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KAI RYSSDAL: Today’s installment of the credit crunch takes us back to an old protagonist: the mortgage giant Countrywide Financial. The New York Post reports today the nation’s largest home lender is looking for another $2 billion. The prospect that Countrywide might need more money after Bank of America ponied up $2 billion just last month has already jittery markets on edge, as Marketplace’s Steve Tripoli reports.
Steve Tripoli: Well, we know for sure that someone’s wrong about Countrywide. The company has investing pros placing big opposing bets. Two of Countrywide’s biggest institutional investors are dumping shares. But wait, a third big investor’s upping its stake.
When Bank of America recently injected $2 billion into Countrywide some called it a shrewd and cheap purchase during a panic. And if today’s report of another bailout deal is true?
Eric WASSERSTROM: I don’t know if that would be a remarkable event, if that were to be the case.
UBS Analyst Eric Wasserstrom, whose company does business with Countrywide, says the lender could just need more bridge financing as it cleans up its balance sheet.
WASSERSTROM: They’re gonna get tremendous cost savings from laying off somewhere between, let’s say, 15 and 20 percent of their workforce. But those cost savings aren’t going to come for some period of time. And yet the liquidity crunch is occurring today.
So those who help out today will reap the recovery. Analyst Paul Miller isn’t so sure. He thought Countrywide was in big trouble before the August bailout. But he still reckons the company’s in a medium amount of trouble whether today’s story is true or not.
Paul MILLER: The problem is they have a $90 billion portfolio that could cause a lot of problems down the road, if delinquencies continue to go up. So that medium amount of trouble could lead to a big amount of trouble a year from now.
So, one side’s right and one side’s wrong here. And there’s one other sure thing: It takes chutzpah to invest in this company right now. But that’s how fortunes are made in times of turmoil. And lost.
I’m Steve Tripoli for Marketplace.
Ryssdal: Steve spent his day trying to get somebody from Countrywide on the phone. After deadline today, the company came out with a firm No comment about that Post report.
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