{"id":196116,"date":"2008-05-22T21:00:00","date_gmt":"2008-05-23T02:00:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/05\/22\/ok-ive-predicted-it-so-what-does-it-mean-if-the-countrywide-deal-crashes-and-burns\/"},"modified":"2008-05-22T21:00:00","modified_gmt":"2008-05-23T02:00:00","slug":"ok-ive-predicted-it-so-what-does-it-mean-if-the-countrywide-deal-crashes-and-burns","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/05\/22\/ok-ive-predicted-it-so-what-does-it-mean-if-the-countrywide-deal-crashes-and-burns\/","title":{"rendered":"OK, I’ve Predicted It, so What Does it Mean if the Countrywide Deal Crashes and Burns"},"content":{"rendered":"

It’s pretty clear that if Bank of America does not go through with the purchase, Countrywide is insolvent, and it gets shut down, because it is, by any standard, insolvent without a white knight of some kind.<\/p>\n

Nouriel Roubini considers this to be a distinct possibility:<\/p>\n

The views of Whalen are \u2013 based on a survey I made of banking experts \u2013 shared by most bank analysts. On May 2nd S&P cut Countrywide’s rating to junk; while on May 5th a number of analysts recommended that BAC walk away from this lousy deal. BAC is already sitting on a potential loss of about $1.3bn from its initial $2bn stake in CFC but as one analyst put it: “I hope Bank of America isn’t throwing good money after bad”.<\/p><\/blockquote>\n

Thus he raises the question as to what exactly such a collapse might mean<\/a>, given that Countrywide has originated nearly 1\/5 of the mortgages in the US in recent years.<\/p>\n

He takes a look at the bigger picture:<\/p>\n

Of course the bust of CFC is only a symptom of a much bigger systemic banking problem in the US: with 47% of the assets of all large US banks being related to real estate (residential, commercial, etc.) and with 67% of assets of smaller banks being related to real estate hundreds of smaller community banks and dozens of regional banks and a few national banks will be bankrupt in the likely scenario that home prices fall at least 20% (they are already down 14.7% from peak based on the Case and Shiller\/S&P Index) and possibly as much as 30% by the time they bottom out in 2009-2010.<\/p><\/blockquote>\n

That’s hundreds of banks, some of them of a fairly significant size, that end up liquidated and under FDIC stewardship.<\/p>\n

If he is 10% right, then we aren’t even half way through the down slope on this thing.<\/p>\n","protected":false},"excerpt":{"rendered":"

It’s pretty clear that if Bank of America does not go through with the purchase, Countrywide is insolvent, and it gets shut down, because it is, by any standard, insolvent without a white knight of some kind. Nouriel Roubini considers this to be a distinct possibility: The views of Whalen are \u2013 based on a …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1004,985],"tags":[],"class_list":["post-196116","post","type-post","status-publish","format-standard","hentry","category-finance","category-regulation"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/196116"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=196116"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/196116\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=196116"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=196116"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=196116"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}