Farmer Jones got out of his car and while heading for his friend's door, noticed a pig with a wooden leg. His curiosity aroused, he asks, "Fred, how'd that pig get him a wooden leg?"

"Well Michael, that's a mighty special pig! A while back a wild boar attacked me while I was walking in the woods. That pig there came a runnin', went after that boar and chased him away.  Saved my life!"

"And the boar tore up his leg?"

"No he was fine after that. But a bit later we had that fire. Started in the shed up against the barn. Well, that ole pig started squealin' like he was stuck, woke us up, and 'fore we got out here, the darn thing had herded the other animals out of the barn and saved 'em all!"

"So that's when he hurt his leg, huh, Fred?"

"No, Michael. He was a might winded, though.  When my tractor hit a rock and rolled down the hill into the pond I was knocked clean out. When I came to, that pig had dove into the pond and dragged me out 'fore I drownded. Sure did save my life."

"And that was when he hurt his leg?"

"Oh no, he was fine. Cleaned him up, too."

"OK, Fred. So just tell me.  How did he get the wooden leg?"

"Well", the farmer tells him, "A pig like that, you don't want to eat all at once."

Some folks see a correlation between this story and the mortgage banking business. It’s been good to many folks, but it seems like programs and guidelines are either tightening up again or going away entirely, especially at the wholesale/broker level. The latest rumors focus on Washington Mutual having preliminary merger talks with JPMorgan Chase. JP Morgan also may be interested in two other regional banks, Suntrust and PNC Financial. Last week’s Bank of America/Countrywide news came just in time for some nervous warehouse lenders. At least two (GMAC and Southwest Securities) sent out notices saying, “Due to the recent market  conditions and the industry wide news on Countrywide…Regarding loans committed to Countrywide, we will accept ‘agency eligible paper’ with a "DU" or "LP" cert, only, at this time.  FHA also acceptable. No non-conforming or CW proprietary programs.”

Regarding the BofA/Countrywide deal, one analyst thought that “CW as entity is done…the first thing to go is the Wholesale channel, as BofA has made it clear they don't want to be in that business…then, they close down a majority of the retail shops taking the top producers under Bank of America’s roof….Correspondent will stay, but they will evaluate who they want to do business with, and only the cleanest paper will be allowed to go through.” Bank of America's $4 billion deal to rescue Countrywide Financial is getting mixed reviews from Wall Street: are they overpaying for a franchise to save face, following the $2 billion investment in Countrywide late last year? Ken Lewis has had a good history of buying undervalued assets (like Fleet BankBoston in 2004, or the $21 billion purchase of La Salle, a deal that gives B of A a huge footprint in the Chicago region), and it's probable that higher-than-anticipated cost savings will save the day. Countrywide may be able to turn things around on their own, but their name is tarnished, and the best way to extract value from buying Countrywide is to keep its powerful origination and servicing franchises, and re-brand its product. One good article to scan is http://money.cnn.com/2008/01/11/news/companies/tully_countrywide.fortune/index.htm?postversion 08011112

Bank of America supposedly sent 60 analysts to Countrywide's headquarters, and after four weeks analyzing Countrywide's legal and financial predicament, and modeling how its loan portfolio was likely to perform, Bank of America offered an all-stock deal valued at $4 billion for Countrywide – with a book value of 3x that. There certainly appears to be ample cushion for potential damages, settlements and other litigation costs involving mortgages that went bad.

• Speaking of “big deals” Merrill Lynch is seeking $4 billion, to help cover and additional $10-20 billion of write-downs, and the Kuwait Investment Authority is expected to be a significant investor in the new deal. Citi is expected to announce a write-down of close to $20 billion and present plans to raise as much as $14bn in new capital from the Chinese, Kuwaiti, and public market investors. Under the proposal being discussed, the bulk of the money - roughly $9bn - would be most likely to come from China, people familiar with the negotiations say. I always wondered what they were doing with that oil money…
• The city of Baltimore has filed a fair-lending lawsuit against Wells Fargo Bank, contending that the San Francisco-based bank's subprime lending practices have led to high foreclosure rates in minority neighborhoods and cost the city millions of dollars in expenses and lost revenues.
• Capital One Financial has lowered its estimate of 2007 earnings, citing among other factors costs associated with GreenPoint Mortgage, which the company has shut down.

How about the market today, with the 10-yr at 3.82% and mortgages unchanged? There is no data today, aside from some pro-IBM news, the week’s most important releases are coming tomorrow morning with December’s Retail Sales (expected +.1%) and the Producer Price Index (PPI, expected +.2% and +.2% for the core rate). On Wednesday we’ll see the Consumer Price Index (CPI), one of the most important monthly reports that we see since it measures inflationary pressures at the consumer level of the economy. It is expected to rise 0.2% while the core data is also expected to increase 0.2%. December’s Industrial Production report is the second report to be posted Wednesday, expected -.1%, and then Wednesday afternoon the Fed Beige Book report will be posted, detailing economic activity regionally throughout the U.S. December's Housing Starts report will be released early Thursday morning, and then Friday we have December’s Leading Economic Indicators and January’s preliminary reading to the University of Michigan Index of Consumer Sentiment.

While on a road trip, an elderly couple stopped at a roadside restaurant for lunch.  After finishing their meal, they left the restaurant, and resumed their trip.  When leaving, the elderly woman unknowingly left her glasses on the table, and she didn't miss them until they had been driving about forty minutes.  By then, to add to the aggravation, they had to travel quite a distance before they could find a place to turn around, in order to return to the restaurant to retrieve her glasses.
All the way back, the elderly husband became the classic grouchy old man.  He fussed and complained, and scolded his wife relentlessly during the entire return drive.  The more he chided her, the more agitated he became. He just wouldn't let up one minute.  To her relief, they finally arrived at the restaurant.  As the woman got out of the car, and hurried inside to retrieve her glasses, the old geezer yelled to her, “While you're in there, you might as well get my hat and the credit card.”

Rob