More Mortgage Lenders to Close as Impact of Real Estate Slump Hits

Posted by Bill Bonner on Sep 13th, 2007

The Dow bounced right back – up 180 points Tuesday. Gold soared over US$721.

What do you think, dear reader? Both went up…but which is the surer bet? We have our opinion. What bothers us is that it is too obvious. Central banks and financial intermediaries have been flooding the world with cash and credit. As the quantity increases, it is only reasonable to expect the quality to go down. That’s why we have a problem in subprime debt…lenders stretched to earn more money by making loans to marginal borrowers and then selling the paper on to investors who didn’t ask too many questions. Now, the lenders…and the investors who bought the mortgages from them…are in trouble…and in turn, you could be too.

Countrywide (NYSE: CFC)…known as “Countryslide” in the New York Post…has seen its share price fall 60% this year. The stock fell 5% on Monday…following word that the firm needed a bailout pronto. The company’s president, Mozilo Angelo, said the business desperately needs cash to continue operations.

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