With news the embattled mortgage lender Northern Rock is being nationalized by the British government, until it can find a buyer, the question arises whether this is a good move or not?

Analysts at Bear Stearns said that the government's move is positive for the sector. The expected managed decline in the Northern Rock balance sheet should create less competitive mortgage market conditions," said analyst Robert Sage.

Who is this positive for? Certainly not the consumer. Competitive mortgage markets are the best thing that can happen to a consumer. Why should the consumer have to pay higher mortgage rates? Does this analyst think that the government setting mortgage rates is helpful in anyway? Let's not forget that the banks are responsible for this whole mess. Had they actually been careful in their lending practices, we wouldn't be in the mess we are currently in.

Today's report that the US economy grew buy 4.9% in the 3rd quarter even with pressure from the housing market, is a tribute to the strength of the economy. The fact that in the third quarter, the housing slump cut a sizable 1.08% off GDP, makes you admire just how strong and resilient the economy is. I hate to burst the bubble of the mainstream media (could they have a political agenda?), but facts are facts. Unemployment remains low at just 4.7%, the economy is growing, taxes remain low, and interest rates are falling. I admit that fourth quarter (Q4) GDP numbers wont equal Q3's but a recession? Not going to happen. The pessimist always say that the consumer will stop spending and that will be the nail in the coffin. Well I have been hearing this for years and years, and they continue to spend and there is no reason to think they will stop spending.

The claim will be made that foreclosures are surging and that will be a big drain on the economy. What the FED needs to do is drop short-term rates even more. The sub-prime adjustable-rate mortgages (ARMs) are due to reset and since they are linked to Fed Funds markets as well as the LIBOR rate, so if the FED cuts these rates it will provide relief to the mortgage holder.

What ever happened to personal responsibility? Apparently, in an election year, it doesn't exist. President Bush's plan to help out homeowners who took adjustable rate mortgages is to freeze interest payments on hundreds of thousands of adjustable-rate mortgages for three to five years. Why should these people be bailed out? What is missing in this whole sub-prime issue is that these mortgages were introduced for individuals who wouldn't otherwise qualify for a more traditional mortgage. This hi-risk mortgage was created for people to reach the American dream of owning their own homes. Over about 90% of those who took these mortgages are still paying them back. Why are we bending over backwards to bailout out this small minority of people, who for the most part, couldn't get a normal mortgage because of their financial situation? Isn't this teaching them that they do not need to be fiscally responsible for anything they do because politicians will "take care" of them to get their votes?

In the late 90s, when the then Secretary of the Treasury Robert Rubin helped bail out Wall-Street firms during the Asian currency collapse, Wall-Street firms had a precedent that no matter how wrong, corrupt and just plain bad business they did and whatever risk they took upon themselves, it didn't matter because if there was going to be a blowup, the Federal Government will save the day. Perhaps they took this lesson to heart and the billions and billions of dollars being written off due to their exposure to subprime, CDOs, etc. is because they knew they could take a risk and ultimately would never have to pay the piper.

I am afraid that the small percentage of individuals who are currently being pandered too will learn the same lesson. Let's wait another decade and see what they end up doing and how they end up getting bailed out.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/7/07.

Could a rush on E*Trade Financial Corp. (NASDAQ: ETFC) accounts cause the company to go out of business, and take with it the assets of all of its biggest customers? That is the question asked yesterday by The New York Times' DealBook blog; but a bigger question might be, could this be the time the government doesn't step in to save consumers? Or put another way, could E*Trade become a cautionary tale told to consumers by the Fed?

E*Trade is, after all, the haven for the little guy's money. Not totally little -- after all, accounts are insured up to $100,000 by the FDIC (and with $900,000 of private insurance, according to Silicon Alley Insider) -- but the guy who is little enough to not have his money in hedge funds; to not be on the top of the invite list to Republican candidates' fundraising dinners. Remember Long-term Capital Management? When they went belly-up because of questionable investments (no more questionable than that of E*Trade, it seems), the money of Really Important People was at risk.

Today, the risk of a run on the bank seemed less imminent, and the talk was of takeovers, not liquidity crises. But it seems that the sub-prime crisis has finally hit home to that place between Wall Street and Main Street -- Park Place, perhaps? -- and Real People with Good Credit Ratings are now getting nervous.

In thinking about current market trends, it occurs to me that the market may be at a fundamental turning point. To profit from the change, consider investing in energy services and selected Asian equities.

For years I have been railing against the rapid growth in borrowing to buy assets which have risen in price. I rail against this because of my experience dealing with the aftermath of such cycles of borrowing to buy assets which rapidly appreciate in price.

In the early 1980s, I consulted to the FDIC – helping it build a system to track the bank assets it acquired from banks in Texas and Oklahoma which lent too much money to finance oil and gas drilling as well as commercial real estate. At the end of the decade, I worked with Bank of Boston helping it to clean up the aftermath of too much lending to LBO firms and commercial real estate developers.

Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he'll offer advice to investors who are just getting started.

Housing stocks have been the whipping boys of this market. A few months ago, there were tepid upward swings in some of them, caused by investors thinking the worst might be over. But they were wrong. The worst wasn't over and things look blacker now than ever.

It's the perfect time to start looking at the sector and consider investing in the leaders.

There's an old saying on Wall Street: Buy stocks when there's blood in the streets. In other words, when total chaos reigns, you've got a much better chance of making money because most people think the world is ending. But it doesn't. Never has. Somehow things have a way of righting themselves. Economic laws still apply. Supply does dry up. Demand returns.

The sub-prime saga continues.

Impac Mortgage Holdings (NYSE: IMH) announced Wednesday that it will not pay a Q2 dividend. Impac said its decision was part of the company's previously disclosed strategy to accelerate the liquidation of its real estate owned portfolio (REO) through a new auction process implemented this summer. Impac said it is experiencing higher than expected loss levels, adding that it believes accelerating the disposition of REOs through this auction process will ultimately reduce losses and preserve capital over the long-term.

Short-term, however, Wall Street did not respond favorably to the dividend suspension: IMH shares plunged $1.20 to $4.65 in Wednesday afternoon trading.

As a small mortgage player -- Impac's 2007 revenue estimate was $200 million according to analysts surveyed by Reuters -- the circle of investors directly affected by Impac's decision is small. Still, the psychological impact is the more-telling dimension to the development -- one that has Wall Street's professionals paying close attention.

That's because Impac's announcement -- like a spring Northeast U.S. rain storm that suddenly stalls off the East Coast -- provides a substantive data point to Wall Street that the worst may not be over for the sub-prime mortgage sector.

Fly Analysis: To be sure, there have been some positive data points this year regarding the sub-prime sector. Wall Street has adjusted to the rise in sub-prime defaults: bond holders have adjusted the prices they're willing to pay for higher-risk sub-prime debt, and the sub-prime sector has tightened lending requirements.

Nevertheless, IMH's Wednesday announcement alerted the Concrete Canyon that there may be many more bumps in the road up ahead for the sub-prime sector and its investors.

The sub-prime mortgage market is in shambles. But Wall Street, making every effort to rid itself of risky mortgage-backed securities, has found a new group of potential buyers -- university endowments.

The Wall Street Journal reported (subscription required) that university endowments have started to dip into the risky world of buying sub-prime mortgage debt. An opportunity recently stemmed from two money-losing hedge funds at Bear Stearns (NYSE: BSC), and one that required loans from various banks to halt the seizure of the fund. Merrill Lynch & Co. (NYSE: MER) a lender to these funds, auctioned some assets it had seized from Bear for $850 million. However, the auction sold for less than half that amount, according to people familiar with the matter.

Lou Morrell, vice president for investments and treasurer at Wake Forest University in Winston-Salem, N.C. is quoted as saying he sees value in those auctions. "There's an opportunity out there to buy these loans at a discount," he told the WSJ, and that "will be popular with a lot of endowments out there." The university is placing $25 million of its $1.2 billion endowment with a hedge fund to invest in sub-prime mortgages.

They're not the only ones dealing in big risk either.

In a departure from my usual BloggingStocks posts covering specific stock ideas from the financial newsletter community, I came across a fascinating article on the housing market -- with important advice for those who may be -- or know someone who may be -- at risk of foreclosure.

This report comes from Sy Harding, editor of Street Smart Report, who explains that there are several relatively easy and available steps that most people overlook that could help avoid this unfortunate situation.

He says, "Home foreclosures are at their highest level ever. That's the bad news. But the good news is that more than half of those foreclosures could probably have been avoided, or at least postponed until the real estate sector has recovered.

"Lenders don't want to own houses. A foreclosure is almost as much a disaster for them as for the unfortunate home-owner. Not only do they lose the income from the mortgage payments, and wind up with another bad loan on their books, they also incur legal costs to foreclose.

"They wind up owning, maintaining, and insuring the house until they can get it sold. And when it is sold it will quite probably be sold for considerably less than they loaned on it via the mortgage, putting a loss on their books.

"Therefore, most lenders have always been willing to help borrowers avoid foreclosure. The problem has been that borrowers don't realize the help is available, and the lender doesn't find out there's a problem until it's too late.

Back on March 26th I wrote a piece that perhaps Countrywide Financial (NYSE: CFC) was beginning to break out and see its shares go up. The comments I received from readers suggested that I look for a different line of work (and that's putting it nicely).

The stock was trading at $34, having already come down from the $40's as the sub-prime mortgage issue was front and center in the minds of investors. The stock went down to a low of $32.30 before the rebound began. I was indeed early in my recommendation. But I do not believe I am wrong. The stock today is up nicely at $35.80. I am not taking a victory lap yet as I recommended CFC to the members of my website for a play to $45. So it is up a bit from the recommendation point, but has a lot more to go.

I wrote the piece because the reaction to CFC's positioning in the sub-prime market was simply an overreaction. Markets have a tendency to do that: Shoot first and ask questions later. Now that the questions are being asked in a non-emotional environment and the media is on to other "scandalous" stories, we find out that sub-prime mortgage defaults will not bring down the U.S. economy, nor will it create a crisis in the real estate markets either.

The sub-prime news (or noise) has gotten front-page coverage galore. Even the French are discussing it over their cafe. Now you know its serious!! But is it? We were in near-panic mode in late 1999 because the dreaded and feared Y2K was coming, and all major systems run by software were going to collapse. Did not happen, not even remotely. A lot of companies spent millions and billions to fortify their computer run systems and we survived.

Now, the new scary expression is sub-prime. Let's understand one thing: the vast majority of Americans pay their rent or mortgage payments on time. There is some exposure, for sure, to sub-prime loans, but is there a catastrophe looming in the weeds? I think not. But, hey it makes for great press and the talking heads can all understand the simplicity of sub-prime.

This all leads me to Washington Mutual, Inc. (NYSE:WM). The stock has become a bit of a poster child for sub-prime loans. Wamu is based in Seattle, Washington and has over 2,225 retail banking centers and over 470 lending "stores." Wamu's sub-prime profile is not way out of the ordinary; about 9% of the bank's loans are sub-prime caliber.

Standard & Poor's Research Division lowered its rating on WM because of this risk, and the fact that 28% of WM's loans are adjustable rate mortgages and they have yet to "be stress tested." Not a very insightful research piece. This analyst is almost assuming, pointing out that all sub-prime loans are valued at zero and written off by WM. There will be some write-off, but the stock has been hit way too hard and is oversold.

WM estimates are for earnings per share this year at $3.90, and next year at $4.35. The current dividend is $2.16 for a robust 5.4% yield. If, and I say if, Wamu has to take a $.30-.50 per share earnings hit to absorb sub-prime and clean it up, no serious analyst thinks the dividend is at risk. This is all worst-case scenario stuff. If WM takes a smaller hit to earnings or even no hit to earnings, the stock at this level is ridiculously cheap!!

Georges Yared is the author of "Stop Losing Money Today" and "Baby Boomer Investing"

Goldman Sachs (NYSE: GS) came in with very strong earnings, crushing Street estimates. Goldman reported earnings per share of $6.67 versus Street expectations of $4.60-4.70 per share. All divisions of Goldman reported superb growth and the ultimate measurement of return on equity was over 40%. Stunning and surprising.

Peeling back the onion a bit, Goldman Sachs indicated on their conference call that sub-prime exposure was minimal and not threatening at this juncture. Lehman Brothers (NYSE: LEH) also reported a superb quarter as well this morning, $1.96 earnings per share, again ahead of Street estimates. Lehman has yet to hold its conference call, but the press release did not signify any issues with sub-prime. Listening to both Goldman and Lehman would lead one to believe that sub-prime issues are not really a big issue. Phew!!

Well, that was easy . . . until the CEO of Countrywide Financial (NYSE: CFC), Angelo Mozilo, was quoted as saying that we could see a liquidity crisis and that the sub-prime issue is nowhere near over. Countrywide announced last week that it would no longer accept or process zero percent-down loans. Minimum down payments would be set at 5%.