Here’s a story to watch: the WSJ goes C1 with an exclusive that former Countrywide execs are forming a company to buy up distressed mortgages—not mortgage-backed securities but whole loans.

Essentially these guys would be trying to profit off the collapse of a system they helped weaken.

PennyMac’s plan to profit from the mortgage industry’s turmoil is likely to draw fire, especially from those who believe Countrywide’s aggressive sales tactics and lowered lending standards helped lead to the subprime-mortgage troubles in the first place.

“The whole subprime mortgage fiasco was built on sort of Wall Street’s snake-oil salesmen convincing America this is a can’t-miss scheme,” says Irv Ackelsberg, a consumer lawyer in Philadelphia who testified to the Senate Banking Committee on lending last spring. “It sounds like they’ve just morphed into some new version.”

We don’t know whether to buy this bit of unhappy talk from the execs who have an interest in lowballing the market right now, but it sounds about right:

It thinks whole-loan losses have barely begun to materialize, and a new wave of problems is coming as certain loans with low initial “teaser” rates reset to higher rates, squeezing borrowers’ ability to pay.

Oh, right, the Little Man

The Los Angeles Times has an interesting story on how the Fed’s moves last week to bail out Wall Street were made possible by a 1930’s law created to help out the “little man.”

(Speaker of the House John Nance) Garner may have rolled in his grave at what the Fed did with his largely forgotten bit of populist lawmaking, but most economists applauded.

“It was almost a miracle that it was there, and it was a miracle that someone in the Fed figured out how to use it,” said David M. Jones, a former Fed official who is now chief economist at Investors Security Trust in Fort Myers, Fla.

There’s that much-misused word “populist”, but this is a good story overall.

Fees, fees, and more fees

Also on C1, the WSJ has a good analysis of how the financial sector’s rebound last week may not last. It “faces a business environment unlike anything it has seen in more than a decade.”

“The earnings power of financials has been bruised and the question is, how fast can it come back,” says David Kostin, market strategist at Goldman Sachs Group.

Mr. Kostin rattles off a list of income sources from recent years that, while not necessarily dead, are going to be greatly reduced for some time to come. “You had mortgage origination, mortgage-servicing fees, loan-commitment fees, advisory fees, and then the home-equity fees, consumer fees,” he says.

The paper also notes that firms are highly likely to become more risk averse and take on less debt, which has goosed returns for years.

Yes, and?

The FT fronts a confusing story saying some credit securities have lost a third of their value while others have lost 95 percent. It says the numbers are “the first public price estimates for specific structured credit securities to have emerged since the start of the credit crisis.”

Context, people. Context.

End times

The WSJ fronts a gloomy look at the New Malthusianism. It’s today’s must-read:

Now and then across the centuries, powerful voices have warned that human activity would overwhelm the earth’s resources. The Cassandras always proved wrong. Each time, there were new resources to discover, new technologies to propel growth.

Today the old fears are back.

The Journal says the increasing population’s increased prosperity is putting unbearable strains on resources and raises the prospect of sharply slowed economies and an increase in wars as states battle over increasingly scarce basics like water.

Next up, Lightstone

The WSJ on C3 says another commercial real-estate investor is in trouble, this time Lightstone Group, which bought Extended Stay Hotels from Blackstone for $8 billion near the peak of the market last year.

Lightstone is more than a week late on $31 million in debt and is negotiating with creditors to delay its payment. Even if it cuts a deal, the company will struggle because of its massive debt load, which is 13 times its annual earnings.

Lightstone CEO David Lichtenstein was always one of our favorite interviews when we were at the WSJ, and this shows you why:

Lightstone Group was founded in 1988 by Mr. Lichtenstein, who recently said on CNBC that “you’re safer giving your children to Britney Spears for child care” than to invest in a New York real-estate company in this environment.

The hotel industry is facing a wave of new supply at a time when demand for travel is falling. That makes the odds that much stiffer for this deal.

Exports up, NYC down

In economic news, exports are up big as the weaker dollar makes it cheaper to buy U.S. goods overseas. That’s somewhat easing the pain of the downturn.

Bloomberg reports that Wall Street has slashed about 35,000 jobs, nearly as many as it cut after the dot.com bust seven years ago.

The NYT says on A1 that New York City, with its economy tied more closely than ever to the Street, is in trouble.

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