Colling, Gilbert, Wright & Carter Securites Fraud

Birmingham-based Regions Financial Corp., parent company of embattled brokerage firm Morgan Keegan, will cut its dividend as second-quarter profit decreased 54% as more home borrowers and builders missed loan payments. The stock price plummeted on the earnings report.

Like many other banks and brokerages, Regions has been hit hard by defaults in subprime mortgages, risky loans made available to least qualified borrowers.

"Credit quality deterioration is today's overriding issue for financial services companies, and Regions is not immune," said CEO Dowd Ritter. The bank announced it has slashed it's stock dividend in an effort to shore up its weakened capital position.

This is not a new story. (see today's blog entry regarding Wachovia Bank's earnings report). A similar tale of woe is unfolding at brokerages Charles Schwab and Morgan Keegan who's investments in subprime mortgage backed securities decimated the Charles Schwab YieldPlus Fund and Morgan Keegan RMK Funds and cost their investors millions of dollars.

If you have suffered losses involving any of the above entities, please contact us for information regarding how you may recover your losses.

In a July 22, 2008 Wall Street Journal article it was reported
Wachovia took a loss of $8.66 billion for the current period, after posting a net profit of $2.34 billion a the prior year.

In response to the huge loss, the bank slashed its quarterly dividend to five cents a share and decided to exit the business of wholesale mortgage origination. Like many of its banking and brokerage peers, Wachovia was stung by taking huge gambles in the subprime mortgage sector. Wachovia's Evergreen Ultra Short Opportunities Fund has also expierienced huge losses, as have the fund's investors as a result of subprime investments.

Wachovia is just the latest in a long line of financial institutions that are struggling with the fallout from subprime exposure. Other firms facing investor lawsuits over the failure to disclose the extent of subprime exposure include Charles Schwab, Morgan Keegan, and Fidelity Investments. Please contact our office for more information.

Last month, Fidelity Investments was sued in U.S. District Court in Boston on behalf of investors who have suffered losses in the Fidelity Ultra-Short bond fund (Ticker: FUSFX). Like several of its well-publicized peer funds, the Fidelity managers invested in risky and untested mortgage-backed securities.

Much like similar actions against Charles Schawb and Morgan Keegan, the class action complaint alleges the Boston-based mutual-fund giant was "misleading" in promoting the fund as a safe alternative to cash and that the company didn't adequately disclose risks to investors.

For its part, Fidelity has said the "lawsuit is without merit" and that the company intends to "defend the case vigorously."

Fidelity's Ultra-Short bond fund is one of several fixed-income funds that have come under fire and seen investor defections in recent months after losing money in securities tied to subprime mortgages, which are home loans given to borrowers with shaky credit. In similar actions nationwide, investors have sued Charles Schwab Corp. for deep losses in its Schwab YieldPlus fund.

Fidelity's stated objective for the Fidelity Ultra-Short bond fund is to seek a "high level of current income consistent with the preservation of capital." In large part due to its mortgage holdings, the fund is down 6.6% for the year, trailing its benchmark by 7.6%. While these losses are not as dramatic as the Morgan Keegan bond funds (down 80% in the last year) and Charles Schwaby (lost approx. 35% in the past 6 months), the losses sustained by the Fidelity Ultra-Short bond fund are still unfathomable to those investors who were sold this fund as an alternative to money market and a safe haven.

If you have lost money in the Fidelity Ultra-Short bond fund, please email or call (866) 352-3476. Thank you.

Stocks ended Friday's session in the red after continued turmoil in the credit markets again pulled down the broader indexes. Amid other negative news, new questions were asked about the overall health of Fannie Mae and Freddie Mac, the government-sponsored mortgage institutions whose shares have been ravaged over the past week.

The Dow Jones Industrial Average tumbled below the 11000 level for the first time in two years during the session but finished at 11100.54, off 128.48 points. Other major indexes followed a similar path, rebounding in afternoon trading and then sliding again to the closing bell. The Dow remains in bear-market territory, down 22%from its record close of 14164.53 hit on October 9, 2007.

The widespread use of Fannie and Freddie paper in the repurchase market (repos), an overnight facility that serves as a key funding source for banks and other institutions to finance their various business activities. A government infusion (ie. bailout) of capital to the GSEs could effectively erase some or all of their debt, which would leave the repo markets less liquid, with agency-debt borrowers scrambling to liquidate other assets to repay their loans.

Some observers believe the situation with Fannie Mae and Freddie Mac is far more serious than the "Bear Stearns" debacle because of the potential negative effects on the repurchase markets.

The turmoil around Fannie and Freddie has upset the shares of other companies that have large mortgage-related businesses. Lehman Brothers Holdings shares fell 16.6%; Lehman has a large mortgage book. Wachovia also has exposure to residential mortgage-backed securities and risky subprime loans as a result of its Golden West Financial acquisition. Its shares declined 12.1%.

This is just the latest repercussion from the street's bad bets on mortgage backed securities (MBOs). Investors in bond and income funds marketed and sold by firms such as Evergreen, Fidelity, State Street, Charles Schwab or Morgan Keegan already understand the devastating effect the continuing fallout in the credit markets has on their individual investments. For more information call (866) 352-3476.

A recent article indicates even those folks sitting in the Wall Street's ivory towers are feeling the pain of the credit crisis and a down market. The executives of some of the largest brokerage and banks are used to losing money, just not their own. However, as shares of these companies fall, so does the wealth of their leaders.

While small investors are unlikely to feel sympathy for the same people that have ravaged their retirement nest eggs, is still note worhty that Wall Street executives are finally reaping some of what they have sewn. The shares of Lehman Brothers, CitiGroup and UBS are off about 70% from their peak prices. Merrill Lynch, 60%. Morgan Stanley, 50%. For years, the rich pay of Wall Street professionals has been anchored in these firms’ shares. That is why the recent free fall in share prices has decimated Wall Street’s personal wealth.

Measured from peak prices, Jimmy Cayne lost almost a billion dollars in the collapse of Bear Stearns. Bear’s other employees lost more than $5 billion. At Lehman Brothers, employee paper losses are probably upward of $8 billion. The total personal losses of Wall Street run well into the tens of billions of dollars.

That is mild compared with the Bear Stearns bloodbath. It all happened so suddenly. It probably never even occurred to Bear’s “smart money” traders and bankers that they would nearly lose it all.

Maybe now these folks can relate to how the average investor feels when they are sold a bond or income fund as a safe place to store their retirement money, only to find their are the victims of one of Wall Street's worst bets (and perhaps frauds)ever. Perhaps these execs know how the investors in the Schwab YieldPlus Fund or a Morgan Keegan Fund or the Evergreen Ultra Short Opportunities Fund feel.

If you have lost money in a bond or income fund, contact one of our stock market and mutual fund fraud attorneys for a free case evaluation.