The layoffs are staring to mount smack in the face of the Rain City Guide declaring No, Chicken Little, the sky isn’t falling and the only concern for jobs at Countrywide would be from a takeover not a bankruptcy or job losses.

Today we see Capital One to close wholesale mortgage unit, cut 1,900 jobs.

Capital One Financial Corp. (COF)late Monday said it’s closing its wholesale mortgage banking unit, GreenPoint Mortgage, effective immediately. The McLean, Va.-based credit-card giant also said it will close GreenPoint’s California-based headquarters, along with 31 locations across 19 states. The closures will result in the elimination of about 1,900 jobs, most of which will go by the end of the year, the company said.

Capital One said it estimates the total after-tax charge associated with the closures will be about $860 million, or $2.15 a share. The company said it now expects 2007 earnings of about $5 a share. Without the charges related to the mortgage banking business, the company said it would have maintained its existing earnings outlook. Analysts polled by Thomson Financial are currently looking for per-share earnings of $7.05 for the year.

At Countrywide, the Chicken Little’s running the show were too afraid to even state the number of layoffs coming as this headline shows: Countrywide Financial has begun undisclosed number of layoffs amid credit crunch.

Countrywide Financial Corp., the largest U.S. mortgage lender, has begun laying off staff as part of its effort to ride out the credit crunch that has rocked the home loan industry, according to a report published Monday.

The job cuts occurred in Countrywide’s Full Spectrum Lending unit, according to the Wall Street Journal, citing an internal e-mail sent Friday to employees of that division.

The e-mail did not disclose how many employees were laid off from that division, which handles many Alt-A mortgages, which are given to customers who either have minor credit problems or who cannot provide full income documentation required to get a traditional prime loan.

So much for the only concerns at Countrywide being a takeover by Bank of America. Exactly why would anyone want Countrywide anyway?

Fraud at Sentinel

The Wall Street Journal is reporting Sentinel Faces SEC Fraud Charges.

The Securities and Exchange Commission filed civil fraud charges against Sentinel Management Group Inc., an investment adviser whose problems helped roil the markets last week, in a move that could rewrite the history of last week’s market turmoil.

The SEC is also seeking a temporary restraining order to freeze the proceeds from Sentinel’s sale of assets to Citadel Investment Group.

Regulators allege the Northbrook, Ill. firm misappropriated investors’ funds by mixing their assets into a house account without alerting them, according to a complaint filed in federal court in Chicago. Sentinel then hid those losses from clients by providing them with misleading account statements, the SEC alleges.

The SEC is asking the judge overseeing the bankruptcy filing to freeze the assets until it has a chance to look over the accounts. They are concerned that some investors may receive more money than they are entitled to, at the detriment of other investors.

Well that was fast. I see we need to tack fraud on the end of my previous report on Sentinel: Duration Mismatch to Bankruptcy (in one week flat).

No doubt that bankruptcy heightened concerns about money market funds invested in Mortgage Backed Securities (MBS), corporate bonds funds and the like.

Real Time Corporate Bond Market Color Commentary

Bennet Sedacca, one of my favorite Minyanville professors and also one of the best bond analysts that I know, reported the following conversation today.

I just had the following e-mail exchange with large primary dealer ‘X’.

Me: Hey, is your corporate bond desk open for business?
Dealer: Sure as long as you are looking for offerings, not bids.

This is a sign of little or no liquidity in high grade corporates.

Boom Boom Bernanke had better be ready to buy a lot for paper, because the Street is choking on it. Every trader I know is being told not to buy anything until they lose some inventory.

There is actually so much good content coming out of Minyanville these days that I hardly know what to do with it all. Let’s take a look at someone new. Here is an interesting post by Sally Limantour called In the Wake of the Discount Rate Cut.

We have been witnessing the phenomenon of deleveraging and if history is any guide this rarely occurs smoothly, or without some effect on the wider economy. It is hard to imagine that what took years to create is over in a few weeks.

In addition, there are clear signs that the pain is spreading from hedge funds to banks. The total amount of rescue financing has placed tens of billions of dollars at risk for many of the biggest banks. Most charge nominal fees for the guarantee of liquidity and some banks did not properly reserve for the risk since the prospect of default seemed remote.

Citigroup (C) and JPMorgan Chase (JPM), for example, have guaranteed more than $90 bln of liquidity, or about 5 or 6% of their total assets, according to a recent Banc of America (BAC) Securities report. State Street, a custody bank, guaranteed about $29 bln, or 23% of its total assets.

That has ignited fear that the subprime contagion has spread to the global banking system — and, some suggest, caused the Federal Reserve Board to take action Friday.

“The Fed is concerned because of the banks’ exposure. The banks are on the hook for potentially tens of billions of dollars,” said Christian Stracke, an analyst at CreditSights, a fixed-income research firm. “That could tighten credit conditions significantly if all that paper is tied up in things that none of the banks want to hold.

Flight to Safety

Earlier today I noted there was a Flight to Safety as the yield the one-month Treasury bill fell 160 basis points to 1.34 per cent. The yield on three-month Treasury bills tumbled to 2.51 per cent, 123 basis points below Friday’s close – a sharper fall than during the October 1987 stock market crash.

Emergency Meeting

Things are running so smoothly in the wake of Futures Fireworks and Moral Hazards that there is an emergency meeting with Dodd to meet Bernanke, Paulson on Tuesday to discuss financial and mortgage market volatility.

The chairman of the Senate Banking Committee will confer with the chiefs of the Federal Reserve and Treasury Department on Tuesday in an effort to hatch solutions to ongoing turmoil in the financial and mortgage markets.

Dodd will discuss market volatility with Bernanke and Paulson, “as well as possible additional steps that can be taken to help stabilize mortgage and financial markets and help homeowners nationwide,” the senator’s office said in a press release announcing the meeting.

Speaking during a candidates’ debate in Des Moines, Iowa on Sunday night, Dodd said he believes the Fed will cut interest rates in September. However, he said, “we also need more liquidity” and again urged the Bush administration to allow big Mortgage-buyers Fannie Mae (FNM) and Freddie Mac (FRE) to prop up the mortgage market by buying more loans from banks. “You can’t get a mortgage in America today,” Dodd said.

Earlier Monday, Fannie Mae said it was skipping a benchmark debt offering for the first time since May 2006, prompting an analyst to declare that demand for high-rated mortgage paper is “scant” amid an investor boycott of mortgage-backed securities.

It’s ironic that Dodd thinks Fannie Mae taking on more mortgages is the solution to the problem when the initial problem was Fannie Mae (and everyone else) taking on too many mortgages. It is also strange that shares of Fannie Mae and Freddie Mac have been rising when increased leverage is killing everyone else. My guess is that everyone thinks Fannie Me is too big to fail. On the other hand I believe Fannie Mae is too big to bail. Time will tell who is right.

A lot sure happened on a day the stock markets were pretty much flat. More fireworks are coming. Be prepared for them.

Mike Shedlock / Mish/