Spring Break
Economy will save itself from disaster
Mihir Oza
Issue date: 1/25/08 Section: Ed-Op
As all of us have heard and read a million times, the American economy is, simply put, suffering. The national housing market has been down, along with millions of Americans filing for bankruptcy and defaulting on loans they once premeditated to repay, but now find themselves in a pickle. So what has really happened?
The No. 1 country in the world, a vast land of opportunity, is at the meeting point of many struggles. The mortgage problems, weakening economy, falling home values, and bad credit, have dangerously slowed down consumer spending.
Just imagine - Countrywide Financial Corp. was once known as "an innovator, survivor of slumps and fierce competitor that rocketed to No. 1 in U.S. mortgage lending by the early 1990," according to a recent Wall Street Journal article. During the 90s, their lending of sub-prime and other risky loans is a substantial reason why they're on the verge of filing bankruptcy today. During and after 2004, the mortgage king decided to lower its lending standards and hire insistent and task worthy salespeople, who thrived to meet high quotas. The combination of these things, along with the unforeseen decline of the economy, disabled the unqualified lenders to settle their debts and Countrywide to descend in reputation.
Countrywide, surprisingly, with a stock price of $4.96 as of Jan. 18, found a rescue. The infamous Bank of America Corporation, which the Wall Street Journal called "the largest U.S. bank in stock-market value," plans to buy the staggering giant and save it from collapse. By doing so, Bank of America would assume over $30 billion in Countrywide's home equity loans, but aren't too cautious.
Kenneth D. Lewis, Bank of America CEO and chairman, says the opportunity to sell other services to mortgage customers, along with luring borrowers with its vast retail network, is insurance enough.
Also a victim of credit-default trades, Citigroup Inc., a banking giant, is rapidly finding money in "unholy" places, a section of the world that Americans fear and question - the Middle East. Well then why did Citigroup seek to find investors from there? And where did these investors get their money? The answer to all, oil.
The No. 1 country in the world, a vast land of opportunity, is at the meeting point of many struggles. The mortgage problems, weakening economy, falling home values, and bad credit, have dangerously slowed down consumer spending.
Just imagine - Countrywide Financial Corp. was once known as "an innovator, survivor of slumps and fierce competitor that rocketed to No. 1 in U.S. mortgage lending by the early 1990," according to a recent Wall Street Journal article. During the 90s, their lending of sub-prime and other risky loans is a substantial reason why they're on the verge of filing bankruptcy today. During and after 2004, the mortgage king decided to lower its lending standards and hire insistent and task worthy salespeople, who thrived to meet high quotas. The combination of these things, along with the unforeseen decline of the economy, disabled the unqualified lenders to settle their debts and Countrywide to descend in reputation.
Countrywide, surprisingly, with a stock price of $4.96 as of Jan. 18, found a rescue. The infamous Bank of America Corporation, which the Wall Street Journal called "the largest U.S. bank in stock-market value," plans to buy the staggering giant and save it from collapse. By doing so, Bank of America would assume over $30 billion in Countrywide's home equity loans, but aren't too cautious.
Kenneth D. Lewis, Bank of America CEO and chairman, says the opportunity to sell other services to mortgage customers, along with luring borrowers with its vast retail network, is insurance enough.
Also a victim of credit-default trades, Citigroup Inc., a banking giant, is rapidly finding money in "unholy" places, a section of the world that Americans fear and question - the Middle East. Well then why did Citigroup seek to find investors from there? And where did these investors get their money? The answer to all, oil.
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