will be rockey and more of the same for banking, finance, and the housing industry. The mortgage industry (which this report will focus mostly on) is realing. New Home Sales appear to be heading south, and that's saying something given the current pace. The National Assocation of Realtors says pending new home sales fell to the lowest level on record in November, falling another 4% to a 82.3 index. Please don't ask me how to disect the index, these are their report(s) not mine. Either way, as in many future report(s) this doesn't bode well for 2009'.
That said, there is some good news which was reported today, the Fed actually made their first purchase of mortgage-backed securities this morning. The total amount of the purchase will not be known until it is announced on Thursday, January 8th. The Fed intends to keep a running tally of its aggregate purchases and will update its figure every Thursday until they’ve spent the allotted $500 billion. It is worth noting that the money the Fed will spend to support the mortgage and housing market is not attached to any debt – the Fed just printed it up.
While this capital solves the near-term problem of providing attractive financing to stimulate home buying – it comes with a price that will be paid later – in the form of higher inflation levels. That is a concern for a different day.
The Fed’s mortgage-backed securities purchases could not have come at a better time. Sure interest rates are at historic low's. I know you have heard that before, but trust me they are!!! Treasury prices have “taken-it-on-the-chin” since Friday as a growing number of investors are pacing the floor and wringing their hands over the massive $1.5 to $2.0 trillion worth of debt Uncle Sam plans to issue to support the financial markets and the economy in general this year.
The Obama administration have made it abundantly clear that the risk of doing too little to re-fire the country’s economic engines poses a greater risk to our collective financial well being than the risk associated with doing too much.
Outside of today's pending home sales report, the central feature on this week’s economic calendar will be Friday’s December nonfarm payroll report. The market has already priced in the expected loss of 485,000 jobs together with the likelihood the national jobless rate ratcheted up to 6.9% from last month’s 6.7% level. Chances are the actual numbers will match or fall within shouting distance of the consensus estimate values. If so, the report’s impact on the trend trajectory of mortgage interest rates will not be large, if it registers at all. In the off-chance the headline December payroll shows a job loss of 470,000 or less and/or the national jobless rates posts a reading of 6.7% or less look for mortgage interest rates to edge fractionally higher. Here's to a brighter 2009'!
Economic Releases
Release Date & Time
Economic Indicator
Consensus Estimate
Analysis
Mon. Jan. 5,
Treasury auction announcement
The Treasury Department will announce the dollar size of the 3- and 10-year note auctions scheduled for Wednesday and Thursday respectively. Big numbers here will likely put some modest upward pressure on mortgage interest rates.
Tue. Jan. 6, 10:00 a.m. ET
Nov. Factory Orders
-2.5% vs. last -5.1%
The erosion in November factory orders will likely go largely unnoticed today. Look for this data to have little, if any direct impact on the trend trajectory of mortgage interest rates.
Tue. Jan. 6, 10:00 a.m. ET
Dec. Institute of Supply Mgmt.
Service Index
37.0 vs. last 37.3
Fixed Income MBS Traders have already priced-in expectations that this index of activity in the service sector slumped to an all-time record low last month. If the consensus estimate proves accurate, the reaction in the mortgage market will likely be limited. In the highly unlikely event this index posts a reading of 38.0 or higher -- look for mortgage interest rates to move fractionally higher as well.
Wed. Jan. 7, 1:00 p.m. ET
Treasury auctions 3-year notes
Most analysts believe this offering and tomorrow’s 10-year note offering will be an excellent early-year gauge of global investors’ perception of risk. Strong demand for both offerings will tend to be supportive of steady to fractionally lower mortgage interest rates. If the yield on the 3-year note climbs above 1.165% and/or the 10-year note posts a yield higher than 2.430% on a closing basis look for mortgage interest rates to creep higher as well.
Thurs. Jan 8, 8:30 a.m. ET
Initial jobless claims for the week ended 1/3
+48,000
Further erosion in the employment sector is broadly anticipated by investors and has already been deeply priced into the current market. Today’s figures will likely draw little more than a passing glance from market participants.
Thurs. Jan. 8, 1:00 p.m. ET
Treasury auctions
10-year notes
Should the 10-year note posts a yield higher than 2.430% -- look for mortgage interest rates to creep higher as well.
Fri. Jan. 9, 8:30 a.m. ET
Dec. Nonfarm Payroll
Jobless Rate
Avg. Hourly Earnings
-500,000
7.0% vs. last 6.7%
+0.2% vs. last +0.4%
This data set will only be a threat to the prospects of steady to fractionally lower mortgage interest rates if the headline number posts a job loss of 470,000 or less and/or if the national jobless rate posts a reading of 6.7% or less. The probabilities are very low that one or both of these conditions will occur.
Fri. Jan. 9, 10:00 a.m. ET
Nov. Wholesale Inventory
-0.8% vs. last -1.1%
There is little doubt that slumping demand has taken a heavy toll on the wholesale inventories – so this report will only measure the degree of weakness. This old, stale bit of macro-economic news will likely draw nothing more than a disinterested glance from mortgage invertors today.
Tuesday, January 6, 2009
Tuesday, December 23, 2008
Holiday Peak
I hope you and your family finds peace, solice and safe travels over the next 10 days. 2009 looks to be an exciting challenge to just about every industry in the US.
Release Date & Time
Economic Indicator
Consensus Estimate
Analysis
Mon. Dec. 22, 1:00 p.m. ET
Treasury auctions $38 bil. of
2-year notes
Market participants’ desire for maximum asset protection continues to trump their desire for a meaningful return on invested capital as Uncle Sam comes to the market place looking to borrow a record setting $38 billion in the form of 2-year notes. This event will was supportive of steady mortgage interest rates.
Tue. Dec. 23, 8:30 a.m. ET
Final revision Q3
Gross Domestic Product
-0.5% vs. last -0.5%
Look for this data set to do nothing more than take up space on this week’s economic calendar as far as mortgage investors are concerned.
Tue. Dec. 23, 10:00 a.m. ET
Nov. Existing Home Sales
Down 1.6%
Mortgage investors have already “priced-in” expectations for a dismal November existing home sales figure. A reported value that falls anywhere near the consensus estimate will likely have little, if any impact on the trend trajectory of mortgage interest rates today.
Tue. Dec. 23, 10:00 a.m. ET
Nov. New Home Sales
Down 3.0%
Rising unemployment, stock market losses, tight credit underwriting standards and competition from a huge stock of existing homes for sale probably took a toll on the pace of new home sales last month. A number that lands to close to the consensus estimate will likely draw nothing more than a passing glance from mortgage investors. In the unlikely case new home sales post a decline of 2.5% or less – look for “surprised” investors to push mortgage interest rates fractionally higher.
Tues. Dec. 23, 1:00 p.m. ET
Treasury auctions $28 bil. of
5-year notes
Economic uncertainties will likely be strong enough to create decent support for this offering. If so, this event will tend to be supportive of steady mortgage interest rates. A poorly bid 5-year note auction will almost certainly make it difficult for mortgage interest rates to move notably lower today.
Wed. Dec. 24, 8:30 a.m. ET
Initial jobless claims for the week ended 12/20
-4,000
The modest expected decline in the initial jobless claims figure will likely draw nothing more than a passing glance from mortgage investors today.
Wed. Dec. 24, 8:30 a.m. ET
Nov. Personal Income
Spending
Core PCE index
0.0% vs. last +0.3%
-0.7% vs. last -0.1%
0.0% vs. last 0.0%
The most important component of this data series is the core personal consumption expenditure index, the Fed’s favorite measure of inflation pressure at the consumer level. The expected unchanged reading for core PCE will tend to be supportive of steady to fractionally lower mortgage interest rates.
Wed. Dec. 24, 8:30 a.m. ET
Nov. Durable Goods Orders
-3.0% vs. last -6.9%
The modest improvement in this forward looking measure of manufacturing activity will likely be completely overshadowed by the announced month-long plant closing for most of the auto industry. This report will likely have little, if any impact on the direction of mortgage interest rates today.
Wed. Dec. 24, 2:00 p.m. ET
The mortgage market closes early for the Xmas Holiday
Thurs. Dec. 25,
Marry Christmas
Fri. Dec. 26, 2:00 p.m. ET
The CBOT will close early.
Release Date & Time
Economic Indicator
Consensus Estimate
Analysis
Mon. Dec. 22, 1:00 p.m. ET
Treasury auctions $38 bil. of
2-year notes
Market participants’ desire for maximum asset protection continues to trump their desire for a meaningful return on invested capital as Uncle Sam comes to the market place looking to borrow a record setting $38 billion in the form of 2-year notes. This event will was supportive of steady mortgage interest rates.
Tue. Dec. 23, 8:30 a.m. ET
Final revision Q3
Gross Domestic Product
-0.5% vs. last -0.5%
Look for this data set to do nothing more than take up space on this week’s economic calendar as far as mortgage investors are concerned.
Tue. Dec. 23, 10:00 a.m. ET
Nov. Existing Home Sales
Down 1.6%
Mortgage investors have already “priced-in” expectations for a dismal November existing home sales figure. A reported value that falls anywhere near the consensus estimate will likely have little, if any impact on the trend trajectory of mortgage interest rates today.
Tue. Dec. 23, 10:00 a.m. ET
Nov. New Home Sales
Down 3.0%
Rising unemployment, stock market losses, tight credit underwriting standards and competition from a huge stock of existing homes for sale probably took a toll on the pace of new home sales last month. A number that lands to close to the consensus estimate will likely draw nothing more than a passing glance from mortgage investors. In the unlikely case new home sales post a decline of 2.5% or less – look for “surprised” investors to push mortgage interest rates fractionally higher.
Tues. Dec. 23, 1:00 p.m. ET
Treasury auctions $28 bil. of
5-year notes
Economic uncertainties will likely be strong enough to create decent support for this offering. If so, this event will tend to be supportive of steady mortgage interest rates. A poorly bid 5-year note auction will almost certainly make it difficult for mortgage interest rates to move notably lower today.
Wed. Dec. 24, 8:30 a.m. ET
Initial jobless claims for the week ended 12/20
-4,000
The modest expected decline in the initial jobless claims figure will likely draw nothing more than a passing glance from mortgage investors today.
Wed. Dec. 24, 8:30 a.m. ET
Nov. Personal Income
Spending
Core PCE index
0.0% vs. last +0.3%
-0.7% vs. last -0.1%
0.0% vs. last 0.0%
The most important component of this data series is the core personal consumption expenditure index, the Fed’s favorite measure of inflation pressure at the consumer level. The expected unchanged reading for core PCE will tend to be supportive of steady to fractionally lower mortgage interest rates.
Wed. Dec. 24, 8:30 a.m. ET
Nov. Durable Goods Orders
-3.0% vs. last -6.9%
The modest improvement in this forward looking measure of manufacturing activity will likely be completely overshadowed by the announced month-long plant closing for most of the auto industry. This report will likely have little, if any impact on the direction of mortgage interest rates today.
Wed. Dec. 24, 2:00 p.m. ET
The mortgage market closes early for the Xmas Holiday
Thurs. Dec. 25,
Marry Christmas
Fri. Dec. 26, 2:00 p.m. ET
The CBOT will close early.
Thursday, December 11, 2008
US Financial Crisis Circa 2007 - 2010
Did my title grab your attention? I changed it 5 times in an attempt to properly convey my thoughts regarding this Blog.
Last night one of my partners' called me on his way home and during our discussion he stated that it was his opinion the US was in the bottom of it’s current "recession cycle". He has good reason to believe such a trend as we are having one of our best months year to date. But one month (good or bad) doesn't make a Quarter and One Quarter (good or bad) doesn't make a year. While I hastily supported his comment over the phone, selfishly because of statements I had made earlier this year regarding the timing of our rebound, it nonetheless got me thinking.
This morning I started to do a little research on where our country is today, reviewed how we got here and how exactly our government has attempted to fight this present economic slowdown. Time and time again, my research would defer to a lengthy recession which started in the 80’s and in Japan. While our country’s economic infrastructure is quite a bit different I concluded 7 similarities that I would like to share. Additionally, how their government responded is eerily similar to how the US’s.
In Japan mid to late 1980s, you found excess liquidity in the financial system. This caused an asset and stock market bubble. People with spare cash bought assets and shares causing them to rise (in the US this was paid through credit cards and mortgages. In the last 1987, the Japanese monetary authorities worried about inflation doubled interest rates. As the economy stalled, they were then slow to reduce them.
Loan defaults increased because Japanese banks had made a series of bad lending decisions. Sound familiar?
This caused a fall in house and share prices. Hmmm….
Higher interest rates ensued and slumping asset values caused an increase in loan defaults.
The Japanese economic miracle was based on a strong degree of government intervention. See Obama’s Great Works Plan.
When the crisis came, banks were encouraged to continue lending to firms, even if on verge of bankruptcy. In other words, the decision to bailout declining / inefficient firms masked the problem but didn't deal with the underlying issues.
There was a failure to acknowledge the true extent of the problem, hoping asset prices would rebound. Check your 401k value recently?
Inflation expectations fell to negative. Deflation made normal demand side policies ineffective. See US backs bonds at 0% yield.
The Japanese government eventually cut interest rates to 0%. As mentioned above, they increased government spending to try and increase aggregate demand. Unlike the US, there was well documented reluctance to increase money supply because even though Japan had deflation, they held an unwarranted fear of inflation. Here in the US, do you know anyone who would be interested in buying residential mortgages with negative HPA values a 8-15% annually? It’s almost as bad as car loans where you know you are going to lose value month over month on the asset.
Your history lesson for today is that the economic consequences of Japan's crisis were the following:
Longest Bear Market in History (10 years)
Long Period of stagnant Growth
Significant rise in Unemployment. Japan’s unemployment was almost unheard of from the post war period.
Rise in inequality. Issues such as homelessness have become a real problem.
National Debt rose to 180% of GDP.
These findings provided above will not be the first to declare that the systemic risks associated with the current path in which our country’s government decisions to address our problems will do more harm than good. When our government made that fatal decision that certain companies were too large to fail, capitalism (as this country is famous for) died. There are deep rooted discussions which I will save for another time regarding our country's softness as it relates to "Everyone being a winner" and the changing (liberal) attitues within this country.
In closing I am now under the impression that our economic woes will continue throughout all of 2009. Should some of this country's fiscal policies not change there is a very good chance we fall straight into a depression. This is the first time I have the D word and am afraid you may see it in future posts.
This Week’s Remain Economic Figures
Fri. Dec. 12, 8:30 a.m. ET
Nov. Producer Price Index
Core Rate
-2.0% vs. last -2.8%
+0.1% vs. last +0.4%
Falling food and energy prices will continue to limit inflation pressure at the producer level. The notable drop in the core rate (a value that excludes the more volatile food and energy components) will be welcome news for most investors. Look for this data to be supportive of steady mortgage interest rates.
Fri. Dec. 12, 8:30 a.m. ET
Nov. Retail Sales
Ex. Auto
-1.9% vs. last -2.8%
-1.7% vs. last -2.2%
No one will be surprised to see a sharp drop in retail sales as consumers are stressed by meltdown in the labor sector. If the consensus estimate proves accurate, investors will likely consider this data a positive for the prospects of steady to perhaps fractionally lower mortgage interest rates.
Last night one of my partners' called me on his way home and during our discussion he stated that it was his opinion the US was in the bottom of it’s current "recession cycle". He has good reason to believe such a trend as we are having one of our best months year to date. But one month (good or bad) doesn't make a Quarter and One Quarter (good or bad) doesn't make a year. While I hastily supported his comment over the phone, selfishly because of statements I had made earlier this year regarding the timing of our rebound, it nonetheless got me thinking.
This morning I started to do a little research on where our country is today, reviewed how we got here and how exactly our government has attempted to fight this present economic slowdown. Time and time again, my research would defer to a lengthy recession which started in the 80’s and in Japan. While our country’s economic infrastructure is quite a bit different I concluded 7 similarities that I would like to share. Additionally, how their government responded is eerily similar to how the US’s.
In Japan mid to late 1980s, you found excess liquidity in the financial system. This caused an asset and stock market bubble. People with spare cash bought assets and shares causing them to rise (in the US this was paid through credit cards and mortgages. In the last 1987, the Japanese monetary authorities worried about inflation doubled interest rates. As the economy stalled, they were then slow to reduce them.
Loan defaults increased because Japanese banks had made a series of bad lending decisions. Sound familiar?
This caused a fall in house and share prices. Hmmm….
Higher interest rates ensued and slumping asset values caused an increase in loan defaults.
The Japanese economic miracle was based on a strong degree of government intervention. See Obama’s Great Works Plan.
When the crisis came, banks were encouraged to continue lending to firms, even if on verge of bankruptcy. In other words, the decision to bailout declining / inefficient firms masked the problem but didn't deal with the underlying issues.
There was a failure to acknowledge the true extent of the problem, hoping asset prices would rebound. Check your 401k value recently?
Inflation expectations fell to negative. Deflation made normal demand side policies ineffective. See US backs bonds at 0% yield.
The Japanese government eventually cut interest rates to 0%. As mentioned above, they increased government spending to try and increase aggregate demand. Unlike the US, there was well documented reluctance to increase money supply because even though Japan had deflation, they held an unwarranted fear of inflation. Here in the US, do you know anyone who would be interested in buying residential mortgages with negative HPA values a 8-15% annually? It’s almost as bad as car loans where you know you are going to lose value month over month on the asset.
Your history lesson for today is that the economic consequences of Japan's crisis were the following:
Longest Bear Market in History (10 years)
Long Period of stagnant Growth
Significant rise in Unemployment. Japan’s unemployment was almost unheard of from the post war period.
Rise in inequality. Issues such as homelessness have become a real problem.
National Debt rose to 180% of GDP.
These findings provided above will not be the first to declare that the systemic risks associated with the current path in which our country’s government decisions to address our problems will do more harm than good. When our government made that fatal decision that certain companies were too large to fail, capitalism (as this country is famous for) died. There are deep rooted discussions which I will save for another time regarding our country's softness as it relates to "Everyone being a winner" and the changing (liberal) attitues within this country.
In closing I am now under the impression that our economic woes will continue throughout all of 2009. Should some of this country's fiscal policies not change there is a very good chance we fall straight into a depression. This is the first time I have the D word and am afraid you may see it in future posts.
This Week’s Remain Economic Figures
Fri. Dec. 12, 8:30 a.m. ET
Nov. Producer Price Index
Core Rate
-2.0% vs. last -2.8%
+0.1% vs. last +0.4%
Falling food and energy prices will continue to limit inflation pressure at the producer level. The notable drop in the core rate (a value that excludes the more volatile food and energy components) will be welcome news for most investors. Look for this data to be supportive of steady mortgage interest rates.
Fri. Dec. 12, 8:30 a.m. ET
Nov. Retail Sales
Ex. Auto
-1.9% vs. last -2.8%
-1.7% vs. last -2.2%
No one will be surprised to see a sharp drop in retail sales as consumers are stressed by meltdown in the labor sector. If the consensus estimate proves accurate, investors will likely consider this data a positive for the prospects of steady to perhaps fractionally lower mortgage interest rates.
Monday, November 24, 2008
Holiday Focused Week
The next 10 days are fairly busy on the economic front. I'll keep this fairly light.
The Economic Calendar for the week of Monday, November 24th through Monday, December 1st, 2008
Release Date & Time
Economic Indicator
Consensus Estimate
My Analysis
Mon. Nov. 24, 8:30 a.m. ET
Oct. Existing Home Sales -2.5%
Most investors expected sluggish economic growth and an unsettled labor market took a toll on the pace of existing home sales last month. They were right and mortgage fell rates today.
Mon. Nov. 24, 1:00 p.m. ET
Treasury auctions $36 bil. of
2-year notes
Most observers believe demand will be solid for this debt offering from Uncle Sam. If so, this event should prove to be supportive of steady to perhaps fractionally lower mortgage interest rates.
Tue. Nov. 25, 8:30 a.m. ET
2nd estimate Q3
Gross Domestic Product
-0.5% vs. last -0.3%
Previously released economic data strongly suggests economic activity cooled sharply during the quarter. A downward revision to the initial estimate will not likely surprise anyone – rendering this data toothless in terms of its impact on the direction of mortgage interest rates today.
Tue. Nov. 25, 10:00 a.m. ET
Nov. Consumer Confidence
38.0 vs. last 38.0
No one will be surprised to see that gloomy news from the economy, rising joblessness and plunging stock markets have all taken a toll on consumer confidence. This data will likely draw little more than a passing glance from mortgage investors.
Tue. Nov. 25, 1:00 p.m. ET
Treasury auctions $26 bil. of
5-year notes
The majority of analysts believe this offering will be well bid. If so, it will likely have little impact on the trend trajectory of mortgage interest rates. If analysts are proven to be overly optimistic (as I think they likely will be) the yield of these notes will rise -- which will cause mortgage interest rates to move higher as well
Wed. Nov. 26, 8:30 a.m. ET
Oct. Personal Income
Spending
Core PCE Index
+0.1% vs. last +0.2%
-0.9% vs. last -0.3%
0.0 vs. last +0.2%
If the consensus estimate proves accurate, incomes will post their smallest gain in three months while a sharp drop in spending is likely setting retailers up for the worst holiday season in six years. The decline in income and spending combined with the Fed’s favorite measure of inflation at the consumer level, the personal consumption expenditure index, showing that core inflation pressures are nowhere to be seen -- will all likely be viewed as a positive for the prospects of steady mortgage interest rates today.
Wed. Nov. 26, 8:30 a.m. ET
Initial jobless claims for the week ended 11/22
Down 7,000
The modest expected decline in the initial jobless claims figure will likely draw nothing more than a passing glance from mortgage investors today.
Wed. Nov. 26, 8:30 a.m. ET
Oct. Durable Goods
-2.6% vs. last +0.9%
If the consensus estimate proves accurate, look for the news to push stock prices lower creating a “flight-to-quality” in the mortgage market which will be supportive of slightly lower rates.
Wed. Nov. 26, 10:00 a.m. ET
Oct. New Home Sales
-2.17%
The combination of weak economic conditions and tight credit likely restrict the pace of new home sales in October. Look for this data to have little, if any impact on the direction of mortgage interest rates today.
Wed. Nov. 26, 2:00 p.m. ET
All markets closes early
Thurs. Nov. 27
Market closed for the Thanksgiving Holiday. I wish you and your family a safe and enjoyable holiday.
Fri. Nov. 28, 2:00 p.m. ET
Fixed income markets closes early
Mon. Dec. 1, 8:30 a.m. ET
Nov. Institute of Supply Mgmt.
37.6 vs. last 38.9
Everybody knows the manufacturing sector is weak so today’s report will only define the degree of weakness. Look for this data to have little, if any impact on the direction of mortgage interest rates today.
The Economic Calendar for the week of Monday, November 24th through Monday, December 1st, 2008
Release Date & Time
Economic Indicator
Consensus Estimate
My Analysis
Mon. Nov. 24, 8:30 a.m. ET
Oct. Existing Home Sales -2.5%
Most investors expected sluggish economic growth and an unsettled labor market took a toll on the pace of existing home sales last month. They were right and mortgage fell rates today.
Mon. Nov. 24, 1:00 p.m. ET
Treasury auctions $36 bil. of
2-year notes
Most observers believe demand will be solid for this debt offering from Uncle Sam. If so, this event should prove to be supportive of steady to perhaps fractionally lower mortgage interest rates.
Tue. Nov. 25, 8:30 a.m. ET
2nd estimate Q3
Gross Domestic Product
-0.5% vs. last -0.3%
Previously released economic data strongly suggests economic activity cooled sharply during the quarter. A downward revision to the initial estimate will not likely surprise anyone – rendering this data toothless in terms of its impact on the direction of mortgage interest rates today.
Tue. Nov. 25, 10:00 a.m. ET
Nov. Consumer Confidence
38.0 vs. last 38.0
No one will be surprised to see that gloomy news from the economy, rising joblessness and plunging stock markets have all taken a toll on consumer confidence. This data will likely draw little more than a passing glance from mortgage investors.
Tue. Nov. 25, 1:00 p.m. ET
Treasury auctions $26 bil. of
5-year notes
The majority of analysts believe this offering will be well bid. If so, it will likely have little impact on the trend trajectory of mortgage interest rates. If analysts are proven to be overly optimistic (as I think they likely will be) the yield of these notes will rise -- which will cause mortgage interest rates to move higher as well
Wed. Nov. 26, 8:30 a.m. ET
Oct. Personal Income
Spending
Core PCE Index
+0.1% vs. last +0.2%
-0.9% vs. last -0.3%
0.0 vs. last +0.2%
If the consensus estimate proves accurate, incomes will post their smallest gain in three months while a sharp drop in spending is likely setting retailers up for the worst holiday season in six years. The decline in income and spending combined with the Fed’s favorite measure of inflation at the consumer level, the personal consumption expenditure index, showing that core inflation pressures are nowhere to be seen -- will all likely be viewed as a positive for the prospects of steady mortgage interest rates today.
Wed. Nov. 26, 8:30 a.m. ET
Initial jobless claims for the week ended 11/22
Down 7,000
The modest expected decline in the initial jobless claims figure will likely draw nothing more than a passing glance from mortgage investors today.
Wed. Nov. 26, 8:30 a.m. ET
Oct. Durable Goods
-2.6% vs. last +0.9%
If the consensus estimate proves accurate, look for the news to push stock prices lower creating a “flight-to-quality” in the mortgage market which will be supportive of slightly lower rates.
Wed. Nov. 26, 10:00 a.m. ET
Oct. New Home Sales
-2.17%
The combination of weak economic conditions and tight credit likely restrict the pace of new home sales in October. Look for this data to have little, if any impact on the direction of mortgage interest rates today.
Wed. Nov. 26, 2:00 p.m. ET
All markets closes early
Thurs. Nov. 27
Market closed for the Thanksgiving Holiday. I wish you and your family a safe and enjoyable holiday.
Fri. Nov. 28, 2:00 p.m. ET
Fixed income markets closes early
Mon. Dec. 1, 8:30 a.m. ET
Nov. Institute of Supply Mgmt.
37.6 vs. last 38.9
Everybody knows the manufacturing sector is weak so today’s report will only define the degree of weakness. Look for this data to have little, if any impact on the direction of mortgage interest rates today.
Monday, November 10, 2008
The Ride That Never Ends
I have started working on our firms' forecast for 2009 and in looking an a number of micro and macro economic reports I've got to tell you that I don't like what I am seeing. Not in one bit.
The concerns are many, the challenges are well publicised. Am I predicting the end of modern finance as we know it.... No. Do I believe the experts when they say Americans have run out of money.... Perhaps. The driving concern I have is jobs. Should this recession (we are in one and if you don't believe me feel free to contact me off line to discuss) prolong itself past the second quarter of 2009, I anticipate significant job loss. Note that we have certain markets almost at 9.5% today (see my previous post titled National City Bank - Did the C ranks really drop the ball). I am referring to a national average perhaps as high as 12%.
Like it or not, the US government has and will continue to socialize our way out of this mess(including debt) because my first prediction mentioned above may no longer be a No. We could end up with a completely socialized banking, auto and our financial system. Since our country is no longer manufacturing oriented, service industries which make up a HUGE percentage of GDP (perhaps as high as 75%) now take center stage. In case you haven't noticed, it's a whole lot easier to get that corner table at the new high-flying restaurant or club. In short, if you think people aren't spending money today... you haven't' seen anything yet!
Back to jobs. If you look at the largest labor sectors (housing, manufacturing, service - already mentioned above) most are already depressed with the latter having more room to fall. The latest GDP numbers 0.3% was somewhat smaller then I expected. The reason for this contraction is not really a sound one: government spending soared. While I had expected government spending to rise, it rose a lot more than usual. Government purchases rose from 20.1% of GDP to 20.4%-the highest since Q3 1991, and up from just 17.6% in Clinton's last quarter (During the Clinton era, government purchases decreased significantly as military spending fell). As before, military spending increased particularly much, but non-military federal spending and state & local government spending increased its share of GDP too. Excluding government purchases, the contraction would have been closer to 2%.
My point, the citizens of the United States might have elected the right party in charge (at the present time). A return to a strong financial footing for this country may be through a significant government spending package, one the Democrats will likely give us. Otherwise, this could be a long painful road, one which this country hasn't seen in 70+ years.
This weeks economic figures: dominted by Treasury Auctions
Release Date & Time
Economic Indicator
Consensus Estimate
Analysis
Mon. Nov. 10, 1:00 p.m. ET
Treasury auctions $25 billion of 3-year notes
This will be the first leg of a three-part borrowing Uncle Sam will engage in this week. By the time Friday rolls around, Uncle Sam will have tapped investors for an additional $55 billion. That’s a record amount for November – well above last year’s $18 billion capital need. All of this incoming supply from the government will likely make mortgage investors hesitant to push mortgage interest rates notably lower.
Mon. Nov. 10, 2:00 p.m. ET
The mortgage market will close at 2:00 pm EST for the Veteran’s Day Holiday
Tue. Nov. 11
Veteran’s Day Holiday
Wed. Nov. 12, 1:00 a.m. ET
Treasury auctions $20 billion of 10-year notes
All of this incoming supply from the government will likely make mortgage investors hesitant to push mortgage interest rates notably lower.
Thurs. Nov. 13,
The current delivery month for most mortgage-backed securities “rolls” to December
This is a standard monthly administrative function of the mortgage market. The small price impact this event creates is already reflected on most investors’ rate sheets.
Thurs. Nov. 13, 8:30 a.m. ET
Initial jobless claims for the week ended 11/8
Up 1,000
The modest expected increase for initial jobless claims will likely draw nothing more than a passing glance from mortgage investors today.
Thurs. Nov. 13, 1:00 p.m. ET
Treasury auctions $10 billion of 30-year bonds
We might see a small “relief rally” in the bond and mortgage-backed security once the supply from Uncle Sam is out of the way. Any such rally will likely be limited in terms of price movement and duration.
Fri. Nov. 14, 8:30 a.m. ET
Oct. Retail Sales
Ex. auto
-1.9% vs. last -1.2%
-1.0% vs. last -0.6%
Unless they’ve been living under a rock – there is no one that doubts the October retail sales figures will be weak – the only question is how weak. The consensus estimate is already reflected in current mortgage prices, so it will take numbers considerably worse (a headline drop of 2.1% or more and an ex auto value showing a decline of 1.2% or more) to create much support for the prospects fractionally lower mortgage interest rates. The likelihood that the consensus estimate proves to be overly pessimistic is very small. Nonetheless a headline number showing October sales did not fall as sharply as expected will probably tend to nudge all credit including mortgage interest rates higher.
Fri. Nov. 14, 10:00 a.m. ET
Sept. Business Inventories
0.0 vs. last +0.3
This sliver of dated economic news will undoubtedly be completely overshadowed by the much more important October retail sales report that was released early today.
Mon. Nov. 17, 9:15 a.m. ET
Oct. Industrial Production &
Capacity Utilization
-0.5% vs. last -2.8%
76.1 vs. last 76.4
Already released reports showing sagging factor orders and plummeting retail sales make it a virtual “given” that these two measures of manufacturing activity will be puny as well. Look for this data to have little, if any noticeable impact on the trend trajectory of mortgage interest rates today.
The concerns are many, the challenges are well publicised. Am I predicting the end of modern finance as we know it.... No. Do I believe the experts when they say Americans have run out of money.... Perhaps. The driving concern I have is jobs. Should this recession (we are in one and if you don't believe me feel free to contact me off line to discuss) prolong itself past the second quarter of 2009, I anticipate significant job loss. Note that we have certain markets almost at 9.5% today (see my previous post titled National City Bank - Did the C ranks really drop the ball). I am referring to a national average perhaps as high as 12%.
Like it or not, the US government has and will continue to socialize our way out of this mess(including debt) because my first prediction mentioned above may no longer be a No. We could end up with a completely socialized banking, auto and our financial system. Since our country is no longer manufacturing oriented, service industries which make up a HUGE percentage of GDP (perhaps as high as 75%) now take center stage. In case you haven't noticed, it's a whole lot easier to get that corner table at the new high-flying restaurant or club. In short, if you think people aren't spending money today... you haven't' seen anything yet!
Back to jobs. If you look at the largest labor sectors (housing, manufacturing, service - already mentioned above) most are already depressed with the latter having more room to fall. The latest GDP numbers 0.3% was somewhat smaller then I expected. The reason for this contraction is not really a sound one: government spending soared. While I had expected government spending to rise, it rose a lot more than usual. Government purchases rose from 20.1% of GDP to 20.4%-the highest since Q3 1991, and up from just 17.6% in Clinton's last quarter (During the Clinton era, government purchases decreased significantly as military spending fell). As before, military spending increased particularly much, but non-military federal spending and state & local government spending increased its share of GDP too. Excluding government purchases, the contraction would have been closer to 2%.
My point, the citizens of the United States might have elected the right party in charge (at the present time). A return to a strong financial footing for this country may be through a significant government spending package, one the Democrats will likely give us. Otherwise, this could be a long painful road, one which this country hasn't seen in 70+ years.
This weeks economic figures: dominted by Treasury Auctions
Release Date & Time
Economic Indicator
Consensus Estimate
Analysis
Mon. Nov. 10, 1:00 p.m. ET
Treasury auctions $25 billion of 3-year notes
This will be the first leg of a three-part borrowing Uncle Sam will engage in this week. By the time Friday rolls around, Uncle Sam will have tapped investors for an additional $55 billion. That’s a record amount for November – well above last year’s $18 billion capital need. All of this incoming supply from the government will likely make mortgage investors hesitant to push mortgage interest rates notably lower.
Mon. Nov. 10, 2:00 p.m. ET
The mortgage market will close at 2:00 pm EST for the Veteran’s Day Holiday
Tue. Nov. 11
Veteran’s Day Holiday
Wed. Nov. 12, 1:00 a.m. ET
Treasury auctions $20 billion of 10-year notes
All of this incoming supply from the government will likely make mortgage investors hesitant to push mortgage interest rates notably lower.
Thurs. Nov. 13,
The current delivery month for most mortgage-backed securities “rolls” to December
This is a standard monthly administrative function of the mortgage market. The small price impact this event creates is already reflected on most investors’ rate sheets.
Thurs. Nov. 13, 8:30 a.m. ET
Initial jobless claims for the week ended 11/8
Up 1,000
The modest expected increase for initial jobless claims will likely draw nothing more than a passing glance from mortgage investors today.
Thurs. Nov. 13, 1:00 p.m. ET
Treasury auctions $10 billion of 30-year bonds
We might see a small “relief rally” in the bond and mortgage-backed security once the supply from Uncle Sam is out of the way. Any such rally will likely be limited in terms of price movement and duration.
Fri. Nov. 14, 8:30 a.m. ET
Oct. Retail Sales
Ex. auto
-1.9% vs. last -1.2%
-1.0% vs. last -0.6%
Unless they’ve been living under a rock – there is no one that doubts the October retail sales figures will be weak – the only question is how weak. The consensus estimate is already reflected in current mortgage prices, so it will take numbers considerably worse (a headline drop of 2.1% or more and an ex auto value showing a decline of 1.2% or more) to create much support for the prospects fractionally lower mortgage interest rates. The likelihood that the consensus estimate proves to be overly pessimistic is very small. Nonetheless a headline number showing October sales did not fall as sharply as expected will probably tend to nudge all credit including mortgage interest rates higher.
Fri. Nov. 14, 10:00 a.m. ET
Sept. Business Inventories
0.0 vs. last +0.3
This sliver of dated economic news will undoubtedly be completely overshadowed by the much more important October retail sales report that was released early today.
Mon. Nov. 17, 9:15 a.m. ET
Oct. Industrial Production &
Capacity Utilization
-0.5% vs. last -2.8%
76.1 vs. last 76.4
Already released reports showing sagging factor orders and plummeting retail sales make it a virtual “given” that these two measures of manufacturing activity will be puny as well. Look for this data to have little, if any noticeable impact on the trend trajectory of mortgage interest rates today.
Fannie Mae posts $29 billion loss
As recently reported in the AP, Fannie Mae on Monday posted a $29 billion loss in the third quarter as it took a massive tax-related charge, and said it may have to tap the government’s $100 billion lifeline in the coming months.
The mortgage finance company, seized by federal regulators more than two months ago, posted a loss of $13 per share for the July-September quarter, mainly due to a $21.4 billion non-cash charge to reduce the value of tax assets. That compares with a loss of $1.4 billion, or $1.56 a share, in the year-ago period. Analysts surveyed by Thomson Reuters had expected a loss of $1.60 per share.
Fannie Mae’s net worth — the value of its assets minus the value of its liabilities — fell to $9.4 billion at the end of September down from $44.1 billion at the end of last year. If that number turns negative, Fannie Mae would be forced to obtain funding from the Treasury Department.
The ultimate bill for taxpayers remains unclear. Jim Vogel, a debt analyst with FTN Financial in Memphis, Tenn., said total aid for Fannie and its sibling company Freddie Mac is unlikely to exceed the $200 billion initially pledged by the government.
Despite worsening housing market conditions, Fannie Mae is “still setting aside way more for future losses than they’re absorbing today,” Vogel said. Others aren’t so sure. Barclays Capital analyst Rajiv Setia said the government’s arrangement with Fannie and Freddie “may need to be amended” next year. Many analysts consider Freddie Mac, which is expected to report earnings later this week, to be in worse financial shape.
The real estate industry is also waiting to see if the government, under President-elect Barack Obama, will use Fannie and Freddie to help alleviate the foreclosure crisis by aggressively modifying or refinancing loans. Together, Fannie Mae and Freddie Mac own or guarantee around half of U.S. home loans. “They’re no longer being run for profit,” said Fox-Pitt Kelton analyst Howard Shapiro. Fannie Mae posted a loss of $13 per share for the July-September quarter, mainly due to a $21.4 billion non-cash charge to reduce the value of a tax asset and $9.2 billion in expenses resulting from falling home prices and surging defaults. Fannie Mae, which has bled $33.5 billion in red ink so far this year, is now run by CEO Herbert Allison, formerly chairman and chief executive of retirement fund manager TIAA-CREF. Fannie Mae’s former top executive, Daniel Mudd, was ousted as part of the government takeover. Fannie and Freddie are now facing a federal grand jury investigation into their accounting practices.
Last month, Fannie Mae said it would change its accounting for its deferred-tax assets, which can result from operating losses and be used to offset taxes on future profits. But Fannie may not have any profits for a long time to come, the company said. The U.S. housing market is continuing to decline. Fannie Mae posted $9.2 billion in credit losses, up from $1.2 billion in the quarter a year earlier. Delinquent loans rose to 1.7 percent of all single-family loans — double the level last fall.
Fannie Mae owned more than 67,500 foreclosed properties at the end of September, up 25 percent from the end of June. Shares fell 4 cents to 70 cents in afternoon trading.
The mortgage finance company, seized by federal regulators more than two months ago, posted a loss of $13 per share for the July-September quarter, mainly due to a $21.4 billion non-cash charge to reduce the value of tax assets. That compares with a loss of $1.4 billion, or $1.56 a share, in the year-ago period. Analysts surveyed by Thomson Reuters had expected a loss of $1.60 per share.
Fannie Mae’s net worth — the value of its assets minus the value of its liabilities — fell to $9.4 billion at the end of September down from $44.1 billion at the end of last year. If that number turns negative, Fannie Mae would be forced to obtain funding from the Treasury Department.
The ultimate bill for taxpayers remains unclear. Jim Vogel, a debt analyst with FTN Financial in Memphis, Tenn., said total aid for Fannie and its sibling company Freddie Mac is unlikely to exceed the $200 billion initially pledged by the government.
Despite worsening housing market conditions, Fannie Mae is “still setting aside way more for future losses than they’re absorbing today,” Vogel said. Others aren’t so sure. Barclays Capital analyst Rajiv Setia said the government’s arrangement with Fannie and Freddie “may need to be amended” next year. Many analysts consider Freddie Mac, which is expected to report earnings later this week, to be in worse financial shape.
The real estate industry is also waiting to see if the government, under President-elect Barack Obama, will use Fannie and Freddie to help alleviate the foreclosure crisis by aggressively modifying or refinancing loans. Together, Fannie Mae and Freddie Mac own or guarantee around half of U.S. home loans. “They’re no longer being run for profit,” said Fox-Pitt Kelton analyst Howard Shapiro. Fannie Mae posted a loss of $13 per share for the July-September quarter, mainly due to a $21.4 billion non-cash charge to reduce the value of a tax asset and $9.2 billion in expenses resulting from falling home prices and surging defaults. Fannie Mae, which has bled $33.5 billion in red ink so far this year, is now run by CEO Herbert Allison, formerly chairman and chief executive of retirement fund manager TIAA-CREF. Fannie Mae’s former top executive, Daniel Mudd, was ousted as part of the government takeover. Fannie and Freddie are now facing a federal grand jury investigation into their accounting practices.
Last month, Fannie Mae said it would change its accounting for its deferred-tax assets, which can result from operating losses and be used to offset taxes on future profits. But Fannie may not have any profits for a long time to come, the company said. The U.S. housing market is continuing to decline. Fannie Mae posted $9.2 billion in credit losses, up from $1.2 billion in the quarter a year earlier. Delinquent loans rose to 1.7 percent of all single-family loans — double the level last fall.
Fannie Mae owned more than 67,500 foreclosed properties at the end of September, up 25 percent from the end of June. Shares fell 4 cents to 70 cents in afternoon trading.
Thursday, October 30, 2008
Feds probe Countrywide's 'V.I.P.' program
By Lisa Myers & Amna Nawaz, NBC News
The wide-ranging criminal investigation into wrongdoing at Countrywide - once the nation's largest mortgage originator - now includes serious scrutiny of a loan program that provided special mortgage deals to the well-connected and powerful, including two U.S. senators.
NBC News has learned that Robert Feinberg - a former Countrywide loan officer who handled what were known as the "V.I.P." mortgages - spent six hours last Thursday with a six-person team from the Justice Department. The team included prosecutors from the Public Integrity section, which handles investigations of possible public corruption.
"The Justice Department is making very serious inquiry into any possible wrongdoing that may involve (former Countrywide CEO) Angelo Mozilo, other Countrywide employees, Sen. Chris Dodd, Sen. Kent Conrad, (former Fannie Mae CEO) Franklin Raines or other public officials," said Feinberg's lawyer, Anthony Salvano. "Robert has always cooperated thoroughly with authorities and is strictly a witness in their investigation."
'Friends of Angelo's'Salvano said the prosecutors and FBI agents seemed focused on whether the preferential treatment given to V.I.P. customers was part of an effort by Countrywide to buy influence - as well as on the conduct of each public official who received a mortgage from Countrywide.
Feinberg says that Countrywide's clients in this program were known by a nickname.
"We called them F.O.A.'s," Feinberg told NBC News, "which were Friends of Angelo's."
"Angelo" is Countrywide's then-CEO, Angelo Mozilo, who once called an ordinary borrower's plea for help on his mortgage payments, "disgusting."
But Mozilo seemed to have a different attitude toward people of influence. In fact, Feinberg says part of his job was to hammer home to the V.I.P. clients that they were getting special deals.
"You spoke in a manner that was different than you spoke with a regular customer," said Feinberg. "'Your loan has been specially priced by Angelo.' 'You're getting special discounts because you're in the V.I.P. loan department."
So what would a "Friend of Angelo" get that an average customer would not? According to Feinberg, the possible benefits ran the gamut.
"They got a discount on the interest rate," said Feinberg. "They got discounts on their fees. They got a free floatdown option before closing."
In one instance of a "Friends of Angelo" deal, Mozilo sent an e-mail to Feinberg ordering him to "Take off one point" on a loan to Sen. Conrad. That one point equaled a savings of $10,700 in fees.
Feinberg's client list also runs the gamut. Among those benefitting from the VIP program were four former Cabinet members spanning Democratic and Republican administrations: Henry Cisneros, Richard Holbrooke, Alphonso Jackson, and Donna Shalala. Two former CEO's of Fannie Mae, James Johnson and Franklin Raines, heads of the government-sponsored entity which bought Countrywide's mortgages - also received VIP mortgages from Countrywide.
All have denied impropriety and declined to elaborate to NBC News. Some say they had no idea they were getting favorable rates or any sort of discount. But Feinberg insists part of his job was to make clear to VIP's they were receiving special treatment. "There were many, many taglines we used to let them know their level of importance to make sure that they understand where they're located," said Feinberg. "And nine times out of ten, once you mention 'V.I.P' the person's gonna ask you 'what am i getting for being in this V.I.P department?' Or 'what am I getting because I know Angelo?' Or 'I talked to Angelo and he said I'm getting this.'"
Senator Conrad says he never asked for, expected, nor was aware of any special treatment from Countrywide, and only found out about the discount after it had been reported in the press. He released and posted to his website all his mortgage documents, and donated all the money he saved to Habitat for Humanity.
Senator Dodd says he thought the VIP program just meant better customer service, and that he received market terms that he could have received from other lenders. The senator said in a press conference on the matter that if anyone had suggested at the time that he was receiving some kind of financial benefit on the loans because of his position, he would have terminated the relationship immediately.
Both Conrad and Dodd say they never sought any favors, and are cooperating with the Senate Ethics Committee investigation. Feinberg says he's not aware of any discounts linked to favors, but he did see e-mails noting the potential value of the relationships to Countrywide's political and business interests. The e-mails noted one particular client was "of importance to Countrywide." Another encouraged a discount, noting "they are incredibly important to us." Yet another asked that the loan officer, "make an exception" in Countrywide's lending rules, "due to the fact that the borrower is a Senator."
Daniel Golden investigated the program for Condé Nast's Portfolio magazine.
"There was a great variety of people who got special deals," said Golden. "Many of them were figures in Congress or government or business partners of Countrywide - all of whom were in a position to help Countrywide in one way or another." To Golden, the company's intention was clear.
"The purpose for Countrywide was to ingratiate itself with the people in Washington who might be able to help the company down the road," said Golden.
But was any of it illegal? Legal experts say prosecutors will be looking into whether Countrywide was trying to buy influence, and into whether public officials were taking improper gifts, or gifts they should have disclosed.
The wide-ranging criminal investigation into wrongdoing at Countrywide - once the nation's largest mortgage originator - now includes serious scrutiny of a loan program that provided special mortgage deals to the well-connected and powerful, including two U.S. senators.
NBC News has learned that Robert Feinberg - a former Countrywide loan officer who handled what were known as the "V.I.P." mortgages - spent six hours last Thursday with a six-person team from the Justice Department. The team included prosecutors from the Public Integrity section, which handles investigations of possible public corruption.
"The Justice Department is making very serious inquiry into any possible wrongdoing that may involve (former Countrywide CEO) Angelo Mozilo, other Countrywide employees, Sen. Chris Dodd, Sen. Kent Conrad, (former Fannie Mae CEO) Franklin Raines or other public officials," said Feinberg's lawyer, Anthony Salvano. "Robert has always cooperated thoroughly with authorities and is strictly a witness in their investigation."
'Friends of Angelo's'Salvano said the prosecutors and FBI agents seemed focused on whether the preferential treatment given to V.I.P. customers was part of an effort by Countrywide to buy influence - as well as on the conduct of each public official who received a mortgage from Countrywide.
Feinberg says that Countrywide's clients in this program were known by a nickname.
"We called them F.O.A.'s," Feinberg told NBC News, "which were Friends of Angelo's."
"Angelo" is Countrywide's then-CEO, Angelo Mozilo, who once called an ordinary borrower's plea for help on his mortgage payments, "disgusting."
But Mozilo seemed to have a different attitude toward people of influence. In fact, Feinberg says part of his job was to hammer home to the V.I.P. clients that they were getting special deals.
"You spoke in a manner that was different than you spoke with a regular customer," said Feinberg. "'Your loan has been specially priced by Angelo.' 'You're getting special discounts because you're in the V.I.P. loan department."
So what would a "Friend of Angelo" get that an average customer would not? According to Feinberg, the possible benefits ran the gamut.
"They got a discount on the interest rate," said Feinberg. "They got discounts on their fees. They got a free floatdown option before closing."
In one instance of a "Friends of Angelo" deal, Mozilo sent an e-mail to Feinberg ordering him to "Take off one point" on a loan to Sen. Conrad. That one point equaled a savings of $10,700 in fees.
Feinberg's client list also runs the gamut. Among those benefitting from the VIP program were four former Cabinet members spanning Democratic and Republican administrations: Henry Cisneros, Richard Holbrooke, Alphonso Jackson, and Donna Shalala. Two former CEO's of Fannie Mae, James Johnson and Franklin Raines, heads of the government-sponsored entity which bought Countrywide's mortgages - also received VIP mortgages from Countrywide.
All have denied impropriety and declined to elaborate to NBC News. Some say they had no idea they were getting favorable rates or any sort of discount. But Feinberg insists part of his job was to make clear to VIP's they were receiving special treatment. "There were many, many taglines we used to let them know their level of importance to make sure that they understand where they're located," said Feinberg. "And nine times out of ten, once you mention 'V.I.P' the person's gonna ask you 'what am i getting for being in this V.I.P department?' Or 'what am I getting because I know Angelo?' Or 'I talked to Angelo and he said I'm getting this.'"
Senator Conrad says he never asked for, expected, nor was aware of any special treatment from Countrywide, and only found out about the discount after it had been reported in the press. He released and posted to his website all his mortgage documents, and donated all the money he saved to Habitat for Humanity.
Senator Dodd says he thought the VIP program just meant better customer service, and that he received market terms that he could have received from other lenders. The senator said in a press conference on the matter that if anyone had suggested at the time that he was receiving some kind of financial benefit on the loans because of his position, he would have terminated the relationship immediately.
Both Conrad and Dodd say they never sought any favors, and are cooperating with the Senate Ethics Committee investigation. Feinberg says he's not aware of any discounts linked to favors, but he did see e-mails noting the potential value of the relationships to Countrywide's political and business interests. The e-mails noted one particular client was "of importance to Countrywide." Another encouraged a discount, noting "they are incredibly important to us." Yet another asked that the loan officer, "make an exception" in Countrywide's lending rules, "due to the fact that the borrower is a Senator."
Daniel Golden investigated the program for Condé Nast's Portfolio magazine.
"There was a great variety of people who got special deals," said Golden. "Many of them were figures in Congress or government or business partners of Countrywide - all of whom were in a position to help Countrywide in one way or another." To Golden, the company's intention was clear.
"The purpose for Countrywide was to ingratiate itself with the people in Washington who might be able to help the company down the road," said Golden.
But was any of it illegal? Legal experts say prosecutors will be looking into whether Countrywide was trying to buy influence, and into whether public officials were taking improper gifts, or gifts they should have disclosed.
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