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 will bluntly say, I don’t find the keyword spamming funny.
Blunt enough?
This is exhausting.
I support that.
The fore closurerate is up, I said debt not deficit, that huge, and recession is coming.
I find it hilarious at times. One of my favorites is “Tom Joad.” But with any comedy, some of it works, some does not. And blasting it—spamming it—becomes tiresome.
Hacking into computers is a crime.
I know that. I’m an attorney.
Are you an attorney?
Oh, I though you were a mortgage broker.
By now you must have grown accustomed to being profoundly wrong.
How much and why would that necessarily cause a recession?
I said debt not deficit, that huge,
The debt is growing slower than GDP. Again, why would a debt growing more slowly cause a recession?
and recession is coming.
The lost productivity of the doom and gloomers is enough to shrink GDP. Of course many of them aren't adding much to GDP at this point.
Probably the Russian mob. I heard they love to post keywords. LOL!
A bunch of greedy rich people who bought the bad loans as investments losing their money is not going to lead to a recession. Those who borrowed the teaser loans will only suffer temporarily. Their lenders can’t afford to foreclose on properties that have lost a lot of value if they can reset the loans so the borrowers can stay in the properties. They will just need to readjust their expectations on the return on investment.
Of course, there are many borrowers who had no business being approved of the loans they got. In the short term, they should have been renters until they had a larger down payment.
The investors in RE loans have only themselves to blame for the money they are losing.
Dig this thread!
It’s got everything: russian mob, wire fraud, conspiracies, nutbars, groundless accusations, reckless insinuations, blogpimps, vultures, Tom Joads and giant talking chickens.
good business plan, pal...lending $$$ to people who can’t afford to pay it back
good business plan, pal...lending $$$ to people who can’t afford to pay it back
Which one is the chicken?
See #39.
I forgot that one. LOL!
I’m not sure, but I think the mod added the picture in the story portion of the thread. Hilarious!
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