Another mortgage business goes down
A foreclosure sign hangs in front of a home in Miami.
TEXT OF INTERVIEW
Scott Jagow: Capital One has decided to close its wholesale mortgage banking business. Capital One made the announcement last night after the markets closed. Greenpoint Mortgage will close by the end of the year. Almost 2,000 people will lose their jobs. Greenpoint has 31 locations in 19 states.This will cost Capital One about $860 million.
We told you yesterday that Countrywide was starting to lay people off. Countrywide's problems have captured a lot of attention because it's the biggest mortgage lender. A Merrill Lynch analyst went so far as to suggest Countrywide was headed for bankruptcy, but Countrywide is trying to reassure people. It's taken out full-page ads in newspapers this week. Joining us now is Ben Steverman of BusinessWeek Magazine. Ben, dire predictions for Countrywide, the Federal Reserve cuts a bank lending rate on Friday. What's the reality at this point?
Ben Steverman: That was a big shock to people that the Merrill Lynch analyst came out and said that Countrywide might be facing bankruptcy. Countrywide was actually hiring pretty aggressively earlier this year and a lot of analysts were kind of scratching their heads and wondering why it was doing that. The strategy there was basically take up market share that other mortgage lenders that were going bankrupt were abandoning. So Countrywide was hoping basically to hire a lot during this crises and then at the end of the crises be an even bigger player. Now they seem to be cutting back staff again, reacting to the realities that this crisis is probably going to be hurting this company for a little while now.
Jagow: What's the result of the Fed's actions here when it comes to Countrywide Financial?
Steverman: Well Countrywide is a bank so it can use this discount window to borrow money. Now it might not actually do that, but its creditors might. And it might just lower the temperature on Wall Street and let everybody relax and let Countrywide work out some of its problems.
Jagow: Do you get the sense that the Federal Reserve is going to do more than what it's done on Friday?
Steverman: The Fed's statement on Friday sure seemed to indicate that the Federal Reserve was planning to cut rates again in September. They really shifted gears from just a couple weeks ago when the Federal Reserve said that inflation was its main concern. So it sure seems like the Federal Reserve is preparing for a rate cut and if that happens it could help a lot of the people who have mortgage payments they can't meet or who're facing foreclosure on their mortgages.
Jagow: All right, Ben Steverman from BusinessWeek, thanks for joining us
Steverman: Thank you.