Wall Street may be left a little smaller after the dust from the credit crisis settles. But will its next incarnation be even more profitable?

Markets Get a Pick-Me-Up. 12//12 The Fed’s plan to ease the credit crunch was met favorably on Wall Street but there are still plenty of concerns.

Cuomo Subpoenas Street Firms on Underwriting

As part of an expanding probe into the mortgage crisis, New York Attorney General Andrew Cuomo has subpoenaed loan underwriting records from a handful of Wall Street firms, according to industry sources.

Wednesday morning The Wall Street Journal identified three firms that reportedly received subpoenas: Bear Stearns, Deutsche Bank, and Merrill Lynch.

The Attorney General’s office has already subpoenaed records from contract underwriting firms, including The Bohan Group, San Francisco, and Clayton Holdings.

One executive close to the matter indicated that “The Street is trying to blame the contractors they used.” At deadline time, a spokesman for the Attorney General’s office had not commented. Bear Stearns, Deutsche Bank, and Merrill Lynch had not released any statements on the matter.

Donate Bonuses to Foreclosure Fund

A coalition of housing and community activists is calling on five Wall Street investment banks that “reaped” huge profits from funding and securitizing subprime loans to contribute their 2007 bonuses to a foreclosure prevention fund.

It has been reported that as of June 1 2007, Bear Stearns paid out over $17 Billion in bonuses - despite 2 of their hedge funds have filed for bankruptcy protection

The National Training and Information Center, the National Association for the Advancement of Colored People, and other groups contend that the investment banks pushed subprime lending to unsustainable levels and reaped tremendous profits and bonuses.

The groups also are releasing a report that details Wall Street’s involvement in the subprime mortgage debacle. “Wall Street must do the right thing and forgo their lavish bonus to help families stay in their homes,” said NTIC board member Inez Killingsworth.

“It’s time they clean up their mess.” As part of a “Save the American Dream” campaign, the groups are inviting Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Brothers, and Bears Stearns to a summit to set up a foreclosure prevention fund.

Will Subprime Foreclosures Spur $70B in Losses?

Two million households with adjustable rate subprime mortgages could end up in foreclosure by the end of 2009 and lose $71 billion of their housing wealth.

According to a Joint Economic Committee report that breaks down the impact of foreclosures on each state, “The Bush administration needs to take off its ideological handcuffs and act quickly to save financially strapped families from drowning in a tidal wave of subprime foreclosures,” JEC Chairman Charles E. Schumer, D-N.Y., said in releasing the report.

It appears that Charles Schumer does not read the opinion polls. The vast majority of Americans do not favor a government bailout. Most families feel that they should not pay for the mistakes of people that probably should not have ever had a mortgage in the first place.

FACT: From Jan/2007 to June/2007 Bear Stearns paid out over $17 Billion in Bonuses and yet they have 2 bankrupt hedge funds. What should you favor? Is it not time we stand up for what is right?

The Wall Street hedge funds got rich from all the subprime mortgages and all the banks underwrote the mortgages so why make Americans foot the bill? Make those that profited pay!

The report estimates foreclosure losses by state, including projections that neighboring homeowners will see the value of their homes decline by $32 billion.

The congressional report covers subprime foreclosures from the beginning of 2007 to the end of 2009 and assumes that house prices will decline sharply. The Bush administration estimates that foreclosures will not exceed 500,000, Sen. Schumer said, adding, “That is much too low.”

Some 125,000 mortgage reps that work for both banks and mortgage brokers are likely to lose their jobs and some 18,000 brokerage firms will probably shut down by the middle of next year, according to a partner in the Columbia, Md.-based research and consulting firm Wholesale Access. Well over 150 national Mortgage banks have closed since the beginning of 2007 and nearly 50 more were acquired to avoid that same fate.

“Given the current environment, survival should be everyone’s goal,” consultant Tom LaMalfa told the Illinois Association of Mortgage Brokers earlier this month. His talk was re-printed in the newsletter Holm Mortgage Finance Report. Some who blame brokers for the mortgage meltdown may see the analyst’s prediction as the perfect antidote for what ails the market, but Mr. LaMalfa laid the blame squarely on Wall Street, saying this is the third time in 20 years that the Street has “pillaged Mortgage Land.”

Investors throughout the world “got shafted by the guys from Wall Street,” he told the IAMB. The consultant advised brokers to get out of subprime and refis and move swiftly into purchase money mortgages that fall within the conforming loan limit. Otherwise, he said, they won’t survive. “If someone doesn’t want to operate in the agency space, there’s no market for their services”, he said.

Extensive coverage of the Bush and Bernanke bailout of the U.S. housing market, along with a discussion with economists Mark Zandi and Diane Swonk and their expectations for an upcoming Fed rate cut. This second part also contains a conversation with Mark Shields and David Brooks on this subject and its significance.

Special Report: Just Another Weekend in the Hampton’s. Traders on Wall Street Seek R&R in the Hampton’s After a Tumultuous Week in the Markets.