Orange County, CA is my home and it is also the home of a significant number of the sub-prime lenders that are closing down or have quit altogether.  The most visible one is New Century, up until recently the industry's largest. It has filed for bankruptcy protection.

New Century's latest problems were caused by the forced re-purchase of hundreds of millions of dollars of defaulted loans where borrowers did not make any payments.  When it happens with a lot of loans, you'd have to suspect wide-spread collusion between the borrowers and employees at the company. How far up the ladder did that go?  Well, there are investigations into insider-trading that reach into the highest levels of the company, so you would have to wonder.

In the meantime, the company is trying to sell the loans they had to buy back, the ones that are in default. The company is also trying to find a buyer for the organization itself. That might be a hard sell because of all those lousy loan officers who knowingly did bad loans just so they could make a commission.

The latest news is simply outrageous.  As reported in The Los Angeles Times, the company attorney appeared before the Bankruptcy Court and asked that $6 million be set aside for paying bonuses for 131 "key" employees who they felt necessary to retain so as to make the company more saleable. $3.4 million of that was to go to seven of the highest paid executives. In the words of the company, "The debtors require the means to motivate leadership and to address steeply declining morale of its employees."

I must not know much about morale but I also haven't watched my stockholdings of $100,000,000 evaporate to zero like mist under the morning sun as did each of the major executives of the company. That would tend to be a little depressing, so perhaps it is necessary to give them $500,000 pocket money to get them to come to work every day.

As I write this something like 10,000 unemployed mortgage folks are currently walking around Orange County. So it's not like ANY of those 131 people can go out and find a new job. No one is hiring. They may suffer from poor morale but they will stay as long as you pay them ANYTHING!

So what is everyone going to do without these bonuses? Quit? I don't think so.

I had already anticipated that the vultures were circling to see what they could find to feed off of as this empire collapsed. I didn't think that would include the guys who oversaw creating the mess in the first place.  I hope that the Bankruptcy Court refuses to approve the payments.