Thursday, August 9, 2007

A disturbance in the land of Goldilocks...

What a bear... things are starting to get real nasty as the troubles in the mortgage sectors have now moved up the food chain from the sub-prime lenders to United States' largest mortgage company. The Dow down almost 400 points. After several years of unprecedented easy credit and lowering of credit standards, the chickens coming home to roost... or is that "bears" coming home for a visit?

Countrywide is down about 12% so far in after hours trading.

From the Wall Street Journal:
Countrywide Hit by Credit Market Woes
August 9, 2007 7:31 p.m.

Countrywide Financial Corp. faces "unprecedented disruptions" in debt and mortgage-finance markets that could hurt earnings and the company's financial condition, the Calabasas, Calif., lender said in a regulatory filing. (Read the SEC filing)

The company, the largest U.S. home mortgage lender in terms of loan volume, said reduced demand from investors is prompting it to retain more of its loans rather than selling them. The company also has been shoring up its finances. "While we believe we have adequate funding liquidity," it said in a quarterly filing with the Securities and Exchange Commission, "the situation is rapidly evolving and the impact on the company is unknown."

And from
The ECB said today it provided the largest amount ever in a single so-called “fine-tuning” operation, exceeding the 69.3 billion euros given on Sept. 12, 2001, the day after the terror attacks on New York.

“This is an old-fashioned credit crunch,” Chris Low, the chief economist at FTN Financial in New York, said in a report today. “This is not a small thing. A credit crunch, when the short-term credit markets seize up, is extraordinarily serious, almost always the precursor of a significant recession.”

“Somewhere out there, there are several people that are in trouble — it’s hard to put your finger on it,” said Andrew Busch, global foreign-exchange strategist at BMO Capital Markets in Chicago. “I cannot name names. We know BNP has issues with three funds. But you do not see a movement in overnight rates like that unless there is a huge concern about liquidity and funding.” Full article HERE.

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