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TWST: Steve, we were directed to you by David to answer the question.

Mr. Wharton: First of all, over the last eight months, on a year-to-date basis, the consumer finance/specialty finance group has outperformed the financial sector to the tune of about 500 basis points. The banks have suffered the most due to the fact that they have shown the most fundamental weakness associated with the increase in interest rates that has occurred. A couple of other groups within the sector have actually performed slightly better than some of the specialty finance companies. Ironically, they have been down and out, value-oriented groups like the property-casualty insurers and the thrifts. However, from a fundamental perspective, there is no doubt in my mind that it is the specialty finance companies that possess the best revenue growth, earnings growth and return metrics. This would seem to suggest that on a going forward basis, the specialty finance companies would have the best chance to sustain relative outperformance. The other key factor that has not been addressed so far is the regulatory and legal issues that have weighed so heavily on this group during the last 12 months. Providian Financial (NYSE:PVN) settled it outstanding investigation with the San Francisco District Attorney and the Office of the Comptroller of the Currency (OCC) right before the end of the second quarter. Since that settlement, the group has performed well. The outperformance has not only been due to the settlement, but also reflects the fact that investors have focused on a more benign Federal Reserve going forward. Still, I think that the Providian investigation, along with a few more issues involving some other companies, weighed on the specialty finance group. Investors have feared that these companies would not be able to sustain their growth rates due to the fact that the regulators were going to crack down on some of their business practices. I think those fears have somewhat dissipated.

TWST: Steve, do you see anything else changing in government or oversight regulation?

Mr. Wharton: What the OCC attempted to do with the settlement they reached with Providian is lay out a framework on how these companies are to conduct themselves. If you look at the document, it actually goes into detail regarding a variety of different marketing and sales practices. Some of the things that the OCC suggested changing were things Providian had already changed months ago. It seems the document was almost intended to be a blueprint for the industry on what it can and cannot do in terms of marketing going forward.

TWST: Steve, what are your predictions for the economy?

Mr. Wharton: Well, we all hope and wish for a soft landing, because that is the best environment for these stocks. I would say that if the economy grows fairly quickly, and that leads to renewed inflation fears and higher interest rates, then it is likely to weigh more substantially on some of the other groups within the financial sector. One of the issues brought up previously as the reason the stocks did so poorly earlier this year was the fact that interest rates were increasing and investors felt that these stocks were at risk. But as was also pointed out, the net interest margins at both Capital and Providian are virtually flat (year-over-year), while those of the banks have declined substantially. I do not think there is much of a fundamental impact from increases in interest rates, and conversely, if the economy continues to be very strong, you are more likely to see a continued beneficial experience on the loss side.