maybe the homeowners need to get together and de-condo it. They could then get a multi-family loan and be able to sell the building as an apartment building someday.
• Last Friday we saw three earnings reports; FNMA lost $19 billion, PMI lost about $90 million, and AIG made about $450 million but still owes the government over $150 billion.  One lesson we can learn from these three troubled companies: Don’t have a company name made up of letters!
• We’ve always loved collecting interesting/funny names of banks.  In the past we found Cowpatch Bank, Tomato Bank, Citrus Bank, and Crazy Woman Savings. There is probably a bunch of others we don’t remember.  Anyway, we just saw Hiawatha National Bank in Hager City, Wisconsin .  It’s a tiny little bank with only $42 million of assets, and it’s not a funny name, but it’s a very cool name.  If you haven’t read Longfellow’s Song of Hiawatha lately, you should!  It’s one of the great American poems.
  And doesn’t it seem like when we were kids, parents always had poetry books lying around the house.  Does anyone buy poetry books anymore? When’s the last time you bought one?
• Nearby Oakland has the world’s worst mayor, Ron Dellums.  Dellums comes to work only a few days a week, and when he does, he arrives about 10:00 and usually goes home after lunch. To make it even worse, the IRS just slapped a tax lien on his house and personal property for not paying his taxes since 2004.  What an embarrassment.
• A client told us the other day that his wife was pregnant, but he used that awful phrase, saying “We’re pregnant.”  We?  When did men start claiming to be pregnant?  We’re all for men being more sensitive, but people, this is a third person singular kind of activity (she) and simply not a first person plural situation (we).  Guys, doesn’t this ridiculous phrase make you kind of embarrassed for your gender?
• East-West Bank just took over failed United Commercial Bank here in California and paid the FDIC a  miniscule 1.1% premium for $7.5 billion in deposits.  The deposit base at United Commercial isn’t bad, and that‘s a tiny premium, a real steal.
• We just read Charlie Wilson’ War, and we liked it so much that we rented the movie. Congressman Wilson was a whiskey-drinking, coke-snorting, womanizing vulgarian, but he played a huge role in the fall of the Soviet Union by funding the mujahedeen who defeated the Soviets in Afghanistan .  Tom Hanks can be kind of irritating at times, but he was perfect as Wilson .  Definitely worth renting.
• Certain words have different meanings in different cultures, and we remember when there was a Sincere Federal Savings here in San Francisco . And although they weren’t named this, there were definitely some Very Suspicious S&L’s here as swell.
  
• Effective immediately, the bank cannot accept, renew or roll over any brokered deposits. This is pretty typical language in Cease & Desist orders, and we believe they cause as much harm as any bad loans.  Effective immediately?? What if you had, say, $200 million of brokered deposits maturing in the next 30 days?  Could you bring in $200 million of retail deposits to replace them that quickly? What if your retail deposits are costlier than the brokered deposits?  Put another way, we won’t argue if the regulators want you to stop taking in new brokered deposits, but how about allowing them to be phased out in an orderly manner?
• Remember when mortgage brokers handled 60-70% of all loans, and maybe more?  We’re hearing that brokers now do only 20% of all loans, and our guess is that this number is still dropping.
• A major reason we get asked to do FOCIS-plus Reviews is that owners know they could be doing better, but they don’t know what to fix or how to fix it.  A first step is to quantify their operations. We have a pretty big data base at this point, so if you’re, say, all retail, doing best efforts, and closing under $50 million a month, we know what your profitability can and should be. We’ll look at your cost to originate and your gain-on-sale to see how you’re falling short of your high-performance peers.
  And once we isolate the problem (Is it secondary execution? Cost structure? etc.), we really tear apart the business to find precisely what needs to be fixed.  It’s not brain surgery, and it’s always hugely gratifying for us to help people improve their profitability.
• We’ve getting asked a lot these days to perform due diligence on branches that are being rolled up or acquired by mortgage bankers. Corky Watts is leading this effort, and you should at least talk to him before taking on smaller brokers and their branches.
• Our ever vigilant clients helped us with some on base percentages.  Willie Mays had a lifetime .384 on base percentage and Hank Aaron was .375.  Ernie ”Let’s play two” Banks was at .330.  Someone wrote in last month that Ernie looks like he weighs 330 pounds.  Maybe his problem is that when he orders a Double whooper with fries, he places his order with a “Let’s Eat Two”.

We’ll be in Pennsylvania and New Jersey next week, so there will probably be just this one newsletter for awhile.  We’ll see you at the Client Appreciation Dinner in San Francisco next Thursday.  And it’s getting a bit chilly here (chilly for us means 55 degrees) so bring your coats and scarves.

Garrett, Watts & Co.

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

• Mike McAuley      281-250-2536
• Corky Watts        408-497-3135
• Joe Garrett         510-469-8633

They are 90%+ of the mortgage market …..  (BC)

No Money Down Mortgages Continue – Eric Falkenstein – …  FHA is aggressively promoting lending with only 3.5% down, and the $8k tax credit for buying a house less than $200k…. A person who can’t afford a down payment should not be in a home. One needs capital to pay for routine maintenance, and most importantly, if something major happens, like if a heater breaks. A renter is someone who does not have the wherewithall to handle these large, unanticipated expenses … The government’s program reminds me of the technique children independently discover to make it look like they’ve eaten up hated peas or carrots: spread them around the plate. … – Falkenblog

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Fannie Landlord: Fannie Pushes Rental Alternative to Foreclosure – by DIANA GOLOBAY -  Mortgage giant Fannie Mae released details Thursday of a deed-for-lease program designed to offer borrowers an alternative to foreclosure.  The Deed-for-Lease (D4L) Program aims to minimize neighborhood blight and encourage house price stabilization by cutting down on foreclosures, real estate-owned (REO) and vacant properties, and distressed home sales. – HousingWire

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Fannie’s Draws From Emergency Treasury Fund Reach $60 Billion – by Dawn Kopecki – Nov. 6 (Bloomberg) — Fannie Mae, the mortgage buyer seized by regulators, plans to tap emergency U.S. capital for a fourth time this year, bringing its draws of taxpayer money to $60 billion as the company sees no immediate end to its losses. – Bloomberg

and
Fannie Mae asks for $15 billion in additional funding – John Letzing -  Shares fall nearly 10% in late trading as lender asks for funding by Dec. 31 – MarketWatch

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It’s ok to do the trade - Statement of FHFA Acting Director Edward J. DeMarco Concerning the Possible Transfer of Fannie Mae Low-Income Housing Tax Credits to Investors – FHFA.gov Press Release

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Freddie Mac loses $6.3B in 3Q – by ALAN ZIBEL - Freddie Mac says its losses narrowed to $6.3 billion in the third quarter and the company didn’t need a federal cash infusion. -  AP Forbes
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Bailout: $15 Billion More to Fannie Mae (and More to Come) - by Paul Kiel – The Treasury Department will pump $15 billion more into Fannie Mae, the company announced last night. That brings Fannie’s total bailout to $59.9 billion; together with its sibling Freddie Mac, the toll has risen to $110.6 billion. – ProPublica  
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good treatise on FNMA’s current status – When Does The CHARADE Stop? (Fannie) – It’s a policy (according to Barney Frank) to lose money on purpose, right?  Well then Fannie Mae ought to get some sort of award: … – Market Ticker

A co-worker recently asked me about “instant messaging”. I told him that the only instant messaging that I do is with my middle finger. (Illustration not necessary.)

In a move that other states may take note of, in North Carolina, the N.C. Office of the Commissioner of Banks (NCCOB) is sending a message by announcing that it is proposing mortgage rules to help reduce foreclosures, to improve consumer protection and the functioning of the mortgage market, and to implement the S.A.F.E. Act. (North Carolina’s NCCOB regulates state-chartered banks, thrifts, savings and loans, trust companies, and more than 875 mortgage lenders/servicers/brokers and 9,800 mortgage loan originators, as well as numerous consumer finance companies, check-cashers, and other financial services.) They are considering a rule that would require a mortgage servicer to stop foreclosure efforts pending the consideration of a request by the homeowner for assistance, and require a mortgage servicer to respond promptly and clearly to homeowner requests for assistance.

More on NC, Tax Credit Extension, Fed buying MBS, FNMA Deed For Lease, AIG, Freddie Mac, and joke of the day … CLICK HERE TO CONTINUE

To Our Clients, Colleagues and Friends,   

• An interesting juxtaposition in foreign policy circles:  (1) Jimmy Carter’s onetime National Security Advisor Zbigniew Brzezinski says that if Israel planes take off to bomb Iran’s nuclear facilities, we should shoot them down.  But (2) Hillary Clinton warned the Iranians that if they launch a nuclear attack on Israel , we will “obliterate” them. 
• It’s interesting that when we ask mortgage bankers about their pull-through ratio, a lot don’t take it all that seriously.  We met with someone recently who had a 45% pull-through and told us, “Well, sure, I guess we’d like to get it to 50%, but, like, it’s not a big priority.”  He seemed unaware (or, like, unfazed) by the several ways this was hurting him.
  But we also meet people with terrific ratios who don’t use them to negotiate better pricing with investors.   We were with someone with a 93% pull-through this week that got vanilla best efforts pricing.  They were leaving good money on the table!
• We get asked occasionally who the bank clients are that we help in getting Warehouse Lending programs going.  They’re typically $100-250 million in size and want to issue $10-20 million in total commitments. They intend to issue lines to 2-3 local mortgage bankers, all of them within their footprint and all of them existing bank customers.

We helped one mid-Atlantic bank that had already started warehouse lending, and we were able to find and fix some fairly serious flaws in their process and documentation.    As the bank CEO said with a laugh, “I guess if we’re going to have sex, you’re going to at least make certain we practice safe sex.”  A funny guy.

• Everyone knows we think you are too obsessed with volume.  It’s an important metric, but we’d like to see you equally focused on margins, credit quality, cost-to-originate and a few other metrics.  Yes, greater volume typically leads to greater revenue, but doesn’t increased volume also mean increased problem loans?  Or at least the potential for increased ones? It’s something worth thinking about.
• No one’s probably hitting the cover off the ball like Golf Savings just north of Seattle . And in case you’re wondering, Golf Savings is not in a town named Golf, nor is it named after a founder named Joe Golf.  It got its name, quite simply, because the founder loved the sport of golf and thought it was a memorable name.  You should look up their Call Report (actually their TFR) and see just what kind of returns you can make doing mortgage banking inside a bank or thrift.  It will blow you away.
• Golf’s parent is Sterling Financial, and Sterling needs to raise capital. We’d like to see Matt Mullet and Donn Costa , the two people who run Golf, manage some sort of leveraged buy-out of the bank.  Carve-outs like this can do pretty well, and we think they’d find lots of private equity groups or LBO funds willing to back them.  Sterling would lose all of Golf’s earning power, but its sale could also bring in some much needed capital.
• A year ago in Zimbabwe , inflation was 12.5 million percent, meaning that a candy bar that cost $1 a year earlier would now cost $12.5 million. Printing money with wild abandon never leads to a good lending.  Put another way, how the heck can Zimbabweans afford a Snickers Bar when they feel the need?
• General Manager Billy Beane of the Oakland A’s thinks that the most important statistic is the On Base Percentage.  Since we’re huge A’s fans, we decided to see who were some of the very best.

We couldn’t find Willie Mays or Ernie Banks in there!  And what about Hank Aaron?  We only looked at the top fifty, and maybe they just didn’t make the cut.

• An auditor cleaning up loans from the old Wamu portfolio recently came across a HELOC made to O.J. Simpson in 2007.  There’s a huge judgment against him from his former in-laws, and that judgment takes precedence over other debts, such as his Wamu loan. An underwriter’s note was found in the file:  “When I asked the loan officer how we could possibly foreclose on it given that judgment, he said there was a letter in the file from O.J. Simpson saying ‘the judgment is no good, because I didn’t do it.’ “  Oh.
• While many younger mortgage market participants have barely experienced the down-cycle of a mortgage market, those who’ve been around know that we live in a highly cyclical industry.  We’re reminded of this every time we think about the attached “Carpenter’s Laws of Lending.”  The author, Gene Carpenter, was a legendary old-time banker who had seen it all and then laid out these principles to the other bankers at NatCity.  
  Frank Hattermere first saw it as a young banker in Louisville and passed it onto Mike McAuley, and they used to pin this on the walls of their offices and refer to it whenever they were looking at proposed deals.  In boom times in the mortgage industry, they focused on Law No. 13 (”If it grows fast, it’s probably a weed.”)  In down cycles, they concentrated on Laws No. 7 and 8 (”The odds that forecasts supplied by borrowers are too optimistic are infinite” and “Anything that goes up sharply in price will subsequently come down sharply in price”).  During workouts, they learned all about Law No. 3 (”Collateral always liquidates for less than it should”).   You should have this permanently taped to your wall! Carpenter’s Laws of Lending
• We’ve done some FOCIS-plus Reviews recently for very healthy mortgage bankers.  The general message we got was along the lines of  ”I assume  you mostly do these for companies doing poorly and who want to get better, but we’re doing pretty well.   We just kind of look at it like going for annual physical, and we don’t want to wait till we’re really sick and screwing things up.   We see it as a preventative tool.”  We agree.  And by the way, even in those companies doing really well, we always seem to find ways for them to do better.
• A big anniversary is coming up in a few days. November 9^th is the 20^th anniversary of the fall of the Berlin Wall and the ensuing fall of the horrible Soviet Union . Historians can debate forever what macro-forces brought it about, but the immediate answer is that it was member of the German Politburo named Gunter Schabowski.
  One November day, the Politburo was debating some temporary bureaucratic procedures to someday make it slightly easier for East Germans to cross over to see relatives in West Berlin . Schabowski was out of the room when the decision was made, and he later just skimmed the new regulations before holding a small press conference. When he was asked when this executive order might go into effect, he casually and inaccurately said it was effective immediately.
  Word spread like wildfire and tens of thousands stormed the Brandenburg gate.  The Sergeant manning the gate had heard the news of Schabowski’s press conference, and he assumed it went into effect immediately.  After opening the gate and seeing tens of thousands pouring through, undoing what had happened would have been like trying to put toothpaste back in the tube.

We’d like to suggest that someone establish an annual award for the person who unintentionally sets off the most dramatic action based on making the most dramatically stupid mistake.  It could be like the Oscars or the Nobel Prize, and we’d suggest it be named The Schabowski Award. There could be a big Hollywood event every year when they give out The Schabowski’s.

• The tabloids on display at Supermarket checkout lines are predicting which stars are most likely to die within the next year.  Nice.  Kirstie Alley tops the charts as most like to croak, due to her 350 pound girth, but Lindsay Lohan is in second place  due to her drug use.  It’s interesting reading, and aren’t you glad you get your Hollywood gossip in the same place you get your banking information?  And speaking of Lindsay Lohan, won’t you always remember her as Annie in Parent Trap? Wasn’t that a perfect movie?
  
  Kirstie at 350?  Looking at this picture, Kirstie doesn’t look like she weighs a pound over 300.

We’re looking at our calendars, and we’ll be in Phoenix , Philadelphia , Columbus ( Ohio ) and Beverly Hills in the next two weeks.  Most of this will be after our dinner next Thursday, which we’re really excited about, and while travel can get tedious occasionally, a night at the Beverly Hills Hotel makes it worthwhile.  It’s absurdly expensive, but don’t you love having a drink in their Polo Lounge and hoping to get a glimpse of Lindsay Lohan or maybe Kirstie Allie?See you guys at the Palace Hotel next Thursday evening.   Garrett, Watts & Co.  Helping mortgage lenders increase revenues, control costs, and better manage risk.

• Corky Watts         408-497-3135
• Joe Garrett         510-469-8633
• Mike McAuley      281-250-2536

 Technical Analysis: 2 videos from Market Club – by Adam Hewison
adam12
1.  Weekly Trade Triangle Indicates Exit All Long SP 500 Positions

2.  The Decoupling of Gold 
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Gold and Oil are the New Mecca – has logic – … It is my belief that oil will remain around current levels or pull back for a mild correction as weakening demand and increasing supply weigh in on the price rather than the current fixation on a plummeting dollar.  Many investors have been buying out of the money calls on gold and oil to capitalize on the coming collapse of the dollar. Selling out of the money December or January calls on USO or UGA  looks attractive while the others hope and wait for an apocalypse. – Surly Trader Blog
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Rep. Frank Plans Two Key Changes to Derivatives Bill – By SARAH N. LYNCH -  … said Wednesday he may tighten his over-the-counter derivatives bill to prevent companies from finding clever ways to skirt the clearing and trading rules.  In addition, Mr. Frank said he is planning to change the proposal so the burden is on federal securities and commodities regulators, and not on clearinghouses, to decide which swaps can be cleared. – Wall Street Journal 

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Reverse Repos Spook The Market – Alexandra Zendrian -  The Fed wants to test its tools for taking liquidity out of the banking system. Some stock investors think it’s too soon. – Forbes

Credit woes continue – Posted by Prieur du Plessis – … The chart below, courtesy of economist David Rosenberg of Gluskin Sheff & Associates, shows that credit is still contracting as banks go through the painful process of repairing their balance sheets.  … – Investment Postcards from Cape Town

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The Puzzle of Asia’s Rapid Rebound – By Anoop Singh – … One part of the answer is the powerful measures the region took  to counteract the crisis. … Their fiscal programs were, on average, even larger  than those introduced by the Group of Twenty industrialized and emerging market countries. … IMF Direct
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Heavier Regulation May do Little to Reduce Financial Risk – Increased competition rather than heavier regulation may be a better way to deal with the problem of financial institutions (FIs) that are too big to fail (TBTF), according to an article in Booz & Co’s strategy+business. – Research Recap

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GSEs Miss FHFA’s Goals for Low-Income Originations – By AUSTIN KILGORE – … Fannie Mae exceeded its goal of purchases of loans originated to borrowers in underserved areas by 0.4%, but Freddie missed its goal by 1.3%. Both GSEs missed the goal for special affordable mortgage purchases … For 2009, FHFA will lower the existing low- and moderate-income goal from 56% of each GSE’s total loan purchases to 43%, the existing underserved areas goal from 39% to 32% and the existing special affordable goal from 27% to 18% … -   HousingWire

Fannie Raises Lenders’ Net Worth Requirement Ten-Fold – By JON PRIOR – … To do business with Fannie Mae, lenders must now have a net worth of at least $2.5m — 10 times the previous required net worth — plus a dollar amount equal to 0.25% of the outstanding principal balance of any Fannie Mae portfolio it services. … – HousingWire

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ZIRP: The Cruelest Tax Of Them All – Sarel Oberholster – … How totally one sided. Rip off the savers and give to the borrowers. Not even the socialist dictate of Karl Marx which proclaims that everybody should contribute according to ability and receive according to need, can contain the injustice of a zero interest rate policy tax. … – Gold-Eagle.com

Yesterday was a special day. In the late afternoon I visited Costco, which some people feel simultaneously represents everything that is both bad and good about the retail channel. The change in time over the weekend had made it so the setting sun shone through the front entrance, illuminating the Samsung 46 inch plasma, the flannel shirts, AND the pre-lit Christmas tree boxes all at once. It was a tender moment.

What are Fed Funds? These are cash balances held by banks with their local Federal Reserve Bank, typically involved in an “inter-bank sale” of a Fed fund deposit for one business day – overnight. And the Fed Funds Rate is the overnight interest rate charged by those banks with excess reserves on hand. Why would this impact the mortgage rate that James & Jen Borrower pay on their mortgage? They don’t, directly, since the credit profile of a borrower, or house, is more complicated and riskier than a bank with excess funds, and an overnight rate is obviously different than a 30 year rate.

As was expected, the FOMC kept its central message and the Fed Funds rate unchanged, noting that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Of course the current economic conditions are low rates of resource utilization, subdued inflation trends, questionable housing situation, a weak labor market, and stable inflation expectations. The FOMC (Federal Open Market Committee) reduced the size of their Agency debt (bonds issued by the agencies, not directly backed by mortgages) purchase program to “about” $175 billion from $200 billion, but is still set on purchasing $1.25 trillion of agency mortgage-backed securities. Even with this adjustment the Fed balance sheet should peak above $2.6 trillion at the end of March 2010. Yesterday Wall Street dealers reported that mortgages have maintained their bid all session as sellers have been few and far between.

more news about FNMA, GMAC, Radian, Union Bank of CA, FHA audit delay, USB Wholesale, and joke of the day ..  CLICK HERE to continue

  << from T2 Report

also has T2 report – The performance of the FHA’s loan portfolio - Tim Iacono – … compliments of T2 Partners fine (and lengthy) report on the U.S. housing market that you can download … – themessthatgreenspanmade 

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Ginnie Mae and the government sponsored mortgage machine – good explanation how GNMA’s “double guarantee” works - Sober Look Blog

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MBA Urges Congress to Rethink 10% Risk Retention – By DIANA GOLOBAY – The Mortgage Bankers Association (MBA) joined the call against risk retention requirements in a recent financial regulatory reform legislation draft. … to avoid unintended consequences.  In particular, the 10% credit risk retention requirement may be inappropriately applied to all loan sale transactions regardless of whether the loan purchaser intends to permanently hold the loan, according to Courson. Independent mortgage bankers may also be forced out of business by the retention requirements. … – HousingWire.com 

and
Risk Retention May Shutter Mortgage Bankers: CMBP, CMLA – By AUSTIN KILGORE – HousingWire.com 

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Bernanke Housing Gamble May Bring Pressure to Extend Fed Aid – By Craig Torres – Federal Reserve Chairman Ben S. Bernanke is gambling that come March, he can stop the purchases of mortgage-backed securities that have propped up the U.S. housing market. Congress may have other ideas – Bloomberg

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Fed reads riot act to US bank chiefs – By PAUL THARP – The heads of Wall Street’s top 28 banks got hauled into the federal woodshed yesterday. … The CEOs visited New York Federal Reserve President William Dudley, who told them to follow pay rules — or else. – NY Post 
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The Nascent War on Inflation - By JIM MCTAGUE – YOU DON’T HAVE TO BE A CHINESE CENTRAL BANKER with a vault full of greenbacks to feel queasy about the soaring U.S. deficit and the consequent risks of inflation. Worry warts are breaking out all over. They are sounding the alarm in stock letters, at press conferences, and within the marbled halls of the Federal Reserve itself. … – Barron’s

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Goldman Looks to Buy Fannie Tax Credits – Treasury Lurks as Spoiler as Political Climate Favors Main Street’s Benefit Over Wall Street’s – By DAMIAN PALETTA – Goldman Sachs Group Inc. is in talks to buy millions of dollars of tax credits from government-controlled mortgage giant Fannie Mae, but the potential deal is running into opposition from the U.S. Treasury, which could block the deal.  A sale would bring some needed financial respite to Fannie Mae. But the administration is leery about approving a deal that would help Goldman reduce its tax bill, given the animus held by many lawmakers toward big Wall Street firms in general and Goldman in particular.-  Wall Street Journal

and
Tax Credit Deal – Treasury May Block Goldman Sachs, Fannie Mae Deal – Deal Could Help Fannie Mae’s Finances but Is Goldman Sachs Becoming Too Powerful? – By MATTHEW JAFFE -  ABC News Money 

and

Buffett Joins Goldman in Bid for Fannie Mae Tax Credits -  By SUSANNE CRAIG, CHRISTINA S.N. LEWIS and DAMIAN PALETTA -  … in the investment bank’s bid to buy $3 billion in tax credits from government-owned mortgage giant Fannie Mae, according to people familiar with the matter.  The involvement of Mr. Buffett adds a twist to what was already a politically sensitive deal.  Berkshire Hathaway could be an appealing partner for Goldman. … One investor who has considered a similar transaction said they promise annualized returns of at least 30%. – WSJ Real Estate 

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Survey Confirms that Traffic is Slowing as The Tax Credit Nears Expiration -  Strategic Building Market Intelligence™ – John Burns Real Estate Consulting

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Government cash injection left J.P. Morgan a “loser” – Greg Burns – A little more than a year ago, the Bush administration pumped $125 billion into nine of the biggest U.S. banks in exchange for preferred shares — and J.P. Morgan Chase somehow came out a loser.  That’s the conclusion of  two University of Chicago finance professors who say Morgan Stanley was the big winner, based on which institutions had the most to lose in the absence of unprecedented government aid. – Chicago Tribune Blogs 

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Moral Hazard: The Long-Lasting Legacy of Bailouts - William Poole – hattip Ira A – … This article proposes reforms to the U.S. financial system. A change in incentives is needed.  … – Financial Analysts Journal                  PDF of 7 page article