LOCAL AND NATIONAL EFFECTS OF THE MASTERS OF THE UNIVERSE

From Bloomberg (8/21/2007):

Tucson-based First Magnus filed for bankruptcy on August 21, joining 14 other home mortgage lenders who have done the same since last December. I didn't know until now how much FM owed and to who:

First Magnus relied on investment banks to fund its loans, including affiliates of Washington Mutual Inc., Countrywide Financial Corp., UBS AG and Merrill Lynch & Co. Inc. First Magnus owes the banks $1.56 billion, which is backed by the loans the money was used to fund.

In the local paper, we learn that FM isn't doing this to gain time to re-organize but to liquidate.

After Magnus turned bellyup, Countrywide find a "white Knight" in BoA (also from Bloomberg, 8/23/2007):

Bank of America Corp. bought $2 billion of preferred stock from Countrywide Financial Corp., erasing concern the nation's largest mortgage lender will go bankrupt and boosting investor confidence in stocks worldwide.

Via Atrios -> Bloomberg, I also learned that this "red" tide is getting bigger:

U.S. banks and thrifts suffered the biggest increase in late loan payments in 17 years as more homeowners fell behind on mortgages, the Federal Deposit Insurance Corp. said.

Loans more than 90 days past due rose 10.6 percent to $66.9 billion in the period ending June 30, the largest quarterly increase since 1990, the FDIC said in its Quarterly Banking

It doesn't look like the Bernanke Put has helped out much, at least for now:

Commercial Paper Has Biggest Weekly Drop Since 2000 (Update3)

By Darrell Hassler

Aug. 23 (Bloomberg) -- Outstanding U.S. commercial paper fell 4.2 percent, the biggest weekly drop in at least seven years, as investors fled asset-backed debt and opted for the safety of Treasuries.

The retreat may indicate that the Fed's decision to lower the discount rate last week failed to instill enough calm to draw back investors. Commercial paper backed by assets led the fall as buyers fled debt linked to subprime mortgages.

``The commercial paper market, in terms of the asset-backed commercial paper market, is basically history,'' Bill Gross, manager of the world's biggest bond fund at Newport Beach, California-based Pacific Investment Management Co., said in an interview today.

The decline in outstanding commercial paper was driven by a 6.8 percent fall in asset-backed commercial paper, which represents about half the commercial paper market and has been used to finance purchases of subprime mortgages.

Banks worldwide have $891 billion at risk because of credit agreements on asset-backed commercial paper programs, Fitch Ratings said today.

``There is no doubt that banks have been forced to assume additional liabilities,'' Gross said.

Investors shunned commercial paper in favor of government debt, sending Treasury bill yields down earlier this week by the most since the stock market crash of 1987.