Boomer’s Blog

Eagle-eyed buyers are honing in on California’s huge inventory of foreclosed properties, zooming in on low prices and diverse property options. In August, the Golden State’s home sales jumped nearly 57 percent over the same period last year, but the median price dropped almost 41 percent, according to fresh data from the California Association of Realtors (CAR).

Sales are close to doubling the volume of the home market trough in October 2007, inspiring confidence that market prices are steadily gaining stability  and the number of distressed properties on the market are moving towards decline. This observation is based on the numbers, not the irrational panic you’ll see in the news media.

Signs of Life in California’s Housing Markets
In August, CAR reports that closed escrows of existing, single-family detached homes in August approached 491,000. The median price of an existing, single-family detached home in California during that period was $350,140, down nearly 41 percent from August 2007’s revised $588,670 median price. For all the details, check out CAR’s August Median Home Price Chart to  track price data by county, city and area.

California Trendspotting Improves your Dreams
These much-anticipated signs of  hope for Calfornia’s beleaguered housing markets are quietly setting the stage for a slow but enduring recovery that extends well beyond California state lines.

As in culture and politics, California sets the standard for the rest of the nation’s housing trends. In many of the housing markets hardest hit by the subprime mortgage meltdown, entrepreneurial adaptation is key to endurance and building a rock-solid future and long-term profits in this business.

Marketing is the Foundation of Recovery
As housing markets change, so must your marketing strategies. If you want your business to thrive, especially in a challenging economic landscape, you’ve got to set your priorities. If marketing doesn’t top your list, you’re cramping your growth and and profits in this business.

Look folks, there is no doubt that this business is changing. If we’ve learned anything standing beneath the awesome burst of the housing market’s bubble, it’s that marketing is the umbrella you need to shelter your business from any market storm.

A Business in Motion Stays in Motion
Gone are the days where real estate entrepreneurs can get by without a consistent and comprehensive marketing solution. Today’s tricky markets require a cutting-edge, professional approach to  filling your pipeline with the precision leads you need to build your business. If you’re looking for cost-effective strategies that are designed to conquer today’s markets and build a stronger future for this business, SalesTeamLive’s Done-for-You marketing campaigns deliver results you can bank on.

Broad bipartisan dissention in Congress over Wall Street’s $700 billion bailout package sent markets reeling today while Federal investigators expanded their probe into potential criminal cases against firms and bankers accused of contributing to the Wall Street’s collapse.

Confidence Wanes on Both Sides of the Aisle, Wall Street
If passed in its current form, the massive bailout proposal would essentially have nationalized much of the nation’s outstanding mortgage debt.

Soon after the U.S. Congress voted 228-205 to defeat Treasury Secretary Henry Paulson’s bailout plan, Wall Street’s freefall escalated dramatically. Today the market plunged 778 points in the largest daily point-drop in U.S. history. According to CNN, this represents $1.2 trillion in paper losses.

Fed Probe Intensifies: Spotlight on Fannie and Freddie
Meanwhile, news broke that Federal prosecutors have subpoenaed government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, directing them to cough up documents dating back to January 2007. The Washington Post reports that Federal prosecutors with the Southern District of New York and SEC officials declined to specify what information they are seeking.

A Second Look at the Books
Bloomberg was among the first to report that examination of Fannie and Freddie’s books was underway well before the Fed seized them Sept. 7, and ousted leadership. So far, investigators have found that both government sponsored enterprises (GSEs) used accounting methods that ‘’obscured the ‘low quality’’’ of capital reserves.

Widespread Investigation Continues
Last week, Bloomberg reported that the FBI also is investigating the failure of Lehman Brothers, insurer AIG and about others in connection with the implosion of the subprime mortgage market. An anonymous FBI source told Bloomberg that these companies are among 26 companies that currently are under review for possible accounting misstatements.

Report Finds SEC Failed in Investment Bank Supervision
Last week, in a report of SEC’s supervision of investment banks, inspector general David Kotz said that the SEC had identified “numerous, potential red flags prior to Bear Stearns’ collapse . . . but did not take action to limit these risk factors.” J.P. Morgan Chase bought Bear Stearns last March after initial emergency funding to keep it operating failed.

Chairman of SEC since 2005, Christopher Cox attributes the Bear Stearns’ March collapse to  ‘‘a crisis of confidence’’ that proved to be more lethal than its capital and liquid challenges.

Cox believes that the SEC is not to blame, and that the program was flawed from the beginning because the SEC lacked the legislative authority to force large investment banks such as Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns to report their capital, maintain liquidity or submit to leverage requirements.

SEC Lacked Regulatory Teeth
The SEC’s oversight program for these investment banks, the Consolidated Supervised Entities, was created in 2004 to allow global investment bank conglomerates without a supervisor to be in compliance with the law by voluntarily submitting to regulation. But, Cox says, the SEC lacked specific legal authority to act as the regulator of investment in these cases.

At this point however, the findings have lost some punch because the five largest investment banks have been absorbed by commercial banks, converted into bank-holding companies or filed for bankruptcy protection.

From here on out, it looks like the bulk of the SEC’s oversight duties will shift to the auspices of the Federal Reserve. Still, it’s a great read for the Monday morning quarterback or anyone still wondering who shot J.R.

The heat is on the Fed to hold companies responsible for the mortgage crisis at the foundation of Wall Street’s meltdown, which clearly is extending across the Continent. Financial companies worldwide are reporting in excess of  $500 billion in losses and writedowns, also linked to the U.S. mortgage market’s collapse.

The European Connection
U.S. investment banks clearly basked in the shade with SEC serving as their umbrella regulator. And why not?  It enabled them to avoid regulation of their fast-growing European operations in the European Union.

Barron’s is reporting that the European banking sector also has taken a lot of hard hits lately, but today was among the worst in recent history. Here are some highlights from that report:

• U.K. mortgage lender Bradford and Bingley was nationalized over the weekend due to failure.Iceland’s Glitnir Bank was taken into “temporary” state ownership after encountering insurmountable funding challenges.
• Germany’s commercial property lender, Hypo Real Estate Holdings, became the latest to seek government help. Like IKB that failed last year, Hypo is attributing many of its problems to its exposure to the U.S. mortgage crisis. Hypo has received 35 billion Euros in credit guarantees to stem the bleeding through its funding shortfall. Hypo, like IKB, had significant U.S. subprime exposure and was forced to take substantial write-downs earlier this year.
• Fortis was partially nationalized over the weekend, and each of the two involved governments acquired 49 percent of Fortis’ native banking subsidiaries for 11.2 billion Euros in capital. Barron’s says that many of Fortis’s woes stem from its acquisition of ABN Amro’s Dutch consumer-banking division. Post-acquisition, Fortis was undercapitalized, and eventually succumbed to liquidity problems.

The Devil in the Details: Learn More with these Links

• See key Congressional Vote Data;
• Check out the full Text of the Bailout Plan Congress Defeated Today (Kindly posted in full by Calculated Risk, one of my favorite Blogs.)
• Read About the SEC’s Wall Street Fumbles in the “Final Report of the Advisory Committee on Improvements to Financial Reporting to the U.S. Securities and Exchange Commission.”)

We’re living through truly historic times folks. Stay tuned for more reports. Please, drop me a line and let me know what you think about these developments.

On news of the Fed’s seizure of Wachovia and subsequent sale to Citigroup, and as the U.S. House of Representatives rejected Treasury Secretary Henry Paulson’s Wall Street bailout plan today, panic spread throughout the financial markets and the news media and financial shares plunged 16 percent – the largest percentage drop since Sept. 17, 2001.

Upon its sale to Citigroup, Wachovia lost more than 70 percent of its remaining value after last week’s beating. Under the terms of the deal, Citigroup will pay $1 a share, or about $2.2 billion, for Wachovia’s banking operations. Citigroup pledges to assume the first $42 billion of losses from Wachovia’s worst mortgages and give FDIC $12 billion in preferred stock and incentives, and FDIC has agreed to absorb losses above that level.

More Deals as Wall Street Reels
Also today, the Guardian reports that Morgan Stanley sold a stake to Japan’s Mitsubishi Financial for $9 billion and the bankrupt but not forgotten, Lehman Brothers sold its Neuberger Berman asset management unit for $2.15 billion.
Shares in heavyweight contenders Bank of America, JPMorgan Chase and Citigroup dropped more than 10 percent today as panic dominated the markets. Even investment bank powerhouses cum bank holding companies Goldman Sachs and Morgan Stanley, plummeted more than 12 percent, the New York Times reports.
Who’s Next?
Regional banks took even harder hits, sucker-punched by Congress’s defeat of Treasury Secretary Henry Paulson’s bailout plan and Wall Street’s terror-stricken, freefalling fists. Investors struggled to call which bank might be the next to fail without legislative and public consensus on a bailout plan.

Lenders Crushed
National City Corporation plunged 63 percent, Downey Financial fell 48 percent and Sovereign Bancorp, dropped 36 percent as subprime mortgage-exposed lenders were pummeled. Many were stumbling in the wake of the Fed’s seizure of monolithic Seattle-based thrift Washington Mutual, and the subsequent sale of its banking unit to JPMorgan Chase late last week.

Analysts say that all this activity is putting a mighty squeeze on credit markets and are triggering spikes in bank-to-bank lending rates. Many are wondering who will be left to weather the storm when Congress returns to the drawing board later this week.

Out of  Lifelines
Banks are confronting the enemy borne of the mortgage-lending crisis that has prompted Goldman Sachs and Morgan Stanley to rein in their risky and virtually unregulated business models, and so far forced the low-ball sales of Bear Stearns and Merrill Lynch and brought the bankruptcies of Lehman and WaMu.

The breathless reconfiguration of Wall Street in the two weeks since Lehman’s collapse has sparked a firestorm of mergers among commercial banks. The few remaining banks with the resources are making the killer deals now that’ll ultimately serve their books when investor confidence returns, like Mighty Mouse, to save the day.

Too Big to Fail? Or too Big to Exist?
At that point, we’ll be looking at Wall Street’s anti-bellum landscape, where Bank of America, JPMorgan and Citigroup have 30 percent or more of the entire industry’s deposits. “Too big to fail” will take on entirely new proportions.

Data that could foreshadow lower prices in the U.S. housing markets and even greater mortgage losses was used by JPMorgan to discuss with investors the buyout of Washington Mutual’s banking operation Thursday. As it circulates, these data are fueling even greater concerns about mortgage-related assets held by rival banks left standing amid the ongoing turmoil on Wall Street. But are those data accurate?

Overall, JPMorgan seems to find that much of what was known about the problems that plagued WaMu  turned out to be much worse than originally thought. If true, these findings could have a widespread impact on housing futures by obscuring the light at the end of the tunnel in terms of finding the market’s bottom.

These nuggets are among the highlights used in JPMorgan’s conference call with investors:

• JPMorgan finds that it may be necessary to immediately write down as much as $30 billion in WaMu’s assets because the thrift’s mortgage holdings now appear to be more extensive than previously thought. JPMorgan bases this figure on revelation that cumulative losses on WaMu’s $51 billion option adjustable-rate mortgage (ARM) portfolio will reach or exceed 20 percent – nearly twice what analysts predicted.
• Under the deal,JPMorgan also assumes cumulative losses of at least 20 percent on WaMu’s home equity credit lines and home equity loans. Again, JPMorgan’s data project these losses to be roughly twice as bad as the analysts’ predictions.
• Based on current economic conditions, and how severe the recession becomes, JPMorgan finds the possible impact of a “severe recession” on home prices to include potential peak-to-trough drops of 37 percent in national housing prices, with a 58-percent fall in California and a 64 percent decline in Florida.
• Also in JPMorgan’s worst-case  projections should the U.S. hit a severe recession, is the prospect that national unemployment rates could surge to 8 percent and estimated life losses for the WaMu deal (from Dec. 31, 2007) could reach $54 billion.

To access JPMorgan’s presentation documents for Thursday’s conference call with investors, follow this link.

The Housing Futures Game
Though it may be tempting to suspect that these numbers could reflect an attempt by JPMorgan to leverage its position in the WaMu deal, its worst-case forecast for national home futures appears to be in-line with other data sources.

Case-Shiller futures are predicting a 33 percent decline peak-to-trough, while Goldman Sachs’ forecast stops at 27 percent, and Lehman called it at 32 percent, according to Calculated Risk, a blog providing some of the most insightful coverage the meltdown’s impact on U.S. housing markets I’ve seen.

Where Are we Now?
The National Association of Realtors (NAR) this week attributed scarce mortgage availability for grim existing home sales data. August sales dropped 4.3 percent to a seasonally adjusted annual rate of 5.50 million units from 5.75 million units reported in July. That’s 12.8 percent below the 6.31 million-unit pace set in August 2006.

New Home Sales Stats Slide
This week the U.S. Census Bureau and the Department of Housing and Urban Development  (HUD) released some equally sobering new home sales statistics in their report on new home sales.

Sales of new one-family houses in August 2008 were at a seasonally adjusted annual rate of 460,000. This is 11.5 percent below the revised July rate of 520,000 and is 34.5 percent below the August 2007 estimate of 702,000.

The median sales price of new houses sold in August 2008 was $221,900; the average sales price was $263,900. The seasonally adjusted estimate of new houses for sale at the end of August was 408,000. This represents a supply of 10.9 months at the current sales rate.

For more numbers crunching and analysis on the national housing market, check out this great post on Wall Street Journal online.

What Does this Mean to REI?
Clearly, watching the prices fall will help real estate entrepreneurs to cherry-pick the most promising markets and properties. But the desolate tone we’re getting from the news reports is largely based on the powerful bank’s loss of unbridled freedom and free-flowing capital.

While the tremors from Wall Street’s quake are likely to rattle the economy, they ultimately will set the stage for a housing market rebound. I know this is true because I was working the markets through the last recession, the real estate market runs in predictable cycles and because history always repeats itself.

My $.02
It seems obvious to me that while those who are loosing money on the banking debacle are searching for the housing market’s bottom, savvy real estate investors are gearing up to cash in on the inevitable recovery. Remember friends, patience in this business, and in life,  is a virtue.

After the Fed closed the curtain late Thursday on the biggest bank failure in U.S. history, JPMorgan Chase moved to acquire Washington Mutual’s  extensive branch network and distressed assets and will pay the FDIC $1.9 billion for the privilege.

The Fed’s bold move came as lawmakers stalled on Treasury Secretary Henry Paulson’s  $700 billion bailout fund designed to help ailing banks.

At the time it was seized, WaMu had nearly $200 billion in deposits and more than $300 billion in assets. As we reported here last week, WaMu put itself on the auction block after its credit rating evaporated and its stock price tumbled. At that time, WaMu hired former investment bank Goldman Sachs to broker its sale but found no buyers. (See my post “Train Wreck on Wall Street: Week in Review” for details.)

Since Sept. 15, WaMu’s customers have rushed to yank nearly $17 billion in deposits, prompting the Federal Office of Thrift Supervision to deem WaMu “unsound.” This year, WaMu’s stock plummeted 86 percent as losses on mortgage-backed securities and loans have ravaged the economy with wildfire-like voracity.

Under the terms of the deal, JPMorgan Chase will acquire all the banking operations of WaMu, including $307 billion in assets and $188 billion in deposits.

Resolution Trust Redux
To put the massive scale of the WaMu failure in context, CNN Money reports that its assets were equal to about two-thirds of the combined book value assets of all 747 failed thrifts that were liquidated by the Resolution Trust Corp. - the entity the government created to mop up after the notorious Savings and Loan Crisis that crisis from 1989 through 1995.

When Bear Stearns hit the pavement in March, the Fed brokered a deal for JPMorgan Chase to buy the bank for $2.3 billion. Today, the SEC’s Inspector General released a report on the Bear Stearns collapse that finds the SEC failed to oversee the investment bank and ensure its compliance, and that it ignored many red flags.

In response to the report, Bloomberg reports that SEC Chairman Christopher Cox pointed out that compliance wasn’t required by legislation. New York-based  Morgan Stanley, Goldman Sachs, Lehman Brothers, Merrill Lynch and Bear Stearns all voluntarily reported their capital and liquidity positions to the SEC.

Because WaMu’s holding company was detached from its massive network of banking branches and deposits when JPMorgan bought the assets, the Federal Deposit Insurance Corp. may be able to duck the tab for the collapse, Bloomberg reports.

FDIC Dodges the Bullet
The FDIC’s well is running low, drained by a dozen other failures so far this year. Fortunately, WaMu’s corporate structure allowed FDIC to seize only the bank, leaving liabilities, including senior and subordinated debt and equity to WaMu’s holding company, which lies beyond the agency’s scope.
According to FDIC, its deposit insurance fund fell 14 percent to $45.2 billion in the Q2. IndyMac’s July failure alone ran up a tab estimated at $8.9 billion.

The New York Times reports that IndyMac  was roughly one-tenth the size of WaMu. Analysts guess that a failure of Washington Mutual would have cost the fund in excess $30 billion.

In the wake of all this activity FDIC also has announced that it will consider raising bank insurance premiums in October.

Shifty Assets
Though the FDIC may emerge from this particular abyss relatively unscathed, investors are hurting. WaMu’s shareholders and bondholders will absorb the debt JPMorgan didn’t buy. WaMu had $30 billion in shareholder’s equity on June 30, which would be wiped out by the writedown, leaving some losses for bondholders.

JPMorgan has said it would write down $31 billion of the acquired assets, without reporting a loss because the transferred assets exceeded liabilities by the same amount.

Investors Feel the Hammer
WaMu’s bondholders are likely to lose most of their money as a result of the bank’s awesome failure, according to CreditSights Inc: The deal structure excludes bondholders at WaMu’s holding company and bank levels from the major assets and liabilities of the operating bank. (Check out this Bloomberg article for details.)
Private equity firm TPG Capital, owner of more than 13 percent of WaMu, lost $1.35 billion when the Fed seized WaMu and quickly sold it to JPMorgan Chase, Bloomberg reports.  Unfortunately for many investors, this firm is not alone.

Washington Mutual was forced to raise capital after more than $3 billion of home- mortgage writedowns and loan losses earlier this year. In April, TPG led the charge as investors –hoping to save WaMu and make a profit– snapped up WaMu shares at a 33 percent discount on the then going price of $8.75/per share. Bloomberg reports that other investors at the time include Capital Group Cos., Brandes Investment Partners LP and Hotchkis and Wiley Capital Management LLC, according to a regulatory filing.

WaMu was sued earlier this year by investors who said the company committed securities fraud by over-inflating home appraisals while also inflating prices. Meanwhile, analysts predict that lawsuits against WaMu will remain at the FDIC or the thrift’s holding company (See Money Magazine article: “ WaMu Accused of Appraisal Fraud” for additional information.)

While we wait for Congress to determine the fate of Treasury Secretary Hank Paulson’s Wall Street recovery plan, lots of ears perked today when reports broke that global investing powerhouse Warren Buffett is poised to pump $10 billion into Goldman Sachs’ new commercial bank’s coffers. But what did it take to inspire such confidence?

Goldman and Morgan’s New Footprints
Ravaged by Wall Street’s meltdown but still standing, Goldman Sachs and rival Morgan Stanley emerged from the abyss earlier this week as reinvented bank holding companies. Abandoning their high-risk broker model isn’t their only directive. As the New York Times reports, they’re also raising capital to bulk-up their finances for what’s likely to be a long, hard winter full of pot holes on Wall Street.
As commercial banks with more transparency and greater disclosure requirements, Goldman and Morgan will enjoy higher capital reserves with fewer risks. This could require quite a cultural adjustment for these renowned masters of bold risks and creative debt load management.

By morphing into bank holding companies, the firms are capitulating to tighter regulations and will be forced to submit to intensified supervision by several government agencies, in addition to the SEC.

Inspiring Confidence or Scavengers?
With the U.S.  Federal Reserve serving as Goldman and Morgan’s chief regulator, they’ll be in a better position to access government funds and inspire confidence in U.S. and International markets. It didn’t take long after the shift for the heavy hitters to respond.

Earlier this week, Morgan picked up more than $8 billion from Japanese bank Mitsubishi in exchange for a stake of up to 20 percent. It also has been reported that Japanese bank Sumitomo Mitsui Finanacial Group is considering a $2.5  billion investment in Goldman.

News came late today that Buffett plans to snap up and initial $5 billion holding through his Berkshire Hathaway investment vehicle, and the option to buyp to another $5 billion’s worth at $115 per share over the next five years.

Beyond Buffett, Goldman is aiming to raise $2.5 billion via a public shares offering which also sparked a healthy response during after-hours trading. Business Week reports that Goldman’s stock offering, for 40.65 million shares at $123 each, garnered twice the amount that the firm anticipated from the move.

Goldman: Is it a Finishing School or Coup de Grace for Global Finance?
Buffett’s cash advance likely isn’t the only thing Goldman has going for it. The New York Times calls Goldman a “finishing school” from which other companies and governments, have been known to “pluck their own top leaders.” Of course, this article was originally written last year, when “finishing school” may have had a different meaning than it seems to have today.

Among Goldman’s Stellar Alumni:

• U.S. Treasury Secretary Henry Paulson,
• Citigroup Chairman and former U.S. Treasury Secretary Robert. Rubin,
• Bank of Italy Governor Mario Draghi,
• New Jersey Governor Jon Corzine,
• White House Chief of Staff Josh Bolten, and
• New Merrill Lynch Chairman John Thain reportedly left his post as Goldman’s president to join the effort to “save the New York Stock Exchange.”

Everything Appears to Be Subject to Change
According to Bloomberg, Goldman currently ranks fourth in assets. The top three are Citigroup, Bank of America and JPMorgan Chase, while Morgan takes fifth place. But who knows what next week will bring? I’ll say for the record that when a “fire sale” of such immense proportions is your ticket to inspiring “confidence” in your investors … you’ve got some serious work to do.

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So, it looks like those of us who are following the train wreck on Wall Street are in for another long weekend of ruminations on how our leaders are going to approach fixing this mess. The Fed’s silver bullet du jour likely will be fired from the same gun that built the Resolution Trust Corp. to clean up after the Savings and Loan crisis in the 1980s.

So Far So Good
Since the Wall Street Journal essentially broke the “New RTC on the Horizon” story this morning, stocks soared. The Dow Jones Industrial (DJIA) closed up an optimistic 370 points, and floundering banks and financial institutions displayed signs of life for the first time this week. Deal negotiations among the major players slowed and Wall Street dried its tears and seemed to take its first collective big breath this week. But what impact will all this activity have on battered housing markets?

While the Fed’s efforts to salvage behemoth government sponsored entities (GSEs) Fannie Mae and Freddie Mac and stop Wall Street’s bleeding have gone off with some hitches, is looks likely that these moves eventually will serve to slow the foreclosure epidemic, stall depreciation and help stabilize prices. Still, there is no unified, clear message from the Fed regarding a timeline for the housing market’s recovery, despite its nearly $1 trillion pledge to save the economy from further disaster.

Treasury Says Housing Recovery will Take Years ….
Treasury Secretary Henry Paulson said at a press conference this week: “I believe there is a reasonable chance that the biggest part of that housing crisis can be behind us in a number of months. I’m not saying two or three months, but in months as opposed to years. I think we will have housing issues and mortgage issues for years.”

HUD Predicts Housing Recovery Will Take Months ….
U.S. Housing and Urban Development (HUD) Secretary Steven Preston had a totally different take on the housing markets’ recovery this week at a Christian Science Monitor breakfast where he predicted meaningful improvement would occur in “the middle of next year or well into next year.”
Preston also told attendees that, “The crisis will begin abating in a number of regions of the country. That is what I am hopeful of. But I think it will be more intractable in other regions.” He added that recovery would come much slower to the markets hit hardest by the mortgage crisis, including: California, Florida, Arizona, and Nevada.

According to the “State of the Nation’s Housing,” a report from Harvard University’s Joint Center for Housing Studies released earlier this year, other states hard-pressed for recovery are likely to include states in the “rust belt” and much of New England’s industrial areas, where massive job losses had fueled housing market decline. (To access video of Preston’s speech, follow this link.)

Lehman Brothers’ and the BK Whopper
There was a great deal of discussion this week about the Fed’s decision to let Lehman, a 158 year-old brokerage, collapse into bankruptcy Monday. Over the weekend, Wall Street and the Fed worked, yet failed to devise a plan for an 11th-hour intervention to salvage Lehman, but in the end, it looks like it was cheaper to let Lehman die without benefit of a government bailout.

Analysts attribute this apparent display of “tough love” by the Fed to the massive amounts of bad sub-prime mortgage debt exposure Lehman took on through its involvement with Aurora Loan Services and BNC Mortgage. Many say that Lehman just couldn’t be saved.

Tuesday, despite objections (Bloomberg does a great job covering the controversy in this article. ) from some of Lehmans’ creditors, bondholders and others who thought there had not been adequate time for competitors to submit bids, British bank Barclays gobbled up Lehman’s investment banking and capital markets businesses for $250 million in cash. It also paid $1.5 billion for Lehman’s New York headquarters and two New Jersey data facilities.

This handy timeline of Lehman’s decline does more to put this deal in perspective than most anything else in the news this week.

AIG’s Divine Intervention: Maybe not so Divine for Shareholders
Also suffering from post-traumatic subprime mortgage exposure, mega-insurer AIG got a pardon from the governor this week in the form of an $85 billion bridge loan from the Fed.

Analysts are saying that this “divine intervention” was for the “greater good” because of AIG’s role in the DJIA and ties to multiple mutual funds. Still, the announcement came down Thursday that AIG would be nixed from the DJIA and replaced by Kraft Foods. Hey, everybody’s gotta eat, right?

The quote of the week foes to former AIG CEO Hank Greenberg, who, prior to his “retirement” a few years ago, built this giant and achieved greatness well before the sub-prime mortgage virus infected Wall Street’s soft tissues.

Greenberg, who lost billions this week after several unrequited attempts to save AIG from an uncertain fate, pointed out on Fox news that,  “No one seemed to be minding the store from a risk management point of view.”

Amid the fallout from AIG’s failures, Greenberg, the insurer’s majority stockholder, is admittedly frustrated, angry and bitter this week. If you just read one article about AIG, make it this story about Greenberg’s attempts to intervene in AIG’s destiny before a federal takeover was in the picture.

Bank of America’s Costly Courtship of Merrill Lynch
In on the weekend’s Lehman negotiations, Merrill Lynch was poised to save itself when Lehman took its final gasp. Come Monday, it seems that Merrill Lynch scrambled to make a whopping $29 per share deal with Bank of America (BofA) to save itself from extinction.

Had BofA waited just one day, it probably could have those tainted shares as low as $10 per. At this point, I think it’s safe to say that we al can expect some flack from BofA shareholders for what seems like a total fumble at this point in the game.

Since acquiring the skeletons in Countrywide’s subprime debt closet earlier this year, no one can say that cash-rich BofA didn’t know what it was getting into. Rumor has it that BofA also is among those currently courting Wachovia, who, despite its problems, still has less extreme sub-prime mortgage exposure than Merrill or Countrywide.

Will WaMu Get a Date to the Prom?
WaMu hired Goldman Sachs this week to find it a suitor – fast. That was before the Fed announced that a plan to save the economy vis-à-vis a new RTC is on the horizon.

Though Goldman is negotiating WaMu’s sale, no single buyer has emerged on the top of the heap this week, but there is widespread speculation that Citigroup may have found enough cash in the corporate sofa to buy the ailing Seattle thrift whose rating was downgraded this week to “junk” status by the major rating agencies.

Other interested parties include Banco Santander SA, of Spain, and Wells Fargo.  According to the Portland Business Journal, HSBC and even J.P. Morgan Chase, who made a play for WaMu earlier this year and lost, also are considering bids. If none of these work out, maybe they should try Ebay.

Wachovia and Morgan Struggle to Define Roles and Relationships
It seems more likely than ever that Wachovia could acquire Morgan Stanley. Morgan has had a rough go of it lately. Even after releasing relatively healthy financials, shares plummeted 32 percent this week. Morgan blamed the naked short sellers for the decline.

Wachovia values dropped about 20 percent this week before ralso egaining some footing upon the Fed’s announcement that an RTC-inspired solution to Wall Street’s woes is in the works.

Are the Bailouts Constitutional?
I’ve heard some powerful arguments that the arbitrary nature of some of these bailouts, or takeovers of once-solid Wall Street institutions raises some grave Constitutional issues that are likely to be challenged at some point down the line.

Citing the U.S. Constitution, some observers of the Fed’s bold moves say that by favoring one debtor over another, for example, by allowing Lehman to fail, and then coughing up an $85 billion bridge loan for AIG, the Federal government is exceeding it’s powers.

Critics say that public money is supposed to be used to protect us, to build public-access roads, libraries, etc.  By exposing taxpayers to Wall Street’s idiotic bad-risk debt portfolios, the Fed is, in effect, favoring outfits such as AIG over the majority of U.S. citizens and failing to provide for the “general welfare” of the people.

Will the Fed’s RTC-Inspired Plan Save Wall Street or Spread False Confidence?
Clearly the markets picked up today on the Fed’s announcement that an RTC-style fix is in the works. Is this strategy going to be much more than a drawn-out, massive controlled  bailout? Is providing these players with a taxpayer-funded repository for its bad paper the real best answer to this widespread problem?

For many onlookers, including, ironically enough, former Fed chief Alan Greenspan, the bailouts present a “moral hazard” by promoting the notion that as long as you’re “too big to fail” or can meet the Fed’s seemingly arbitrary standards for being worthy of saving, you can make whatever foolhardy decisions you want in running your business and still be compensated generously for your efforts.  I don’t know about you, but if I run my business that way, I’m sunk.

Eventually, we can anticipate that the recipients of the bailout loans to have default problems of their own. Of course, taxpayers can look forward to covering the litigation costs. We also can expect lawsuits from shareholders who’ve been shafted in these deals.

Who Stole the “Free” from “Free Market Economy”?
We’re looking well over a million more foreclosures this year than last. I think many of us are wondering just where, and by whom, the line will be drawn as to which Wall Street entities are “Too Big to Fail,” what that says about the government’s role in business and how much the taxpayers can be expected to pay.

Heavy implications for Taxpayers and the Nation
I’ve seen rough estimates that the bailouts, takeovers and creation of an RTC-like entity to dispose of Wall Street’s bad paper waste could cost individual taxpayers more than $7,500. As a business owner and taxpayermyself, I find this outrageous. I am appalled by the recent institutional failures and the apparently broken system that let them happen. Even if they’re “necessary,”  we all should be concerned about the high costs, legality and morality of  the Fed’s efforts to save Wall Street from the wounds it afflicted upon itself.

And though it may be some time before the architects of this economic catastrophe are truly identified and brought to justice, I am comfortable with calling them “terrorists” because their all-consuming greed, dishonesty and sheer stupidity strikes at the core of the U.S. and global economies with intense and brutal force.

It has taken some time for me to digest all of the financial news I’ve been gobbling up over the past couple of weeks.  And frankly, I could use an Alka-Seltzer. But I can’t kelp but think about how the $900 billion in Wall Street bailouts so far issued by the Fed still buys a lot of “plop, plop, fizz, fizz” in our nation’s new market economy. Buy will it buy relief? Only time will tell for certain. But there are some signs that Wall Street’s struggles will improve conditions for many of us who are dedicated to making real money in real estate.

Sure the news on Wall Street is bad. But it seems the worse the news on Wall Street gets, the higher the ratings are likely to go for the news channels that profit more from banking on fear these days than anyone can with the U.S. Dollar. The impact of toxic news reporting should not be overlooked by those of us who are following these events.

There’s fair and accurate reporting and there’s also panic mongering in the feeds. I’ve read, watched and listened to a seemingly endless torrent of news about Wall Street’s dramatic takeovers, bailouts, buyouts, merger plans and restructuring efforts from AIG to Wachovia … and what a horrific rollercoaster it’s been. For none has it been worse than for the thousands of employees who have lost and will loose their jobs as a result of this unnatural disaster.

Focus on the Single and Multi Family
Today however, I’m writing as a real estate entrepreneur who sees more great opportunities than ever before to invest in real estate.  And right now, the natural question is “What does all this bloodletting on Wall Street this mean to real estate investors?”

Over the long term, that’s a tough one to call.  And if I’m lucky, I’ll have that dream again tonight where I know all the magic answers to our economic woes. Of course, during waking hours, the person who had those answers likely would make Warren Buffett’s portfolio look like a “nice try.” (Check out this article on why Buffett didn’t save Lehman.)

Real Estate Gets a Grip
To real estate entrepreneurs trying to gain perspective on how recent developments will likely affect us in the short term, there’s some encouraging news. All of these “adjustments” on Wall Street are likely to result in lower interest rates, even as investors take whatever is left of their money and run away from the giant equity brokerages and into the most attractive alternatives they can find. Today, gold futures rose nearly 10 percent to $870.90 per ounce.

Private Money: “Gimme Shelter!”
But precious metals aren’t for everyone, especially now that prices are reaching for the heavens.  And that may help send a lot of private money-lenders into real estate markets soon.
Compared to what many of these investors have been through on Wall Street, many are likely to be attracted to the greater control and relative long-term stability that investing in real estate provides. They’ll also gravitate to real estate because if they still have their money, they likely know a real bargain investment when they see it.

Buyers Want to Believe
It may sound outlandish to say, but there are a lot of qualified and motivated buyers out there who knew better than to get involved in purchasing a high-priced property at a high interest rate. Many of those who are carefully looking at all the numbers also have been sitting on the fence waiting for plummeting property values to stabilize before committing to a purchase.

Due to the housing bubble’s impact on many of the largest metro markets, it makes more economic sense at the moment for many folks to rent rather than buy. So finds an intriguing report that examines 100 of the most densely populated metro markets for equity-earning potential.

The same report also examines ownership vs. rental costs for homes priced below medial levels. (Check out the  “Ownership, Rental Costs and the Prospects of Building Home Equity” study from the National Low Income Housing Coalition and the Center for Economic Policy and research for details. It’s a refreshing, eye-opening read.)

Proof Now Required in Mortgage Application Pudding
According to the Mortgage Bankers Association’s seasonally-adjusted index, mortgage applications to purchase or refinance loan jumped 33.4 percent, the most activity since May. This is an encouraging sign that the action is picking up in many markets.  Couple this with the solid potential for even greater reductions in interest rates and it seems like there is light at the end of the tunnel in terms of market recovery, inventory reduction and overall price stabilization.

Reality Bites for New Mortgage Terms
Still, it’s worth noting that mortgage qualification has reverted to real-world requirements that usually include a minimum of 5 percent down have, demonstrable income and assets that are consistent with the loan amount and credit scores above 700. While these requirements are necessary, they may present some challenges as jobless rates continue to rise and the overall economy appears to have all but stalled.

Always a Catch-22
Despite lower interest rates and spikes in loan applications, there is no guarantee of a speedy recovery for battered housing markets. Keep in mind that with all the lay-offs and power shifts in the industry, we can expect bureaucratic delays in everything from loan applications to foreclosure processing and short sale negotiations. These delays are likely to last until well after the after dust settles on Wall Street.

Lenders Need to Really Tackle Loss Mitigation
All eyes are on lenders and they must know they’re looking pretty bad to most folks these days.
Eventually, lenders will have to find a way to respond more quickly and efficiently to pre-foreclosure and short sale deals. After what they’ve been through in recent weeks, their enthusiasm for the bundles of cash they save by avoiding foreclosure is likely to pique.

New Doors Open Wider for Educated Investors
Another upside to all this mess is that smart real estate investors will have awesome opportunities to capitalize from developing relationships with embattled mortgage brokers and real estate agents who are facing new challenges in this Brave New World of Real Estate. Developing these relationships will open new doors leading to fantastic deals for those of us who are persistent and consistent in our follow through.

There, things aren’t really looking so bad for us, are they? Though Wall Street is a totally different story. Still, we must maintain a clear vision of our businesses, avoid toxic speculation and feed our senses of humor through these confusing and harsh times. Some of us also may pray that Alan Greenspan is correct in his assertion that weeks like these occur only once per generation.

What Do You Think?
Please drop me a line and let me know how you’re reacting to all these developments and tell me what impact you foresee it having on your real estate business.

Free Webinar with Sales and Marketing Master Dan Doran
If you missed my virtual “Fireside Chat” with Dan Doran tonight, you’re in luck! You can catch the replay Thursday at 1:00 p.m. EDT and its free! For details of how Dan and I cut through fear and confusion to talk about building titanium-strength real estate investment businesses, check out my blog post: “REI Fireside Chat with Dan Doran to Show Entrepreneurs Options Well Beyond Wall Street’s Burning Embers”

You also can follow this direct link to register. Remember, to receive all the great bonuses, you have to attend the call. Talking with Dan always is a treat, and I suggest that you check out this Webinar because there just aren’t many chances to hear his golden words of wisdom for free.

While it seems as though the sky is falling on Wall Street, in many ways, it’s business as usual for real estate entrepreneurs across the nation.

Only time will tell about the impact that all the take-overs, bail-outs, buy-outs and restructuring of major U.S. financial institutions will have on the economy — and that’s all fodder for another post later this week. But regardless of what happens with Lehman Brothers, Merrill Lynch, AIG, WaMu or Paris Hilton’s hemline, there remain certain truths in our business that can and will produce profits for real estate entrepreneurs.

Someone needs to cut through all the static and talk about the facts. So, in response to member requests for details about how marketing can build stronger and leaner creative real estate businesses, I’ve arranged a Webinar that’ll change the way you think about the way your business does business despite today’s chaotic economy and challenging real estate markets.

REI Fireside Chat with Dan Doran
Mark your calendar for a special on-line event on Wednesday  at 9:00 p.m. EDT. At that time, I’ll be talking with renowned real estate marketing genius Dan Doran for an REI “fireside chat” about how entrepreneurs can make more money in less time, and generate cash flow and build strong, enduring businesses while so many others seem to be falling by the wayside. Register now for this free Webinar by following this link.

Just to give you taste of what you can expect from Wednesday’s tele-conference, here is a “sneak peak” of what Dan and I are cooking up for Wednesday’s chat:

Don’t Let Fear Slow you Down
Folks, the number-one reason that real estate entrepreneurs fail in our business has nothing to do with Wall Street, the mortgage markets or the national economy. They fail because they underestimate the importance of effective marketing to their businesses.

Simply accepting the reality that marketing is everything in this business, doesn’t give you the structure, tools and resources you need to make it happen in your businesses. Too many of us think we can handle it all on our own if we simply budget our time properly and learn “multi-task” our marketing amid all the other high-priority tasks in our businesses.  What we often fail to realize in our own businesses is that our time is money.

Bridge the Achievement Gap Between “Knowing” and “Doing”
More often than not, entrepreneurs faced with all of the pressing demands that are intrinsic parts of most real estate deals — such as financing, lead-generation, negotiations, and closing the deal –  simply run out of time when it comes to getting the marketing out. And without effective marketing, it’s virtually impossible to raise the bar on your bottom line.

When you’re juggling all of these mission-critical aspects of your business – all of which play major roles in your return on investment (ROI) dollars, merely knowing the secrets behind how marketing can infuse your business with cash is not enough to take you to that next level.

Just Say “No” to Multitasking
For real estate entrepreneurs, realizing that no amount of multi-tasking will bring you the profits you deserve for all the time, heart and effort you put into your business is a critical step in turning the tide on your cash flow. Armed with this realization, you’re free to implement the solutions that will make all the difference in your business.

On his Blog, bestselling author of “The 4-Hour Work Week: Escape 9 – 5, Live Anywhere, and Join the New Rich” (4HWW), Tim Ferriss characterizes multitasking as a “virus” that kills your potential to learn and meet many of your most important goals for your business.

In 4HWW, Tim warns, “ Do not Multi-task.” Tim’s reasoning is that when you take on too many tasks at once, you actually waste time and accomplish less. This is where “working smarter” can change everything in terms of  your lifestyle and your business.

For Tim and hundreds — if not thousands of successful real estate entrepreneurs, “working smarter” requires automating and outsourcing the tasks in your business that require the least amount of direct involvement on your part to be effectively completed.

Automate and Outsource your Marketing to Maximize your ROI
As far as marketing is concerned in your real estate business, no innovation is needed. The key to your success in this arena is to outsource the busywork and automate your real estate marketing using a proven and perfected formula for success. After that, all that’s required is persistence, and you’ll get the results that meet your goals for your business.

Most entrepreneurs who implement solid marketing solutions, such as SalesTeamLive’s Done-for-You marketing campaigns, discover that by automating and outsourcing their real estate marketing, they actually save money on marketing while expanding their reach and profit margins. Tune in for Wednesday’s REI “fireside chat” with Dan Doran and you’ll learn how you can reduce your workload, build a more vibrant business and save money in the process.

Fire-Up Your Bottom Line Wednesday at 9:00 p.m. EDT
Register now for my absolutely free REI “fireside chat” with Dan Doran. If you can’t make it on Wednesday, Sept. 17 at 9:00 p.m. EDT, I’ve scheduled a re-play of the call for Thursday, Sept. 18 at 1:00 p.m. EDT.  When you register, be sure to check out the amazing free bonuses I’ve assembled to ensure that the time you spend with us re-ignites your enthusiasm for “the deal” and invigorates your cash flow.

Marketing Mastery Bootcamp Coming Soon
Several times each year, Dan and the illustrious Richard Roop enlist hundreds of entrepreneurs to become lean, mean real estate investing machines by hosting Marketing Mastery for Real Estate Entrepreneurs Bootcamps. These accelerated training opportunities are legendary in the community for whipping businesses into shape in just four short days. The next Marketing Mastery Bootcamp is slated for Sept. 30 – Oct. 3 in Dallas.

Save Your Money for your Business
Marketing Mastery Bootcamps are not events intended to sell you more stuff. You’ll get everything you need to successfully implement the system all inclusive with the price of enrollment.

Each Bootcamp’s highlights include their What’s Working Best student success panel where Dan and Richard gather veteran attendees from across the nation and drill them on how their cutting-edge strategies are conquering even the roughest U.S. markets. These discussions are followed by question and answer sessions that help attendees to further hone their tactics and finesse the best possible deals.

Spot Train Where you Need Instant Marketing Muscle Tone
Dan and Richard always are working hard to deploy the best possible real estate investment strategies at their Bootcamps: No two events are exactly the same. Vital skill-building sessions are  an important part of their latest event format. These meetings help entrepreneurs to spot-train in areas where they most need marketing muscle tone and fast results.

Free Audio Preview: What to Expect from your Bootcamp Experience
Visit the GaryBoomershine.com Community page for free, no-registration-required audio content from Richard and Dan that explains how this event can help you to overcome your challenges and make the most of  your real estate business.

I’m psyched to be speaking REI Connect 2008 in Columbus, Ohio this weekend. The agenda for this real estate investing seminar, hosted by Colin Egbert, co-founder of RealEstateInvestor.com, is packed full of cutting-edge creative real estate investing techniques and strategies.

Not Your 9 — 5 Job’s Tedious Seminar
But don’t expect it to be a pitch-a-thon or an old-fashioned seminar where you’re supposed to sit still and take notes all day. All of the latest techniques and strategies are are open for what I know will be lively discourse in  round-table discussions, break-out sessions, interactive presentations and unbridled social networking opportunities.

Network and Learn in an REI-optimized Community Environment
From the moment that Colin first conceived REI Connect, he has been busy at work designing the experience for the comprehensive benefit of the real estate community and its individual investors. Here, you’ll get all the awesome content you’d expect from a top-tier event for a fraction of the price. But perhaps more importantly, you’ll have fun participating in  this REI-optimized community event.

The Future of Direct Marketing Is Here!
I can’t wait to chat with folks about how now, more than ever before, investors need to stay on top of their direct marketing efforts. With SalesTeamLive’s Done-for-You campaigns, you can squeeze results out of every last marketing dollar you spend with absolutely no work required on your part.

At REI Connect 2008: Your Vote Really Does Count
Perhaps in honor of the great democracy that makes our businesses possible, Colin has promised to award a trophy to the speaker who receives the most votes by attendees. And I’ve got some pretty stiff competition for the prize. Check out the list of REI luminaries who are all headline speakers in their own specific areas of expertise:

• Than Merrill - Marketing Systems/Automation
• Terry Hale – Commercial Real Estate
• Jerry Foster - Short Sales
• Jeff Adams - Automated Investing
• Darren Dicke – Wholesaling
• Preston Ely – Wholesaling
• Kenny Rushing - Success Strategies
• Pete Skouras - Deal Negotiation
• Chris Daigle - Outsourcing and Virtual Investing
• Sam Bell III - Web 2.0 Strategies
• Matthew Leitz - Business Development

The REI Electorate Speaks!
While the audience will elect the best speaker to receive a trophy, one lucky attendee will win a new laptop computer via raffle. I suppose this is a statistically democratic way to call a winner. Let’s just hope we have no hanging chads to complicate the vote-counting in this election.
For more information about this event, check out the  REI Connect Web site. If you can’t make it to the event, Colin has enough great videos and information to rev you up to register late for this year’s conference, or inspire you to start planning early for REI Connect 2009.

Join Us @ GaryBoomershine.com
Signing up for my monthly newsletter and special reports  always is the best way to ensure you’re first in line benefit from special promotions such as this one. Becoming a member of GaryBoomershine.com is free and easy — just use the yellow fields at the right side of this page or on the GaryBoomershine.com main page.

Not only do members my What’s Working and What’s New monthly and special reports. I’m always looking for ways to delight my members with original news, information and great incentives to attend life-changing and money-making  events such as REI Connect 2008.