If CFC and WM go down, the U S Govt might need to open their own mortgage company. No one wants to buy these companies, as no CEO of a large bank wants to get into the mortgage business. Unless Blackstone or KKR steps up to the plate, the mortgage business may be completely imploding into thin air.
You are over reacting I think. Not everyone in the mortgage business gave loans to unqualified home buyers. Those that did that are punished by the market, The impact to the Economyas a whole has been overstated by the media to force the FED to cut rates and save these companies. The FED has been acting irresponsibly as a result and inflation will show up soon but they will blame it on the oil. John
CFC and WM are two of the biggies. I'm just saying if these two companies go down (their stock prices are reflecting the very real possibility), the mortgage market is going to be in bad, bad shape. In a different environment, someone would want these companies if their valuations got low enough, however, I believe CEO's are too scared at this time to tell their shareholders that they think getting into the mortgage business would be a "good idea". I do believe someone could easily buy WaMu and then dump/write off, the mortgage business, keeping the retail banking side.
the Fed dumped in 41 billion more to try to prop up the whole mess... but the rats are sensing a hole in the hull...
You are providing a great example for newer traders. How do you know when all bad news is priced in? When the stock starts reacting positively to what is perceived to be "bad news". WM and CFC are still acting poorly, thus all bad news is not priced in. It's actually a pretty simple, but important concept.
Just for the fun of it: over/under at 4 months on when WM gets a bid for their retail banking business. I assume it's worth $20.00/share, but I guess whom ever wants to buy needs them to completely write off their mortgage business first. I'll say under at 4 months and price will be $25-$30.