JINGLE MYTH: From The New York Times, word that mortgage borrowers who owe more on their loans than their homes are worth may not be walking away from their properties en masse, after all:

Hmmm. This does not square with the picture apparently lodged in the mind of the conventional wisdom of a housing market in the midst of an extended, catastrophic collapse. Somebody please tell Gretchen Morgenson! For its part, the Los Angeles Times says the supposed wave of jingle mail being sent to mortgage servicers is an "urban myth." In Orange County, Calif., meanwhile, a local real estate consultant says "We're seeing the low-end [foreclosed properties] just fly out the door" when they're listed, the Orange County Register reports. Odd. I thought this housing slump was going to be worse than the one that occurred during the Depression. . . .

"THIS IS LIKELY TO BE ONE OF OUR LAST REPORTS ON AXP EVER . . .": Bear Stearns' research department begins its long goodbye. . .

Gene Marcial of Business Week somehow wants us to believe that if you'd followed his 7 Commandments of Stock Investing last summer during the first round of the credit crackup, you'd have known to buy Goldman Sachs at $164 in August, in time for its 40% runup over the ensuing six weeks. Really? By the looks of some of Marcial's commandments--''Concentrate on major big-cap stocks;" "Buy panics"--you'd have been just as likely to choose Citigroup or Countrywide instead. Whoops! P.S. I say any book that tells you to start your stock search with the Dow 30 is inherently suspect. P.P.S. The commandment about always keeping 20%-30% of your portfolio in cash isn't exactly a confidence-builder, either. . . .

WOE IS WACHOVIA: The bad news out of Wachovia over the past few weeks has been astonishing. First, the company paid $144 million in fines for failing to stop telemarketers from opening accounts at the bank and bilking its customers of over $100 million. Then the company took a $1 billion writedown on lease transactions it did earlier this decade. Soon after that, it restated its first-quarter loss upwards by 80% because of bigger-than-expected writedowns related to its bank-owned life insurance.

All this has gone on, of course, as the company wrestles with the mortgage-related problems it bought for itself at the very top of the market with its acquisition of Golden West Financial. There have been multiple, sizable capital raises and a drastic dividend cut. To say the least, shareholders have not benefitted.

Here you see what happens when a company strays from its core competence. For years, Wachovia has been known for providing the best customer service of the big banks. If the company can be said to have an enduring competitive strength, that’s it. So why did it let itself get distracted by doing a big deal? Why was it messing with BOLI in the first place? How did it let itself turn a blind eye to obvious fraudsters?

It’s true, of course, that many banks have been punished as a result of the down cycle in mortgage credit and credit generally. What makes Wachovia stand out in contrast, though, is that the bulk of its injuries appear to be self-inflicted.

OH, THE JOYS OF DEAL INTEGRATION: TD Commerce Bank can't use the Commerce name in five counties in Massachusetts, including metro Boston, because it would infringe on a local bank's trademark, a judge rules.

At Decision Quality, Kevin Hoffberg provides terrific notes on the formal presentations made at this weeks "Mavericks in Banking" conference. For Kevin's notes on Tom Brown's presentation, click here. For his notes on Tom's Q&A with Bill Taylor, click here. For his notes on Tom's Q&A with Dick Kovacevich, click here. And for his notes on Tom's Q&A with Prosper.com's Chris Larsen, click here.

NEWS FLASH! NOT ALL LOCAL HOUSING MARKETS IN TANK!: In Houston, new-home construction is lately lagging new-home sales. P.S. Okay, fine, $120 oil has something to do with it, but you have to start somewhere. . .

VINTAGE KOVACEVICH: Around here, we tend to dismiss the diversification as "diworseification"--incremental investment in area where one has no particular competitive advantage, solely as a protection against ignorance or bad luck. This morning at the BAI Mavericks conference, Dick Kovacevich gave as smart a defense of diversification as you're likely to hear. The only way to avoid getting swept up and going overboard on a given product path (such as, ahem, subprime mortgage lending, say), "is to be well-diversified so you have plenty of paths." Otherwise "you all go over a cliff holding hands, singing 'Kumbaya.'" Yes. That sort of thing has been in the papers lately. Other highlights from the Q&A:

> Why investment banking is the one product area Wells Fargo has not diversified into: "investment banking is star-based while our culture is team-based; investment banking is transaction-based, while we're relationship-based."

> On making deals work: "You don't do a $30 billion deal to generate a one-time, $1 billion cost save. It's too risky and not worth the effort. Never do a deal unless the prospective revenue growth rate of the combined companies will be greater than the growth rates of the two companies alone."

> On running a bank during downturns: "It's wonderful. The more pestilence and famine, and I just lick my chops."

The quotes above are from my scribbled notes, by the way, and are my best effort at reconstructing what he said verbatim. Kevin Hoffberg, who's one heck of a real-time typist, has more complete notes from the conversation here.

MAVERICK THINKING: I'm in Palo Alto at the BAI's inaugural "Mavericks in Banking" conference (hosted by Tom, by the way). Pretty good so far! During last night's kickoff, Tom had a Q&A with Bill Taylor, author of Mavericks at Work (which bankstocks.com would have rated the best business book of`2006 year even if we had not gotten a positive mention). They touched on a number of key topics I expect to be fleshed out today and tomorrow: what are the characteristics of a true business maverick, how do managers get bad news to flow up, how to identify talent, that sort of thing.

Key highlights so far:

> Taylor says he interviews a lot more wannabe mavericks than actual mavericks in the course of his research. The question he asks CEOs that goes a long way in helping him identify the real deal: "Why would great people want to work at your organization?" If the CEO can't answer that, clearly and convincingly, he's likely an impostor.

> It's more important to do one thing better than any of your competitors, rather than do lots of things really well, Taylor says. If you're best-in-class in just one thing, you can have a real competitive advantage. But without that, you're likely just going out of business in slow motion.

> Southwest Airlines sure has some novel interviewing techniques. In one, a group of ten or so interviewees for flight attendant is each asked to provide the group with his or her "philosophy of life." But during each talk, interviewers watch the audience not the speaker, for signs of empathy, understanding, and other traits that make for good flight attendants.

> How do recognize great talent? Increasingly, pedigree--schools, prior employers, and so on--don't count for as much as they once did. Successful maverick types care as much about who you are and what makes you tick.

This morning kicks off with a Q&A with Dick Kovacevich, followed by discussion. More to come. . . 

WINDY: BofA's Liam McGee tells the A.P. that the final morphing of the LaSalle brand into Bank of America in Chicago today is "just another tangible sign that [BofA] is a very significant part of the Chicago business community." Liam, there's only one problem. The LaSalle having its signage changed today is a shadow of the LaSalle that BofA agreed to buy last April. LaSalle was Chicago's premier middle-market lending franchise, don't forget. But since the BofA deal was announced, over 100 LaSalle bankers have moved on to competitor PrivateBancorp., including LaSalle's ex-CEO, Larry Richman (who's become CEO of Private as part of the deal) as well as most of LaSalle's top management. Private has hired so many LaSalle people it's had to move to new, bigger headquarters. Outside Chicago, meanwhile, the story's the same: LaSalle's office in Minneapolis has gone from 20 employees to six; in Milwaukee, 30 to three. I'm going to go out on a limb and predict that this deal might remembered as one of the dumbest on BofA's long list of dumb deals. The company is so big by now that the effect won't likely show up in BofA's earnings per share (especially compared to the effect of ballooning loan losses at BofA). But it is one more sign of just how poorly Ken Lewis deploys capital. Then again, Lewis learned from the master dilutor, himself. . . .

IT'S FRIDAY, TIME TO LOOK ON BRIGHT SIDE!: Bullish nugget 1: The Bank of England says British banks may have overstated their subprime losses, since the banks have had to mark their assets to a market that's highly illiquid. "It's quite conceivable that in  a year's time these prices will have risen, in which case banks will be marking to market and showing significant profits again." says Mervyn King. . . .Bullish nugget 2: Banks' inventory of unsold leveraged loans, which came to $250 billion at one point last year and were $157 billion in March, are down to just $91 billion, reports CreditSights. At this rate, soon banks will be supplying capital again rather than raising it. . . .

TALES FROM THE BUBBLE: No matter how lax you think things got during the subprime lending boom, it turns out they were even laxer. Distressed-loan buyer Gus Altazurra, among others, has been sifting through the rubble:

Altazurra, who has paid as little as 31 cents on the dollar for some loans, said the terms of some mortgages made at the peak of the boom were hard to believe. One loan he bought from a Texas bank was to a borrower with a very low credit score -- 484 -- who refinanced and cashed out 100% of the equity in the property, he said.

Wow. I didn't know FICO scores even went that low. . .

Here's a worthwhile profile of Jamie Dimon from Bloomberg Markets. That little piece of paper he carries around in his shirt pocket is becoming downright legendary. . .

DUD SCUD: I'd love to read a long, juicy insider's account of the rise and fall of Zoe Cruz at Morgan Stanley. Joe Hagan's 7,000-word piece in the new New York isn't it. The poor woman comes off as two stick figures at once: the Wall Street shrew who eats men for breakfast, and the helpless victim canned because she's a woman. I somehow think the actual Cruz is more complex than that, and the details of her career more nuanced. P.S.: If you like blind quotes, this article's for you. By my count, Hagan got exactly one (1) person, Stanley Druckenmiller, to speak on the record. Dogged journalism!

Odd fact: in Boston so far this year just 41% of selling homeowners have cut their asking prices, compared to 55% of sellers who cut asking prices in 2007, according to the local multiple listing service. A sign the market is finally stabilizing? Nope. Home sales in Boston fell by 32% in March from a year ago. Given the market is still sluggish and the housing slowdown has become an accepted fact, you'd think sellers wouldn't be any less reluctant to reduce their prices now than they were a year ago, right? Possible explanations for conundrum: a) The year is still young! Wait until we get to midsummer, when families need to go ahead and relocate in time for the start of school. Then you'll see them start slashing.  b) A greater percentage of homes for sale this year is foreclosures being sold by banks, who aren't so nimble (they're banks!) on the pricing side and may still be in a dream world as to what houses are really worth. I vote for b. . . .

STILL NONSENSICAL: Back in February, you may recall, Fannie Mae and Freddie Mac decided  (after much browbeating from New York A.G. Andrew Cuomo) to stop buying mortgages from lenders who use in-house appraisers, in order to avoid owning loans backed by properties with inflated values. The idea was that third-party appraisers are somehow more objective. As we noted at the time, the move made zero sense, since the arms of third-party appraisers presumably twist as easily as in-house appraisers' do. But don't take our word for it. Now the Comptroller of the Currency says it's a dumb idea, too.

Carlyle Group's David Rubenstein: "The most attractive thing right now is buying back my own debt."

SIR FRED SLIPS: Word of RBS's surprise £12 billion capital raise isn't just a disappointing piece of news for shareholders; it caps a series of decisions by management over the past twelve months that can only be described as disastrous. Roughly this time last year, when its stock was trading at 700 pence, RBS and its bidding partners first considered putting together a bid for ABN Amro. In October, the consortium finally closed on £47 billion deal; the price was £10 billion above the next highest bid, and worked out to 20 times earnings. RBS's portion of the deal was £10 billion in cash. By this time, RBS's stock was down to 550p. The deal pushed down RBS's capital ratio to 4.25%, well below the 5.50% average for U.K. banks, and just 25 basis points above the minimum that causes regulatory bells to go off. Sir Fred Goodwin said that, no, the company need not raise capital to pay for the deal. It would rebuild its capital via retained earnings instead.

Then in December (with RBS by now trading in the low 400s) Sir Fred told investors again that the company would not raise new capital. Its subprime-related writedown would only be £1 billion, far lower than the hits that companies like Citigroup and Merrill Lynch took last quarter. He also noted that the company's operating results were running "well ahead of market consensus."

In February, Sir Fred raised RBS's dividend, and again reiterated the company didn't need to raise capital (“Not us! No way! Not now!”)

Never mind!  Now the stock is at 358p, and the new capital raise will be much more dilutive to shareholders than it would have been had the company acted earlier. And, of course, if Sir Fred had just stayed out of the ABN mess altogether, he wouldn't have to raise nearly as much as he is. RBS isn't the only bank to take a huge subprime-related hit, of course. But the moves the company have made has helped take a bad situation and make it astonishingly worse. 

NOT ENCOURAGING: Did you see that Vik Pandit, talking up Citigroup to Business Week, told the magazine that "you couldn't design a better footprint or get a better set of assets if you had to build a bank from scratch. This is clearly the right model." Really? Pandit's take on reality is materially different from mine. Here's a bank that's so rife with unneeded costs that it's embarking on its second cost-cutting program in less than a year, has such a shortage of proven managers that Pandit is having to import a new team more or less wholesale from Citi competitors, and that's endured more pain from the subprime meltdown than just about any firm on Wall Street. What are the advantages of size and product breadth again? I was hoping Pandit would take a fresh look at the Citi model and consider spinning off some key businesses as prelude to a broader breakup. This is not an encouraging early indication of where he's headed. If he keeps the wacky "One Citi" strategy, all hope will be lost. . .  

VERY CROSS: At SeekingAlpha, commenter "CrossProfit" whacks me but good for not providing "a single clear actionable thought" in my complaint about Jack Welch's stab in the back of Jeff Immelt on CNBC Wednesday. Can't a guy complain gratuitously anymore? Oh, fine, fine:

For example;
"he's nothing like the management genius he was once cracked up to be."
Care to explain exactly what he was cracked up to be means?

"What he was cracked up to be" means "what he was generally considered to be." Which he was.

"an accounting con game "
Care to be more explicit rather than making general statements?

GE basically made its numbers for the last five years of Welch's tenure by systematically underreserving for losses at its reinsurance unit. It's all there in the link!

"Immelt's main concern should be--duh!--to increase shareholder value"
Care to explain HOW exactly you would achieve this differently, taking into account each divisions capital requirements etc.?

I should develop a strategic plan for GE? I have a day job! Besides, I already made one highly useful suggestion: stop being so obsessed with hitting your quarterly numbers. That should free up at least a little time.

"stop giving earnings guidance in the first place"
Care to explain how this would enhance trust in management and increase shareholder value? Usually, a lack of information is fertile breeding ground for rumors and misunderstandings. Transparency, on the other hand, can go a long way with analysts and the investment community. 

If quarterly guidance makes for such "transparency," why did GE's stock get so clobbered after the miss? Answer: because it doesn't provide transparency! It only obfuscates, by distracting management into worrying about things that don't matter. The provision of quarterly guidance can't possibly help "enhance trust in management," either, since managements who do provide such guidance are promising something that they sooner or later will not be able to deliver. Better to just keep quiet.

Hope this helps!

Old Citi strategy: Cut costs and improve communication and cross-selling. New Citi strategy: Cut costs and improve communication and cross-selling. What was it Einstein said about doing the same thing over and over and expecting a different result?

WELCHED: Note to Jack Welch: If you really think "nothing is worse than having a predecessor perceived as commenting negatively on a successor," how about--oh, I don't know--not commenting on your successor? Just a thought.

Welch's comments yesterday about G.E.'s first-quarter numbers are one more reason to believe that he's nothing like the management genius he was once cracked up to be. In particular, he still doesn't seem to understand that the 1990s are over. People get that quarterly earnings micromanagement (of which Welch was a master) doesn't create shareholder value over the long term, and can instead be a road to doom, disaster, and even jail. You can argue (many have) that that G.E.'s earnings growth over the last five years of Welch's tenure there was basically an accounting con game that Jeff Immelt had to clean up after--which is why the stock has been such an oinker for the past seven years. Thanks, Jack!

Welch's apparent view that Immelt's main concern should be hitting his quarterly numbers is bogus. Rather, Immelt's main concern should be--duh!--to increase shareholder value (let's use book value per share as a proxy) as much as he can for as long as he can, even if results are a little lumpy along the way. Along that line, maybe the first thing Immelt might do is stop giving earnings guidance in the first place. I doubt that's a concept that Jack Welch can even begin to get his head around. At least he can lay off the CNBC appearances, though. . . . 

MY LAST WORD ON OUR NATIONAL CITY DISCUSSION. REALLY:

Gary—

Calm down, bucko! I didn’t bring up your early-2007 rating changes on National City to engage in any after-the-fact scorekeeping. Sorry if I offended. I certainly had my share of forgettable calls when I was on the sell-side—and even more of them last year.

Rather, I was making the point that, if you thought Nat City was overestimating its capital levels in early 2007 after the First Franklin deal closed, and that its pending buybacks were a bad idea, you sure didn’t mention it at the time. It’s easy to look back now and say the company shouldn’t have bought back all that stock. Everyone agrees, even National City. It would have been helpful if you’d made the point at the time. Otherwise, all you’re doing is engaging in 20-20 hindsight. Or is there a note that you published on this issue in early 2007 that I haven’t seen?

Beyond that, I’m glad to see that you agree with me that the company was robustly profitable on a GAAP basis in 2006, and that you have no argument with my defense of the company’s dividend hikes.

This is all I have to say on the topic--time to get back to work!; I'll give you the last word.