Friday, August 24, 2007

Countrywide CEO sees recession ahead

Countrywide CEO sees recession ahead

By Jonathan Stempel Thu Aug 23, 5:18 PM ET

NEW YORK (Reuters) - Countrywide Financial Corp Chief Executive Angelo Mozilo said on Thursday the U.S. housing downturn is likely to lead the country into recession, but that the largest U.S. mortgage lender will survive.

In an interview, Mozilo also said that to promote liquidity, the U.S. Federal Reserve should cut the rate it charges banks to borrow.

Countrywide faced a credit shortage this month as mortgage defaults rose and capital markets tightened. On August 16, it announced an unexpected drawdown of an entire $11.5 billion credit line because it had trouble selling short-term debt.
But on Wednesday, Bank of America Corp said it would invest $2 billion in Countrywide, buying preferred securities convertible into common stock.

This eased fears about Countrywide's fate, which at least two analysts this month had said could include bankruptcy.

Mozilo called the investment a "vote of confidence" and a "priceless endorsement," but said housing and the economy were not out of the woods.
Falling home prices hurt homeowners psychologically and cause them to spend less, he said. The 68-year-old executive has worked in financial services for more than a half century.

"I've seen this movie before, and the ending of the movie always ends up in some form of recession," he said. "I can see the economy slowing down substantially enough to give the regulators, the Fed some pause in what's going to happen next."

Mozilo called on the Bush Administration and Fed Chairman Ben Bernanke to state that they will not allow the housing environment to get out of control.
Last Friday, the Fed cut the discount rate at which it lends to banks to 5.75 percent. Mozilo said it should be reduced so that it is the same as the federal funds rate, now 5.25 percent.

Others agree that more is needed.

"The Fed has cut the discount rate and added liquidity to the markets but those things aren't enough to turn the fundamental market around," said Phil Orlando, chief equity market strategist at Federated Investors in New York. He said the funds rate should be cut to 4.25 percent by year end.

Analysts have said Countrywide might lose mortgage market share to well-diversified commercial banks with deeper balance sheets, including Bank of America, Citigroup Inc, JPMorgan Chase & Co and Wachovia Corp.

Countrywide held a 17.4 percent market share from January to June, according to the Inside Mortgage Finance newsletter.

The Bank of America investment also raised speculation that the Charlotte, North Carolina-based company might eventually buy Countrywide, which Mozilo helped launch in 1969.

Merrill spokeswoman Carrie Gray declined to respond to Mozilo's comments, and said Bruce wasn't granting interviews.

Countrywide shares closed up 20 cents at $22.02. They have fallen 48 percent this year.
(Additional reporting by Joseph A. Giannone, Ellis Mnyandu and Dan Wilchins)

Top 5 Commercial Real Esate Firms

The following information was sourced from careers-in-finance.comReal Estate:

Top 5 Firms Trammell Crow Trammell Crow Co. is one of the largest diversified commercial real estate service companies in the United States. Through its 150 offices in the United States and Canada, the Company is organized to deliver a comprehensive range of service offerings to clients which include leading multi-national corporations, institutional investors and other users of real estate services. In the area of property management, Trammell Crow offers in-house architectural, engineering, space planning, construction, and environmental services. The company reports total management responsibilities of 494 million square feet of space, spread across offices, retail, manufacturing and other commercial buildings.

Lincoln Property Lincoln Property Company was formed in 1965 for the purpose of building and operating high quality residential communities in the Southwest. We have since become one of the five largest residential and commercial firms in the nation with properties in 200 cities. Lincoln has developed over 140 million square feet of commercial space and its residential development arm includes over 140,000 multi-family residential units.

JMB Realty JMB Realty owns, develops and managers a variety of large commercial real estate properties in the United States. Included are a number of marquee properties such as Chicago's Water Tower Place. JMB also has JMB Advisory Group which provides real estate management and consulting to large institutional investors in commercial property.

CB Richard Ellis CB Richard Ellis is the largest vertically integrated commercial real estate services firm in the world. The company offers the most comprehensive portfolio of services, including property sales and leasing, property management, corporate services, investment banking, investment management, capital markets, appraisal/valuation, research and consulting. With offices in cities around the world, CB Richard Ellis combines global reach with localized knowledge. Whether a client just has one property or a portfolio of multinational locations, its offerings scale to meet individual client needs.

Cushman and Wakefield Worldwide Wants to be the world's preferred real estate provider. Cushman and Wakefield provides brokerage, advisory, lease administration and property management services to corporations and financial services firms around the world. Headquartered in tony Mid-town Manhattan, the company has over 130 offices in 40 countries. The company is controlled by Mitsubishi Estate, Ltd. Founded in New York City in 1917.