Media Scaring Countrywide Customers Although Signals Point to its Survival
The Los Angeles Times reported a run of Countrywide Bank by its customers as more and more are panicked about the potential of the nation’s largest home lender to go bankruptcy – something fueled by many of the reports in the media.
“[S]ales of existing homes fell in 41 states from April through June,” said CBS correspondent Susan McGinnis on the August 16 “The Early Show.” “Meanwhile, foreclosures continue to soar. And there are growing worries about the nation's biggest mortgage lender; Countrywide Financial could be forced into bankruptcy.”
But some experts seem to think this scare from the media over Countrywide’s bankruptcy is a little premature.
“Well, Countrywide is amazing,” said Donald Trump on CNN’s “Larry King Live” August 16. “They took down an $11-billion line. These banks must be absolutely thrilled, because everyone's saying they're going bankrupt, but just prior to going bankrupt they took down $11 billion. How would you like to be one of those banks? And it looks to me like Countrywide's going to be around a little bit, because they went out and borrowed a lot of money.”
This morning, the Federal Reserve moved to stabilize the markets with a half-percentage-point cut in its loan discount rate. This suggested to CNBC’s Larry Kudlow the Fed remained confident about these mortgage lenders, primarily Countrywide.
“[C]ommercial paper last week, we just got the new Fed numbers, was down $91 billion, it’s the worst since 9/11 – so Countrywide, Thornburg, Washington Mutual and other big mortgage lenders are not going to go under – that’s basically what the Fed is saying. That’s terrific stuff, but it’s only the first step – much more is coming.”
Countrywide Financial was one of today’s top gainers on the Standard & Poor’s 500 Index in the wake of the Fed’s move.