In 1986, Mikele Mebembe was on holiday in Kenya after graduating from Northwestern University. On a hike through the bush, he came across a young bull elephant standing with one leg raised in the air. The elephant seemed distressed, so Mikele approached it very carefully.
He got down on one knee and inspected the elephant's foot and found a large piece of wood deeply embedded in it. As carefully and as gently as he could, Mikele worked the wood out with his hunting knife, after which the elephant gingerly put down its foot. The elephant turned to face the man, and with a rather curious look on its face, stared at him for several tense moments. Mikele stood frozen, thinking of nothing else but being trampled. Eventually the elephant trumpeted loudly, turned, and walked away. Mikele never forgot that elephant or the events of that day.

Twenty years later, Mikele was walking through the Chicago Zoo with his teenage son. As they approached the elephant enclosure, one of the creatures turned and walked over to near where Mikele and his son Tapu were standing. The large bull elephant stared at Mikele, lifted its front foot off the ground, then put it down. The elephant did that several times then trumpeted loudly, all the while staring at the man.
Remembering the encounter in 1986, Mikele couldn't help wondering if this was the same elephant! Mikele summoned up his courage, climbed over the railing and made his way into the enclosure. He walked right up to the elephant and stared back in wonder. The elephant trumpeted again, wrapped its trunk around one of Mikele's legs and slammed him against the railing, breaking every bone in his body. Probably wasn't the same elephant.

What does that story have to do with mortgage banking? Nothing, aside from when you take something for granted it might not work out.

In spite of many being on vacation Friday, we had a large amount of economic activity. Personal Income was +0.5%, Personal Spending was +0.4% in July, the core PCE deflator was +0.1% (indicating that inflation is under control), the Chicago Purchasing Managers Index was slightly stronger than expected at 53.8 but looking a little slower going forward, Factory Orders were +3.7% in July (stronger than expected), and the University of Michigan Consumer Sentiment Survey sank from July’s 90.4 down to 83.4. President Bush unveiled his plan to aid homeowners in various degrees of financial stress, although how long it takes for some of his proposals to be enacted, if ever, is subject to debate. And Federal Reserve Chairman Bernanke said that the Fed “will act as needed”, that it is not the Fed’s responsibility to protect lenders or investors from the consequences of their decisions, and that some increase in the risk premiums (risky loans versus “safe” loans) is probably a healthy development. Interestingly, the markets did little, although traders reduced the odds that the Federal Reserve will cut its target rate for overnight lending between banks later this month.

Economic news-wise, the first piece of data this week is the Institute for Supply Management’s (ISM) manufacturing index at 7AM PST. It is a measure of manufacturer sentiment and is expected to show a decline from last month’s reading of 53.8 to 53.0 in August.  The next major news comes tomorrow when the Federal Reserve will release its Beige Book report. This report details current economic conditions in the U.S. by region. It is believed to be a key source of data when the Fed meets for their FOMC meetings. Later in the week we’ll have weekly unemployment claims, Q2 nonfarm productivity & unit labor costs, ISM non-manufacturing index, and the unemployment data on Friday.

Ameriquest Mortgage, known for great TV ads and sponsoring the Super Bowl, has stopped taking applications and its parent company (ACC Capital) has sold its remaining mortgage assets and service business to Citigroup Inc. The acquisition includes servicing rights for $45 billion worth of loans, but remember that Citi is not buying Ameriquest.