Enron all over again

The mortgage market collapse is beginning to look like Enron all over again, only this time the stakes may be higher.

This article in Raw Story reminded me:

A major player in the high-risk segment of the US mortgage market said Monday its credit was being cut off, prompting renewed concerns about fallout into the overall financial system.

New Century Financial, the second largest lender of so-called "subprime" mortgages, said all its lenders had cut off or announced their intention to cut off credit.

Shares in New Century, down 90 percent since the start of the year, were suspended on the New York Stock Exchange and other lenders in the sector saw their stocks tumble.

Over the weekend the NY Times reported that as recently as March 1 -- that's less than two weeks ago -- Bear Stearns had written an upbeat report on New Century Financial and had upgraded it's rating of the stock.

On March 1, a Wall Street analyst at Bear Stearns wrote a surprisingly upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.

What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.

Was this Bear Stearns trying to give its favored clients a window of opportunity to get out of the stock? Seems to me there are some real questions here. Will the Bush SEC look into them? Doubtful.