The really crappy thing about all this, at the moment, is that the news was leaked by a low-level manager in the retail loan devision, so most people are finding about it by reading the front page of the paper this morning. That's a horrible way to find out that your future has become incredibly uncertain.
From what I understand, there is every likelihood that First Magnus will go into Chapter 11 to reorganize and ride out the market's credit fears, but that's conjecture on my part. First Magnus employs more than 800 people in Tucson and 5,000 people nationwide, including three of my clients.
My heart is with them and their families as they move through this trying period.
UPDATE: According to this morning's news, Countrywide, the nation's largest home lender, will be the next to fall, with expectations that they might file bankruptcy within the next week or two.
Fannie Mae, which is federally supported, also announced a 36% drop in earnings.
Things look bleak for the US economy.
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Of great concern to me regarding all of this is the federal insurance coverage my mother has on her deposits at a local credit union.
ReplyDeleteThis is something everyone should think about: Making sure your deposits are fully federally insured! Often, you can change something minor that adds coverage: Adding a name to your account, or adding a beneficiary in the event of your death.
As for the effect on our economy: This is another example where society gets infected with a tulipmania-like virus. Mortgages were being given to practically anyone without checking references and (somewhat separately) housing prices spiked beyond all reason.
Equally unfortunate in all of this is the undeserved "winners" that are created along with the unfortunate losers. Some people made a windfall off a timely sale of their house. This is all another example where gambling and gaming the system make people money instead of the more-healthy alternative: Hard work, sweat, and creativity.