Markham Lee_

Financial Sector Value Trap: The Worst is Far From Over

1) The main problem isn't the credit crunch it's the fact that their customers aren't paying back their loans, a trend that is worsening, not improving. CFCs losses from lending will be greater in Q4.

2) The Commercial Paper markets are just as bad now as they were in Q3, and CFC isn't anymore credit worthy.

3) Mozillo has been calling Mortgage Bottoms for months now, he's been wrong for months, why believe him now? In fact, trusting CFC's guidance and judgment is a fatuous endeavor at this juncture.

4) CFC has massive lending needs and with loan losses accelerating, lending costs increasing and loan originations declining (i.e. they're generating less revenue) difficulties in selling loans, etc, the environment is worsening, not getting better.

5) Simply Put, there is very little empirical evidence to support CFC's claim of a return to normalcy, especially within the context of their bad decision making. This is the same company that was on a hiring binge in July and a layoff binge in August.

-M