“Is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?”  Apparently so in more places than just the sand states, where it’s not such a wonderful life for many residents.  Cities like Memphis, New Orleans, and Detroit continue to report ever-more-severe problems with their mountains of sub-prime debt.

Friday left four more banks longing for the old 3-6-3 rule.  Pay your depositors 3%, lend at 6%, and you’re on the golf course by 3pm.  The catch is that the loans have to be good ones.  Friday’s closures brought the year’s tally to 57 banks closed.

Bonds and stocks reversed course last week.  Treasury yields jumped sharply; mortgage rates rose not quite as much.  Lenders are coming to grips with slower lock volume, and are tightening margins accordingly.  Bank of America appears to be the first of the large conduits to make a play for more volume at thinner margins.  30-year conforming rates are pushing towards 5.50%, and with the lock index at 500, overall volume is weak.

The economic debate has shifted to when, not if a recovery lies ahead.  Wholesale and consumer inflation, a stock market rally, and a smattering of good economic reports pushed yields higher.  Adding to the selling pressure, June’s Fed minutes showed growing concern over the effectiveness of more quantitative easing.  Translation:  the Fed is unlikely to buy more than the $300 billion of Treasury securities already slated for purchase.  Fed officials “were concerned that announcements of substantial additional purchases could add to perceptions that the federal debt was being monetized.” Bernanke presents his monetary policy to Congress this week; the market will latch on to any comments about the Fed purchasing more or less debt.

Stocks fell for a month, but rebounded nicely last week.  2nd quarter earnings reports have begun, and early reports are beating estimates.  Bank profits are particularly good, owing more than a little bit to mortgage banking revenues.

There are the two sides to this thing with Cheney and the secret CIA hit squad. The ying and the yang. Idea was we’d kill off al Qaeda leaders. That’s the ying. The yang is that it was completely illegal. But, listen to this. Before you make your judgment, before you decide, if it weren’t for Dick Cheney and his secret assassination squad, Osama bin Laden would be alive today.  – David Letterman

Thanks for your business and have a good week.            — Tom Millon

Market	Close	Wk Chg
30-Yr Agency Note Rate	5.44%	0.14%
30-Yr Mortgage Yield	4.63%	0.27%
Note Rate vs. MBS Yield	0.82%	-0.13%
Mortgage-Treasury	2.13%	-0.01%
10-Yr Treasury	3.65%	0.34%
2-Yr Treasury	0.99%	0.09%
10yr- to-2yr Spread	2.65%	0.25%
Fed Funds	0.16%	-0.01%
Fed (Aug ‘09)	0.20%	0.00%
Fed (Feb ’10)	0.54%	0.06%
Dow Industrials	8,744	+598