PRESS RELEASE
Countrywide Shows:
Stop the Central Bank Bailouts
Aug. 16 (EIRNS)—The following release was issued today by the Lyndon LaRouche Political Action Committee (LPAC).
The virtually simultaneous announcements this morning, that the U.S. Federal Reserve was injecting an additional $17 billion in short-term liquidity into the banks, and that Countrywide Mortgage Co. was drawing down all of an $11.5 billion credit line from 40 banks, show why the central banks' bailout injects of liquidity should be stopped—they worsen the economic crisis.
The desperation attempt of the biggest U.S. mortgage lender to avert bankruptcy, will not work, but will absorb money-printing operations which will soon fuel a ruinous inflation. The company's stock plunged another 15% after the loans, dragging down all equities. Countrywide's debt now being "distressed," the $11.5 billion credit line it got will be at a very high rate of interest, making it useless for generating new mortgage loans. Countrywide has, at the same time, announced it is severely limiting the home loans it is willing to make, and thereby shrinking the crisis-ridden U.S. home mortgage market. Rather, the credit line is simply an attempt to save some value in the mortgage-backed securities Countrywide has sold.
Adding insult to injury to the economy, Countrywide CEO Angelo Mozilo, and his CFO David Sambol, made huge sales of their own stock in the company immediately after July 13, when it first acknowledged severe problems. Mozilo dumped 672,000 shares and made $13 million as the company sank.
This is what Federal Reserve bailout injections of liquidity to the banking system are doing - trying to rescue increasingly worthless speculative financial paper at the expense of wounding the real U.S. economy. These injections are stoking the fire of the crisis; they should be stopped.
