“When you go into court, you are putting yourself into the hands of 12 people who weren't smart enough to get out of jury duty.”

Friday saw the collapse of NetBank, a Georgia-based online bank with $2.5 billion in assets, due to “weak underwriting standards, failed business strategies, and a lack of proper controls” and most recently an excessive level of mortgage defaults.” Depositors with less than $100k are protected by the FDIC, but if one had an account higher than the insured level they will become a creditor of the bank. EverBank (yet another company with a capital letter in the middle of their name) is buying $700 million of their mortgages, and ING Direct is buying $1.5 billion of their deposits.

Speaking of banking, Countrywide’s bank claims that it is attracting $50 million a day of deposits. They also said that they plan to double its number of branches offering savings accounts to more than 200 over the next four to six months – these bank offices are typically small kiosks within CW home-loan offices, often located in strip malls, and don’t handle cash, per a story in the Wall Street Journal. Morgan Stanley expects CW to post a loss of $2.4 billion for the third quarter.

And speaking of Countrywide, both them and Wells Fargo are reportedly making improvements to their jumbo pricing beginning today. So perhaps some investors are indeed seeing an improving jumbo market!

Lastly, Southern California wholesale lender SCME shut their doors Friday. “We have spent a great deal of time analyzing the market and SCME's role in the future of mortgage banking.  There is every indication that the liquidity crisis will continue for the foreseeable future, causing significant challenges to our organization. We would like you to know that SCME has valued our relationships over the past 24 years, resulting in strong partnerships and lasting friendships.  Thus, our decision has not been made lightly, nor has it come easily.  Effective the close of business today, September 28th, 2007, SCME will no longer accept wholesale business. Any loan that is not funded as of today will be returned to our customers.”

The current market with the 10-yr steady at 4.59%? Friday we had Personal Income +0.3% & Spending +0.6%, with the core PCE deflator rising a modest 0.1% for the sixth consecutive month, while the top line deflator fell 0.1%. The saving rate fell to 0.7%.  Consumers showed no signs of cutting back on their spending in August despite the lack of job growth, financial market turmoil, and slower income growth. We also had the Chicago Purchasing Managers Index 54.2 in September, modestly above expectations, but on balance indicated little change in Midwest manufacturing conditions, Construction Spending +0.2% in August, slightly above analysts’ projections, and the University of Michigan Consumer Sentiment Survey at 83.4 unchanged in September from August.

This week brings us the release of only three monthly economic reports for the bond market to digest. Today we have the Institute for Supply Management (ISM) posting their manufacturing index for September. Analysts are expecting a small decline from the 52.9 reading last month to 52.5 this month (50.0 is the level that means equal numbers of executives felt business worsened & those who said it had improved). Thursday the Commerce Department will post August’s Factory Orders data, with current forecasts are calling for a decline in new orders of approximately 2.5%. And on Friday the Labor Department will post September’s Employment report revealing the U.S. unemployment rate, number of new payrolls added and average hourly earnings.

A group of Alabama friends went deer hunting and paired off in twos for the day. That night, one of the hunters returned alone, staggering under the weight of an eight-point buck. "Where's Henry?" the others asked.
"Henry had a stroke of some kind. He's a couple of miles back up the trail," the successful hunter replied.
"You left Henry laying out there and carried the deer back?" they inquired.
"A tough call," nodded the hunter. "But I figured no one is going to steal Henry!"