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)
I’m not confused. There is a problem, and a big one. If a problem’s source isn’t accurately identified, then there’s no hope of solving it. Blaming a band of sinister conspirators does nothing to help matters any.
Not about this issue, maybe.....
Ah, the ole Toddster is back!
How’s things? Hunky-dory?
The typical hedge fund keeps 20% of the profits and charges 2% of assets. Why don't you tell me the maximum percentage of the profit that a mutual fund can keep?
That guy gets the dumb**** award.
Why don’t you tell me the maximum percentage of the profit that a mutual fund can keep?
I answered it and you didn’t respond.
You gave wrong answers. Try again?
Gee, guess I flunked. Oh well...
Todd, here’s a clue for absolutely free: Nobody takes arrogance seriously anymore. It’s gone the way of irony.
Gosh, I was hoping you’d demonstrate your financial knowledge. Oh, wait, you did.
Todd — it’s those kinds of comments that destroy your credibility.
I’m out Todd. Have fun.
That makes sense. We all know how ignorant Congress is.
I’ve heard recently another corporate head say the same thing....will be like Japan, recession coming, won’t see it until another 12-18 months but would happen.
http://www.bloomberg.com/apps/news?pid=20601109&sid=a1IaEO5f_3kQ&refer=home
Almost 75 years since the last massive transfer of wealth.
Deja Vu. I was there.
Sadly things are going just as I thought they would. And I think the worst is yet to come.
I wonder what little token of remembrance they will leave us this time. Amero's?
ping
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