No. 1 Home Lender Taps $11.5 Billion Line of Credit

[RamboLiberal]

Source: Washington Post

Countrywide Financial announced yesterday that it is using an entire $11.5 billion line of credit to ease its way through a severe global credit crunch, an ominous sign of how difficult it has become for the nation's largest mortgage lender to borrow money to fund its loans.

The credit line, 70 percent of which Countrywide has four or more years to repay, comes from a syndicate of the world's 40 largest banks. Many analysts said tapping into this money was a desperate move that signaled a deepening crisis, one that could cripple the mortgage industry and, by extension, damage the U.S. economy.

Countrywide's morning announcement rattled the already volatile financial markets and hurt the lender's stock, which has lost about half its value since mid-July. Countrywide shares closed at $18.95 yesterday on the New York Stock Exchange, down 11 percent.

"What's spooked the market is the fact that these kinds of credit lines are something nobody expects will be drawn upon," said Christopher Wolfe, a managing director at the credit-rating agency Fitch Ratings. "They're kind of like an insurance policy that you never really use."


Read more: http://www.washingtonpost.com/wp-dyn/content/article/2007/08/16/AR2007081601122.html?hpid=topnews

---

This house of cards is collapsing very quickly! Scary where we might be headed!

[mike_c]

1. CF screwed the pooch IMO....

Activating that line of credit will likely accelerate the collapse of some sectors of the mortgage industry, and bring the operating environment down around them even faster. They're desperate, grasping for a lifeline that will just pull the whole industry down that much faster.

Did I mention that I don't have a great deal of sympathy?

[jelly]

6. No sympathy here either.

Countrywide has some of the most disgustingly abusive and oppressive practices vis a vis consumers in the industry. Good riddance.

[Supersedeas]

8. meanwhile the Chimp is clear brush in crawford--not a care in the world

[RamboLiberal]

2. From the LA Times - Shades of the Great Depression

A rush to pull out cash

Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.

Countrywide Financial Corp., the biggest home-loan company in the nation, sought Thursday to assure depositors and the financial industry that both it and its bank were fiscally stable. And federal regulators said they weren't alarmed by the volume of withdrawals from the bank.

The mortgage lender said it would further tighten its loan standards and make fewer large mortgages. Those moves could make it harder to get a home loan and further depress the housing market in California and other states.

The rush to withdraw money -- by depositors that included a former Los Angeles Kings star hockey player and an executive of a rival home-loan company -- came a day after fears arose that Countrywide Financial could file for bankruptcy protection because of a worsening credit crunch stemming from the sub-prime mortgage meltdown.

http://www.latimes.com/business/la-fi-countrywide17aug17,0,1835165.story?coll=la-home-center

[aquart]

3. When was the last time you saw a run on a bank?

Aside from the yearly showing of that Jimmy Stewart movie.

[ClintonTyree]

4. Didn't take them long to max out their credit card.....

now what? :shrug:

[Up2Late]

5. Another very bad sign, this Headline is Wrong, it should be Tapped OUT...

...according to what The Public Radio show Marketplace reported tonight:

"...The proximate cause this morning was Countrywide Financial. The country's biggest mortgage-lender announced it's used up its entire line of outstanding credit: $11.5 billion from a whopping total of 40 lenders. Just another indication of how tough it's getting to find spare change out there.

The official response to all the market unease so far has been, essentially, "You're on your own." Treasury Secretary Henry Paulson told the Wall Street Journal there are no guarantees when market players take risks. And the head of the Federal Reserve bank of St. Louis, William Poole, insists there's no need for the central bank to rush to the rescue with an emergency interest-rate cut.... <http://marketplace.publicradio.org/shows/2007/08/16/PM200708161.html>

And the NPR report was even more frightening, check this out:

<http://www.npr.org/templates/story/story.php?storyId=12847195>

"...But investors have grown increasingly skeptical about Countrywide's future. The company's stock price started the year at $42 a share; it finished at $20 Thursday. Cecala says that if the credit crisis continues for another week, it's not clear Countrywide can survive.

And Cecala says that's a big problem for the economy. If Countrywide fails, Cecala says, it would spark a worldwide panic about the state of the U.S. mortgage market.

"If we're having a panic now, what worse signal could you send than having the largest mortgage lender go under, particularly if they account for almost one in five of all mortgages made?" Cecala says.

It's also hard to imagine how such a big bankruptcy could be carried out. It would mean selling off and disposing of a huge number of assets, and other lenders would have to step in to service Countrywide's large loan portfolio.

And, Cecala says, it's not even clear other lenders have the capacity to do so. There has never been a mortgage lender as big as Countrywide — and for the economy, the prospect of it failing is chilling.

Good thing "The Decider" is on vacation, how long you figure it will take this time for him to realize he has to come off his Summer Vacation for this crisis? I predict at least a week, but more likely a week too late.

[jelly]

7. So what if he's on vacation?

Do you want the federal government to bail these assholes out with our tax dollars? The companies are the ones going to be taking the big hit here, not consumers. Consumers will still at least have plenty of homes to rent, probably for cheap, if not own. After all, the mortgage boom brought with it a ton of new construction. It's the companies that created this mess, and it's the companies that deserve to go down. I understand lots of ordinary people have their retirement tied up in the stock market but I don't think that the stock market will take a long-term hit, and when things right themselves again, we'll all come out of it with a reasonably priced housing market. Gosh, maybe I'll even be able to afford to buy a house. Imagine that. Bail them out, and we'll just go on as things have gone, with those companies collecting ridiculously high payments (from those still willing and able to pay) for the artificially overvalued houses purchased during the last few years. I freely admit I may be ignoring some of the more ominous implications that have been circulated about all this but that's because I am pretty skeptical when I hear that the government needs to come to the rescue of big business or we are ALL DOOMED. Sounds like big business propoganda to me and I don't want to be the sucker that believes it.

[sarcasmo]

9. I like the Global Credit Crunch.

It should be American overspending binge.