What's Noise, What's News: Monday August 20
The financial pundit class is falling all over itself analyzing the Fed's sudden change of heart on the credit crunch. The New York Timessurmises that Ben Bernanke was channeling the ghost of Keynes (“When the facts change, I change my mind. What do you do, sir?”), while some dude at Wharton opines to Bloomberg that Helicopter Ben made "a rookie mistake." Because, you know, professors at Wharton have this hands-on-the-levers-of-world-markets thing figured out even better than Keynes did.
Hello, Countrywide is still in deep, deep doo-doo, but the financial pundit class has already lost sight of this proximate cause of the current mess (never mind the root cause, the Fed's relentless exapansion of the money supply). Word today is CFC has begun laying off staff who originate loans, on the heels of a minor bank run last week at Countrywide branches in California. And the worst is yet to come, says CPA and Lew Rockwell blogger Karen DeCoster:
Countrywide is toast. Someone pass the bacon, please. Remember, Countrywide's bank is a Top-20 US Bank as measured by the amount of its assets. Its assets, by the way, have quadrupled in the last four years, thanks to the Federal Reserve's 'have-pulse-will-loan' credit bubble and the ensuing housing bubble.
If you are really looking for a blood-on-the-scene train wreck, browse the Countrywide 2006 Annual Report – Consolidated Statement of Earnings. Its Balance Sheet will make the "confidence" hucksters proud. Then look at the top of page 179 (Gains on sale of loans and securities), and tell me that business model can survive without Federal Reserve intervention and the government's/ Wall Street's (do I repeat myself?) management of markets.
Somebody else who's studied CFC's 2006 annual report pretty closely is The Survival Report's Mish Shedlock. His subscribers are bagging triple-digit gains on Countrywide puts. For more on what Mish sees as a whole "second wave" of housing hurt on the way, read here.