gwinner

The Next Leg up in Financials

I called E*Trade the first day they started offering mortgages again and the call demand was already high, with no promotion. Jason's analysis is sound, but it is a mixed bag. Most posters still don't seem to understand that E*Trade got rid of the ugliest problem, the "subprime" CDO's, to Citadel in 2007. My understanding is that most of the mortgages E*Trade originated were of reasonable high quality, with an average FICA of around 720. And E*Trade is reserved for losses into the future. However, assume that most who are refinancing now are those who "can" and only those loans will transfer off the E*Trade books (deleverging) and E*Trade will earn origination fees. That's all good for E*Trade. However, it stands to reason that the worst case mortgages won't be able to refinance and will remain on E*Trade books to either weather the storm or croak. So, a higher percentage of the remaining mortgages will be "at risk" when the great refi of 2009 is done. Worst case, E*Trade will be in a first lien position. Unfortunately, the second biggest problem after getting rid of the CDO's has been the HELOC portfolio. They've done their best to close untapped lines, but the portfolio is still nervously large. BAC has a much larger problem with the CountryWide portfolio, but is a cash generating monster. That's another reason why Ken Lewis still smiles.

Long on ETFC and BAC.

Why Is Everyone Blaming the CEOs? It's the Government's Fault

We need Mad Max's Thunderdome. If nothing else, the entertainment value would provide temporary relief from reading the dismal outlook at Seeking Alpha.

Put Ken Lewis in with Barney Frank first. Two men enter, one "man" leaves. I know who my money would be on.