Countrywide "on a collision course with bankruptcy"

Good morning. Yes, more on Countrywide. No, not very good.

The L.A. Times this morning quotes Weiss Research, which rates the condition of lenders, as saying Countrywide Financial "is on a collision course with bankruptcy," adding that it "exhausted many of its extraordinary financing options last year and is ill-prepared for the rising mortgage defaults and home foreclosures that are widely expected this year."

More: The Egan-Jones Ratings Co. says Countrywide is "withering" and "might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks." (Here's one big problem with investing $4 billion in Countrywide today: The entire company is valued by investors this morning at just $3 billion; if you give them $4 billion, what do they give you? The entire company, and then what, an IOU?).

More from Weiss Research about a possible Countrywide bankruptcy, and what it might means for consumers, here, via Fox Business News. (See below for guidance on this item)

Lastly, the mischievous Charlie Gasparino at CNBC went surfing and found a speech Countrywide CEO Angelo Mozilo (pictured) gave back in 2003 in which Mozilo said, "Let's look for every possible reason to approve (mortgage) applicants, not to reject them."

Here's the speech, in which Mozilo argues for easier credit standards. In fairness, Gasparino said this on CNBC this morning: "To make Angelo Mozilo the scapegoat here ... is ridiculous." Gasparino explains that, by his recollection, the push for lower lending standards and more sub-prime lending has its roots in the policies of the first Clinton administration.

Guidance on the Weiss Research item from Fox Business News: The link goes to a press release posted by Fox Business News, but not written by Fox. I'm never 100% comfortable with press releases as sources of analysis. I'm not familiar with Weiss Research, but of course my knowledge of the world is famously limited. Use your own judgment here.

Plenty to chew on here. Chew away. E-mail tips to peter.viles@latimes.com
Photo credit: L.A. Times
Hat tip: BB via email

Comments

[Maggie Knowles]

Oh right, let's blame Clinton, that's just ridiculous. Why not go back to where deregulation really started, with Regan? Mozilo is set, he sold his Countrywide shares before the stock crashed, he knew what was coming. Besides, in the day of deregulation, you can't have it both ways and blame the government. Deregulation means that the company and its leadership is responsible for it's policies, procedures, practices, etc.

Everyone in this market participated, from the buyers and sellers, all the way up to the CEOs and the Whitehouse (and everyone inbetween, I don't want to leave out the loan officers and real estate agents). The market is incapable of doing the right thing and regulating itself. As individuals, we just don't have the ability to take the long view and do what's best for the majority.

[National Bubble]

Countrywide should go into bankruptcy. I think the took excessive risks during the housing boom and they should pay for it. if you have a mortgage with Countrywide, don't worry about it, somebody else will take over servicing your loan.

http://www.NationalBubble.com

[frank vale]

jeeeeeez is everything that is wrong with america these days bills fault. he must have been worse than the current batch of liars we are suffering under today

[Cal]

WSJ: Bank of America is in advanced talks to acquire Countrywide Financial. Full story to follow shortly.

[markl]

As per wall st journal at 11.18 am pst CFC to be aquired by bank of america.

[Hula Girl]

Uh-Oh, Does that mean B of A will be next? There must be a huge gain for them, but what are they risking?

I can buy my neighbor's new (leased) Mercedes for a steal, but I heard it's been in a wreck and "repaired". Does that make it a viable purchase?

[ProblemWithCaring]

‘Gasparino said this on CNBC this morning: "To make Angelo Mozilo the scapegoat here ... is ridiculous." Gasparino explains that, by his recollection, the push for lower lending standards and more sub-prime lending has its roots in the policies of the first Clinton administration.’

Thanks Peter! I saw that this morning on CNBC's The Call and laughed so hard I spit out my tooth paste. He actually said, "It all really started with Henry Cisneros."

Outside of the fact that this peculiar ascertain is patently false, it does bring to mind the policy conundrum of Affirmative Action in America. Once conceived as a multi-tiered strategy aimed at erasing the structural obstacles to minority participation, it then (thanks, in large part, to Assistant Sec. of Labor Arthur Fletcher in the Nixon administration) dovetailed into arcane "quota" calculations.

The idea that housing lenders should increase their efforts to make low-income home ownership possible never threatened the long-term stability of credit and mortgage markets before (think Fannie Mae).

No, a complete lack of lending standards did that.

[Victor the Predictor]

C'mon sillies, whether or not Bofa ends up buying the bones of CW or not, this is all just a lot of mongering to make a fortune off of the ups and downs.

[Rob]

Hula wrote:
I can buy my neighbor's new (leased) Mercedes for a steal, but I heard it's been in a wreck and "repaired". Does that make it a viable purchase?

Depends on the price. You can always part it out like a chop shop. But they get there cars for free, so that’s 100% profit....

[CanWeAllJustGetAlong?]

>the push for lower lending standards and more sub-prime lending has its roots in the policies of the first Clinton administration.

Ah, I knew everything would somehow prove to be the Democrats' fault.

[Uncle Billy]

Problem with caring.. did they qualify, or elaborate what they meant by "this all started with Henry Cisneros"? I've been harping on that fellow and Kathleen Brown as well who jettisoned from CW a while back.

[ProblemWithCaring]

Problem with caring.. did they qualify, or elaborate what they meant by "this all started with Henry Cisneros"? I've been harping on that fellow and Kathleen Brown as well who jettisoned from CW a while back.

Posted by: Uncle Billy

Yes. Not his post-Clinton Administration KB and Countrywide activity though - they were referring to his work at HUD, pushing for more lending to more low-income borrowers.

They glazed over the fact that Cisneros - chimp though he is - was simply articulating the NEED for expansion of lending to low-income and minority borrowers (mostly to justify the existence and prevent the annihilation of HUD.) Could the lending industry have devised methods to reach more minority and low-income borrowers without sacrificing credit standards, encouraging predatory lending practices and without redistributing costs to other mortgage holders?

Yes. They chose not to.

[Rich]

The genius of Clinton, of whom I was never a fan, was that he found a way to give the free-market conservatives everything they wanted so long as he could preserve the public sector. The inherent contradictions in all the crackpot radical deregulation mania have come home to roost--but hey, the free marketeers got what they wanted, so they can explain why we're in such difficulties...