Misinformation Adds to a Tenuous Market -- Please New York Times - We Deserve Better

Implications: With the residential lending capital markets virtually shut down, there is little good information that is known.  But there is a lot of sentiment, including fear.  I look to a firm such as the New York Times to allay fear and communicate good information during these times.  Rather, it seems that someone at Countrywide has upset someone at the NYT, or else the NYT is picking low hanging fruit, knowledgable that there is an audience of people with a problem (employees of mortgage banks gone bust and borrowers who can't make their payments) who are looking for a scapegoat or villain.

Analysis:

The news for your audience who are former employees of failed mortgage banks is that the cycle of economic stimulus and the ensuing housing boom has more-than-run its course and it is time to learn a new trade. The news to the borrowers who can't make their payments is sell your home and move back to where you lived before you got into debt or purchased a home you couldn't afford.

Countrywide provides a valuable service. On the same day that NYT writes about Countrywide using aggressive sales tactics that hurts the consumer, other papers write about how rates on mortgages are high because of the inefficiencies in the market. Ironically, Countrywide and other mortgage bankers create the efficiencies that enable borrowers to obtain loans with a low interest rate. Market turmoil that hurts Countrywide or any other mortgage banker hurts the consumer.

Granted, Countrywide compensates employees for creating value for the franchise.  I don't think that is a bad thing.  And motivated employees who want to improve their incomes for the wives and children work hard to add value in order to increase their incomes.  Is hard work rewarded?  Certainly.  But the firm doesn't do anything that is worse than any Coke commercial at a Superbowl.

In times of chaos, many seek to provide commentary that large audiences will agree with.  This article from the NYT will find readers who either agree, or feel that they should agree that Countrywide's predatory practices have contributed to many people's misfortune.  But that is perhaps only true in a small number of cases.  In fact, companies like Countrywide extend credit that enable individuals to improve their situations.

During these uncertain times, it is important for credit to flow to those that need it.  Granted, the government should regulate against predatory activity, and it does. 

Perhaps Countrywide is the cause of the problems in another sense - not by its predatory or aggressive sales tactics.  Rather, it had built a great model to serve the customer by extending credit to borrowers of all credit profiles, then selling that risk to investors in the form of bonds.  But now there are no buyers of those bonds and consumers suffer from the limited available credit.  Countrywide and its competitors have done damage to the market they created, negatively impacting the consumer.

But if you read the NYT, you would not think that by doing a good job, the consumer is served by Countrywide.  And there are analysts that jump on the proverbial bandwagon regarding the the story by NYT.  That just isn't the kind of noise that this market needs at this time.

Are there enraged reporters at NYT who just learned that Countrywide's Mozilo made money by building his company from nothing to one that was worth nearly $20 billion at the peak?  Is that the resistance?  Or is there another agenda that isn't yet apparent.  When I read the article, it struck me as having a hidden agenda.  Whether politics, jealousy, or the ire of someone with a superman complex, the agenda led to a poor and innaccurate representation of the current conditions at Countrywide and in the market.