Subprime Lender Files for Bankruptcy; joins over two dozen subprime lenders who have shut down in recent months.

 Subprime lender New Century Financial Corp., once one of the country's largest subprime lenders (aka financial sharks), filed for bankruptcy yesterday and immediately fired half of its workforce.

That's 3200 people out of a job.  Meanwhile, New Century executives, including President and CEO Brad A. Morrice, have golden parachutes and fat bank accounts.

New Century blames the downturn in business on the growing housing crunch.  I blame it on predatory and nefarious business practices.

"New Century was the latest so-called subprime lender to fall on hard times amid a spike in mortgage defaults caused by borrowers unable to make payments.  Subprime loans target borrowers with low credit scores.  The mortgages carry relatively high interest rates but can also offer low initial payments (aka adjustable rate mortgages)." - Gary Gentile of the AP

On a financial news channel, Octavio Marenzi stated the "relatively lax" lending standards are not limited to subprime lenders and that the "problems" which resulted in the New Century bankruptcy filing could spread to the broader banking sector.

Sell your bank stocks, folks.  M&T Bank, a Buffalo, NY, based regional consumer bank saw its stock fall nearly $10.00 yesterday after it announced that it was having trouble selling some of its loans into the investment market. 

Consumer banks usually have little trouble selling its loans to lenders.  But investors are becoming a bit more leery of loans which do not require borrowers to provide as much documentation as prime loans.

New Century will try to stay in business under #150 million in loans to be provided by CIT Group and Greenwich Capital.  Greenwich and Carrington Capital will purchase certain loans, the loan servicing business and residual interest for about $190 million. 

Too bad the so-called leaders can protect their own assets under current bankruptcy laws - which in themselves are a bit bankrupt.  Shareholders are not being quiet in their anger, having filed several lawsuits alleging mismanagement by the company's directors and officers - who were wise enough to have D/O insurance policies in place to cover their sorry butts for their financial malfeasance. 

Two years ago, New Century stock traded at nearly $66 a share.  All that greed leaves 3200 workers unemployed and the company kaput.

In related news, a handful of executive managers for  Armstrong are seeking bankruptcy approval for their own bonuses to the tune of $50 million.  Unbelievable.