September 11, 2007 (LPAC)--On February 2 of this year, the stock of Countrywide, the nation's largest home mortgage lender, hit an all-time high of $45 per share. Six months later, in August 3, the company had lost about half of that, having dropped to $24. After a small boost the following week, the credit markets froze nationwide, and the bottom dropped out for Countrywide, its stock value eventually dropping as low as $15 per share on August 16. The day before had seen the first use of the word "bankruptcy" connected with Countrywide, as worried depositors filled the lobbies of its connected bank, seeking to redeem their deposits in cash.
Thus began a train of bailout cash into the black hole which was once Countrywide. On August 16, $11.5 billion was made available to them, funneled directly from the Federal Reserve, through a consortium of 40-some of the nation's largest banks. Within days, it was rumored that money-bags Warren Buffet was on his way with some welcome cash. But it was Bank of America, who eventually dropped an additional $2 billion into the hole, taking 16% of the stock on August 23. As it has become obvious that BoA has now not only lost all of the "profit" it made with the initial jump is stock price, but that the price is still sinking, another rescue mission is reportedly on the way. This one now involves mega-banks Citigroup (number one), and number three JP Morgan Chase, under the supervision of Treasury Secretary Hank Paulson's Goldman Sachs. The New York Post did not note the size of the infusion, but noted that the stock dropped 5%, just on the news.
Congress needs to take a lesson from this, and quickly-- because Countrywide is just the beginning. The bankers are desperate to save it, because it is a primary feeder into the trillion dollar pyramid of the Fannie Mae mortgage pool. But no amount of cash can save it. Either Congress acts to create a "firewall" to protect the homeowners and banks, or the vacuum will only intensify, drawing in the entire nation as it collapses.
As Lyndon LaRouche commented yesterday, Countrywide should not be bailed out.
