Anxious customers of Countrywide Bank jammed its phone lines, branches and website after the nation's largest mortgage lender -- which owns the bank -- announced it was facing problems from a credit meltdown.Reports like this are more reminiscent of Argentina than the United States. It is this type of unsubstantiated panic that could create a self fulfilling prophesy and drive the country into a recession.
"Countrywide Financial Corp., the biggest home-loan company in the nation, sought Thursday to assure depositors and the financial industry that both it and its bank were fiscally stable," wrote the LA Times Friday. "And federal regulators said they weren't alarmed by the volume of withdrawals from the bank."
"The rush to withdraw money -- by depositors that included a former Los Angeles Kings star hockey player and an executive of a rival home-loan company -- came a day after fears arose that Countrywide Financial could file for bankruptcy protection because of a worsening credit crunch stemming from the sub-prime mortgage meltdown," the paper continued.
"At Countrywide Bank offices, in a scene rare since the U.S. savings-and-loan crisis ended in the early '90s, so many people showed up to take out some or all of their money that in some cases they had to leave their names," the Times added. "Bill Ashmore drove his Porsche Cayenne to Countrywide's Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America."
"It's because of the fear of the bankruptcy," Ashmore, president of Irvine's Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees told the paper. "It's got my wife totally freaked out. I just don't want to deal with it. I don't care about losing 90 days' interest, I don't care if it's FDIC-insured -- I just want it out."
Friday, August 17, 2007
Run On Banks in LA?
Countrywide Financials troubles have led to a run on its deposits.