Posted on 08/25/2007 5:59:22 AM PDT by Hydroshock
Edited on 08/25/2007 11:43:24 AM PDT by Admin Moderator. [history]
NEW YORK (Reuters) - Countrywide Financial Corp Chief Executive Angelo Mozilo said on Thursday the U.S. housing downturn is likely to lead the country into recession, but that the largest U.S. mortgage lender will survive.
In an interview, Mozilo also said that to promote liquidity, the U.S. Federal Reserve should cut the rate it charges banks to borrow.
Countrywide faced a credit shortage this month as mortgage defaults rose and capital markets tightened. On August 16, it announced an unexpected drawdown of an entire $11.5 billion credit line because it had trouble selling short-term debt.
But on Wednesday, Bank of America Corp said it would invest $2 billion in Countrywide, buying preferred securities convertible into common stock.
This eased fears about Countrywide's fate, which at least two analysts this month had said could include bankruptcy.
Mozilo called the investment a "vote of confidence" and a "priceless endorsement," but said housing and the economy were not out of the woods.
Falling home prices hurt homeowners psychologically and cause them to spend less, he said. The 68-year-old executive has worked in financial services for more than a half century.
"I've seen this movie before, and the ending of the movie always ends up in some form of recession," he said. "I can see the economy slowing down substantially enough to give the regulators, the Fed some pause in what's going to happen next."
Mozilo called on the Bush Administration and Fed Chairman Ben Bernanke to state that they will not allow the housing environment to get out of control.
Last Friday, the Fed cut the discount rate at which it lends to banks to 5.75 percent. Mozilo said it should be reduced so that it is the same as the federal funds rate, now 5.25 percent.
Others agree that more is needed.
"The Fed has cut the discount rate and added liquidity to the markets but those things aren't enough to turn the fundamental market around," said Phil Orlando, chief equity market strategist at Federated Investors in New York. He said the funds rate should be cut to 4.25 percent by year end.
GOING IT ALONE
Analysts have said Countrywide might lose mortgage market share to well-diversified commercial banks with deeper balance sheets, including Bank of America, Citigroup Inc, JPMorgan Chase & Co and Wachovia Corp.
Countrywide held a 17.4 percent market share from January to June, according to the Inside Mortgage Finance newsletter.
The Bank of America investment also raised speculation that the Charlotte, North Carolina-based company might eventually buy Countrywide, which Mozilo helped launch in 1969.
Mozilo said that was not happening. "We've gone it alone for 40 years and can go it alone for another 40 years," he said.
In an interview with CNBC television, Mozilo said markets are in "one of the greatest panics I've ever seen in 55 years in financial services."
Still, he rejected as "irresponsible and baseless" an August 15 report by Merrill Lynch & Co analyst Kenneth Bruce that downgraded Countrywide to "sell" from "buy" and said the company might face bankruptcy if market conditions worsen.
"There is no more chance for bankruptcy today for Countrywide than there was six months ago, a year ago, two years ago, and when the stock was $45 a share," Mozilo said on CNBC. "We're a very solid company."
Merrill spokeswoman Carrie Gray declined to respond to Mozilo's comments, and said Bruce wasn't granting interviews.
Countrywide shares closed up 20 cents at $22.02. They have fallen 48 percent this year.
(Additional reporting by Joseph A. Giannone, Ellis Mnyandu and Dan Wilchins)
For his company at least he maybe right.
I suppose the bankrupcy lawyers see a giant boom ahead.
That and accountants to figure out this train wreck.
This guy loses his butt giving someone elses money away and that is supposed to reflect on the whole economy?
Sorry - I’m not biting
He seems a little Shysterish to me.
He said he was surprised that new housing was up and people werent less optomistic. In fact he said he had several large companies wanting to invest with him but he chose Bank of America.
Well, his prognostications weren’t so hot when it came to predicting the future of the sub-prime market, back when he elected to jump in with both feet.
He's right. The yield curve never should have been inverted in the first place.
Like he knows? To bad he didn’t see bankruptcy in the future and manage is company in a little more conservative manner.
1/12 of 1% of our economy... right... I see depression for this man’s company and a Capitalist picking up the pieces and making a fortune in the future.
LLS
He’s crying in his soup. His statements are a desperate plea for the Fed to lower rates, in an attempt to save his own bacon.
Capitalism without bankruptcy is like religion without hell.
The widespread use of investment money to fund mortgages is something new. There’s always a learning curve. Americans have always taken risks and jumped in with both feet. It’s messy but we always end up being leaders in the marketplace.
I saw him on Cavuto’s show the other day. Didn’t I see him in “The Godfather?” Or was it “Goodfellas?”
He’s straight from central casting; shiny suit, pointy shoes, etc.
ping
Are you the same guy that called Rush many, many years ago...an attorney?
Nope. Different guy. I did get through to Rush once when he did a local show in NYC. That was a long time ago!
a “spread the misery” moment?
Good for you. A lot of what we hear is propaganda aimed at the hysterics in DC.
How is it that there is talk of the Fed cutting rates and of the EU central bank raising theirs. Who’s right?
He’ll be fine though. He managed to cash out before the toxic sludge hit the fan.
After all, he needs $75,000,000 per grandkid to send them to college, and the poor baby has 18.
if you don’t lose your job and don’t have to move you are ok in this market, even if you do move and the price of the house you are selling is down you are ok as long as the new house you are buying has gone down as well, now if someone has bought a home they can’t afford or has financed it with an unrealistic teaser rate loan they are out of luck but they really should have seen that coming and they may learn from it and make better decisions in the future
I also saw his interview with Cavuto. He was very evasive about the loan the woman said was changed on the day of closing that went to 11% from under the 8% she claimed was on the documents reviewed by her attorney two days before closing. Said he didn’t know the details and couldn’t comment.
I can’t believe Cavuto didn’t give him enough notice in advance so he could check it out prior to the interview. He didn’t even say he would look into it. Tells me the woman’s claims are substantially true.
His comment that Countrywide is a “very solid company” is going to cost him if they go into bankruptcy soon.
When we bought our first house in 1979, we applied for a mortgage when the rate was about 11%. The bank waited for rates to rise, and approved it when they hit 14.625%.
Those were fun years. Thank you, Jimmy Carter.
My Dad, Mr. Doom & Gloom, said that rates would never, never, NEVER fall below 10%.
I’m happy to be paying a 6.125% fixed note.
Thank you, Ronald Reagan.
Bingo!
Everyone buying a home at that time will feel that for many, many, many reasons Jimmy Carter was the worst president this country ever had, including this one. Especially since we came from homes where our parents may have paid what? Maybe a 3% interest rate on a mortgage. Way to let things spin out of control, Jimmah!!!
>> His statements are a desperate plea for the Fed to lower rates, in an attempt to save his own bacon.
... or to restart his industry’s freewheeling boom.
There are those in this country — mostly the speculating class, not so much the productive class — who believe speculative booms should be the economic norm, so they can surf from one to the next and Get Ever Richer (doing little or nothing productive).
I hope the Fed doesn’t lower rates — the only cure for this idiocy is the speculating class going bankrupt in large numbers (and not “play” bankruptcy, but real punishing bankruptcy).
The productive class (that’s the real innovative America that doesn’t build its fortune on speculative asset bubbles and their hangers-on) is doing great — good cash flow, lots of cash in the bank. The upcoming shakeout of the overblown housing-’n-mortage-’n-debt industry won’t cause them to tank.
my 2c. I’m sure I will be assailed for these views by those in the speculating class whose oxen I’m goring. No matter. I’m going to go do something productive, flame away.
I think you’re dead on the money.
Agreed.
ping
Exactly. He recklessly loaned out money to unqualified people for overpriced housing and now he wants the government to bail him out.
And they probably will. He will then be hailed as a financial genius and give himself hundreds of millions of dollars in bonuses.
See:
http://finance.yahoo.com/q/it?s=CFC
“For his company at least he maybe right.” and for him too!
save
After months of adamant official denial of any potential threat of the subprime mortgage meltdown spreading to the global financial system, the US Federal Reserve (Fed) on Friday, August 17, a mere 10 days after declaring market fundamentals as strong and inflation as its main concern, took radical steps to try to halt financial market contagion worldwide that had become undeniable. * * *Free trader cheerleaders and proponents of 'buy now, buy today!' just woke up. At least a few have awakened. Easy credit is a thing of the past. But naysayers still proclaim, 'No big deal. Nothing to see here. Time to move on.' Yeah, right.Politicians are talking about taking measures to help households suffering from the subprime crisis to prevent as many as 3 million largely low-income households from losing their homes.
However, that will not solve the crisis in the financial markets. In fact it may add to it. But with the central banks pumping in money to help banks from failing, while families are evicted from their homes is very bad politics in a election year.
The central banks are giving financial institutions whose credit rating and cashflow are not much better than family with subprime mortgages, free credit cards with a subsidised interest rate and no spending limit for as long as needed, while these very same institutions are foreclosing on the homes of their customers. This crisis will likely build to a crescendo just before the November presidential election. Its going to be a very interesting election. * * * Source Here
Please check out my previous posts or my FR Page. I'm going to be adding some intriguing information there from time to time.
Especially not in this command economy where the big players have federal flood insurance.
"I'm shocked ! Shocked, I say," -- Foghorn Leghorn
The Fed lowering rates isn't going to prevent the poor sucker who couldn't afford the 4.5% teaser rate from defaulting when his rate pops up to 8%. So the holder of his note is still going to lose money.
How does a lower Fed Funds rate stop the foreclosures that will happen soon?
He’s dumping his stock options like they were the ebola virus... CW is done, and he knows it. He’s talking one thing in public and doing another behind closed doors.
Frankly I’m amazed the press is ignoring his cashing out, its publicly avaialable data.
http://finance.yahoo.com/q/it?s=CFC
He’s dumping his stock options like they were the ebola virus... CW is done, and he knows it. He’s talking one thing in public and doing another behind closed doors.
Frankly I’m amazed the press is ignoring his cashing out, its publicly avaialable data.
http://finance.yahoo.com/q/it?s=CFC
What is a free credit card? If you consider a 5.75% Discount Rate to be subsidized when you only get 80% on your collateral and have to pay back the loan in 30 days, that's your prerogative. Doesn't mean you're right.
I'm going to be adding some intriguing information there from time to time.
I'm all a quiver.
Can I ask you one question, you obviously do not share our concerns for teh way the economy is going. What makes you think things are going different?
You're correct, I don't think we're doomed. I don't think the sub prime crisis will necessarily lead to a recession.
What makes you think things are going different?
Different than what?
I think we are headed to a recession, why do you think different?
All capitalist economies are always “headed to a recession” in the long run.
When?
Within the next year if not 6 months.
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