Maria Bartiromo flew out to LA to speak with Angelo Mozilo and CNBC ran a live interview at 11 AM this morning.
Mozilo essentially said that Countrywide is fine, that the company does not face a bankruptcy risk any greater than six months ago, and that the Merrill analyst was "irresponsible" to mention the possibility of bankruptcy. I actually concur with the last point, especially since the analyst mentioned bankruptcy 2 days after saying that the company had no such risk. I am not so sure about Mozilo's other claims and believe that he recognizes that the situation is an especially severe one. He acknowledged that the Bank of America deal announced last night is not a good one for Countrywide - he sold an 'in the money" option on 17% of his company that yields 7.25% for the purchaser until exercised for only $2 billion. That, in fact, smells to me of desperation as Countrywide couldn't get better terms from any other money center bank (Mozilo said that all the other banks told him that they couldn't consider a deal because they have their own mortgage exposure problems).
It is what Mozilo said next that really smelled of hypocracy. Mozilo said he sees a housing-induced recession in the offing over the next year. Somehow, while Countrywide is the largest mortgage lender and is going to be fine, we are going to have a housing-induced recession!
I don't profess to have a clue at this point which way the economy is going tomorrow or the day after tomorrow much less in three or six months. This volatility has made economic judgments very, very certain. The economy may shake this off and return to expansion in September, leading the stock market much higher. However, this economy was strong until four weeks ago, and if housing is going to cause it to unwind and in fact fall into a recession, then this housing / mortgage situation is still in the second inning and the $2 billion that Angelo just got from B of A isn't going to save his business.
Comments
George Polich
August 31, 2007
There seem to be a series of money managers and corporate executives trying to scare Bernanke into cutting when the larger economy doesn't need a cut.
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Teri
September 02, 2007
The feds should let CW die, I agree. CW acted like Enron did... Now Mazio is bailing out of his own company. They sold sup-prime and alt-a loans to people who could have gotten prime loans and they knew it. Their sales force works on commission and that is their incentive.... $$$$. Now, the country is in this mess because of them. Plain and simple. The money was in sub-prime and alt-a and so they pushed these loans onto people who could not afford them. They need to go under!!! I know people who work at countrywide I know what they do. They should be investigated. It is as bad as what Enron did. Trust me.
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A
September 08, 2007
Teri--how can you put all the blame on Countrywide when there are many other companies out there, the old GMAC-RFC for one, that were much more involved in the subprime market for a much longer time than Countrywide. Also, the borrowers need to take at least half the blame if not more. In many cases we are not talking about people who just wanted to buy a home but people, who by choice, overextended themselves on the cars they chose to buy, credit card debt and then felt the need to impress others with a bigger and better home. People need to learn to live within their means. Certainly there has been fraud out there and misrepresentation, but I also know A/E's at Countrywide (yes their pay is performance based, as is every other company's sales force) and they are not "evil" as you would portray. Every company has bad apples. As far as saying Countrywide should go down, that statement is callous and ignorant. You are wishing the demise of an awful lot of people...hmmm...think that says something about YOU!
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Anonymous
September 20, 2007
well. I am not too sure about whats happenning but I wonder if the "war" on terror and the government spending all its money ( and ours) that maybe THATS the reason we're in a recession? I wonder if war makes a big difference in our economy. Also I wonder why the banks are suffering so much? Maybe its a combination of all the sitautions and the war just makes things worse?
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Michelle
September 20, 2007
could the war be a factor for why our economy is hurting?
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