…same as the first.

Or in this case, second quarter numbers are as bad as first quarter ones, if not worse.  We’re seeing the same kinds of new stories in May that we did in February.  The Fed, the Treasury Department, and the Bush Administration has made little to no difference and has only really succeeded in stalling the clock for a few months.

We’re still seeing oil hit record highs almost daily.

Crude oil rose above $120 a barrel to a record in New York on concern that production disruptions in Nigeria, Africa’s biggest producer, will limit supplies.

Militant attacks on an oil-transfer facility in the country forced Royal Dutch Shell Plc to reduce output, the Associated Press reported May 3, citing the company. The Nigerian Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility for the weekend assault.

The attacks “could take more oil off the market,” said James Ritterbusch, president of Ritterbusch & Associates, in Galena, Illinois. “There is not much margin for error as far as losing barrels.”

Crude oil for June delivery rose $3.60, or 3.1 percent, to $119.92 a barrel at 11:18 a.m. on the New York Mercantile Exchange. Futures touched a record $120.21 a barrel in intraday trading. The price has gained 94 percent in the past year.

Oil also climbed as the dollar weakened against the euro and a report showed that U.S. service industries unexpectedly expanded in April, signaling stronger economic growth.

Oil is priced in U.S. dollars. The dollar traded at $1.5496 per euro at 11:19 a.m. in New York, from $1.5424 on May 2. The dollar has lost 14 percent against the euro over the past year.

Not very good news, considering OPEC’s recent statement that a 1% drop in the dollar is worth a $4 hike in oil prices.  Oil has indeed gone up $60 or so in the last 12 months and there’s little sign that this will turn around soon.

As the dollar continues to plummet and oil rises, we’re seeing the same stories that we did three months ago out of the mortgage industry.  Mortgage companies are going under at a rapid rate.

Residential Capital LLC, the mortgage- finance company owned by GMAC LLC, said it will still need to come up with $600 million by the end of June to meet its debt requirements even if its bond exchange offer is successful.

ResCap, the eighth-largest U.S. residential lender in 2007, today began offering as little as 80 cents on the dollar to exchange or buy back $14 billion of bonds to extend maturities and stave off bankruptcy. To finance the restructuring, ResCap is seeking a new $3.5 billion credit facility from GMAC.

“There is a significant risk that we will not be able to meet our debt service obligations, be unable to meet certain financial covenants in our credit facilities, and be in a negative liquidity position in June 2008,” ResCap said in a filing to the Securities and Exchange Commission today.

Record U.S. home foreclosures have led to six straight quarterly losses totaling $5.3 billion, eroding ResCap’s cash position and pushing it closer to violating loan agreements. ResCap said it’s trying to amend the terms of those credit lines. ResCap also wants GMAC to contribute $350 million of ResCap notes outstanding to the mortgage lender by the end of the month and give it $150 million more in borrowings under an existing credit facility.

“Even if we are successful in implementing all of the actions described above, we will be required, in order to satisfy our liquidity needs and comply with anticipated covenants to be included in our new debt agreements requiring maintenance of minimum cash balances, to consummate in the near term certain asset sales or other capital generating actions over and above our normal mortgage finance activities to provide additional cash of $600 million by June 30,” ResCap said in the filing.

GMAC, which has already injected more than $2 billion of capital into ResCap, is part owned by General Motors Corp. and an investor group led by Cerberus Capital Management LP. GM sold a 51 percent stake to the group in 2006 as part of a plan to protect GMAC from the automaker’s declining credit outlook.

Indeed, that foreclosure/subprime debt is about to scuttle the largest deal in the mortgage industry, Bank of America’s purchase of Countrywide.

Bank of America is likely to renegotiate its deal to buy Countrywide Financial down to the $0 to $2 level or completely walk away from it, said Friedman, Billings, Ramsey, which downgraded Countrywide to “underperform” from “market perform.”

Countrywide plunged in reaction, while Bank of America slipped slightly in early morning trading.

Countrywide’s loan portfolio has deteriorated so rapidly that it currently has negative equity and the proposed takeover of the company will be a drag on Bank of America’s earnings due to the elevated credit expenses at Countrywide, analyst Paul Miller wrote in a note to clients.

He cut his target on Countrywide’s stock to $2 from $7.

Bank of America, which said in January it would buy Countrywide for $4 billion, said in a filing last week there was no assurance that any of the mortgage lender’s outstanding debt would be redeemed, assumed or guaranteed.

“Bank of America announced that it might not guarantee Countrywide’s debt, which is most likely the first step in renegotiating the entire deal,” Miller said.

Watch this deal closely.  It’s about to fall apart, and that’s going to send shockwaves through the entire financial sector when it does collapse.  Countrywide is the largest mortgage outfit in the US, and if the deal to buy them falls through, the entire industry is in deep, deep trouble.

It was in deep deep trouble to begin with, but the industry didn’t want to admit it.  Now that the horse is out of the barn and has in fact run into traffic and been hit by a semi, regulators are considering possibly closing said barn door at some point.

A task force of federal, state and local agencies will look into potential crimes ranging from mortgage fraud by brokers to securities fraud, insider trading and accounting fraud, the Journal said.

The Federal Bureau of Investigation is already targeting major corporate insiders and criminal groups in its investigation of fraud in the mortgage lending industry. The FBI has said it is investigating 19 companies in mortgage cases.

The formation of the task force amplifies efforts already under way in Brooklyn, where prosecutors are investigating whether investment bank UBS AG improperly valued its mortgage-securities holdings, the report said.

Also being investigated are the circumstances surrounding the failure of two hedge funds at Bear Stearns, which collapsed last summer because of losses tied to mortgage-backed securities, the report said.

Separately, the New York Times said the FBI and the criminal division of the Internal Revenue Service had formed a task force to examine mortgages that were made with little or no proof of the earnings or assets of borrowers.

The group also includes federal prosecutors in New York, Los Angeles, Philadelphia, Dallas and Atlanta, the Times said, citing an unidentified official.

Of course, this is where we run into the inevitable “everyone was doing it!” defense from the industry.  It will be interesting to see how it plays out and who it takes down.

Hell, even the great Warren Buffett is losing money on this stuff.

Warren Buffett’s Berkshire Hathaway said on Friday that first-quarter profit tumbled 64 percent, hurt by $1.6 billion of pre-tax losses tied to derivatives contracts.

Net income fell to $940 million, or $607 per Class A share, from $2.6 billion, or $1,682, a year earlier.

Operating profit fell 13 percent to $1.93 billion, or $1,247 per share, from $2.21 billion, or $1,434.

Omaha, Nebraska-based Berkshire is a holding company with more than 70 operating units and a wide array of stock investments.

It typically generates about half its business from insurance and reinsurance.

The derivative losses stemmed from Berkshire’s exposure to contracts designed to make money if junk bond stay out of default and stock indexes rise.

In February, Buffett revealed that Berkshire ended 2007 with $40 billion of exposure to 94 of these contracts.

Things continue to steadily get worse across the board.  And as bad as things are now, they’ll be worse in 2009, no matter who is President.

Be prepared.

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