Want a sign of how Americans are growing panicked about the meltdown in the mortgage business? Scott Reckard and Annette Haddad of The Los Angeles Times provides an on-the-ground report on how depositors in Countrywide Financial all descended upon the thrift’s branches in recent days to pull their money out of Countrywide. The angry throng included a former star player for the Los Angeles Kings hockey team as well as the head of another mortgage player:
Bill Ashmore drove his Porsche Cayenne to Countrywide’s Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America.
“It’s because of the fear of the bankruptcy,” said Ashmore, president of Irvine’s Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees.
“It’s got my wife totally freaked out,” he said. “I just don’t want to deal with it. I don’t care about losing 90 days’ interest, I don’t care if it’s FDIC-insured — I just want it out.”
I’m not predicting Countrywide’s bankruptcy, but what effect would it have on the economy and financial markets if Countrywide were to file Chapter 11? A spokesman for the California Association of Mortgage Brokers on Thursday:
“The consumer will feel that there is no loan availability if companies like Countrywide can’t keep their doors open. This isn’t some small company that decided to start up yesterday that had a risky business plan. This is America’s leading lender,” said Ed Craine, the public relations chairman of the group.
But Countrywide got a big boost today from an analyst at Bank of America, who upgraded its stock from “sell” to “neutral” (“neutral” never looked so good, eh, Countrywide shareholders?) Of course, the BofA analyst placed a price target at $21, which is roughly where the stock was already trading. Not that Bank of America was being chivalrous. You may also recall that there were rumors flying around last January (based largely on a story the Financial Times posted on its web site) that BofA might be talking to Countrywide about a merger. Merger would seem a heckuva lot more palatable at $21 a share, vs. the $42 it was trading at when the rumors began surfacing last January.
Some pundits are speculating whether the Fed’s cut in the discount rate this morning was in part designed to prop up Countrywide, which is quickly becoming one of the handful of institutions that are “too big to fail.” Consider that Countrywide has one-fifth of the nation’s mortgages and provides one-fourth of Fannie Mae’s outstanding business, and a third of its new business. Worth mulling.