Countrywide to Cut as Many as 12,000 Workers, Changes Lending Operation

By Mike Caggeso
Staff Writer

Countrywide Financial Corp. (CFC) announced Friday that it plans to lay off 10,000 to 12,000 more employees — about 20% of its workforce — within the next three months. Most of the reductions will be from areas most impacted by the subprime mortgage meltdown.

In its announcement, the company took several jabs at U. S. Federal Chairman Ben Bernanke, who has remained mum about cutting interest rates at the Fed’s next meeting on September 18.

“Actual reductions could be lower should the interest rate environment and related market volume outlook improve. Based on current interest rate levels, Countrywide presently expects that total market origination volumes will decline approximately 25 percent in 2008 compared to 2007 levels,” the release said, not too subtly.

The tone is no different than a few weeks back, when CEO Angelo Mozilo threw a wet blanket on the Bank of America’s $2 billion capital injection into Countrywide.

The release also signals a changing course of direction for Countrywide. It has scraped almost its entire subprime loaning operation, and will focus on secondary market loans and/or “high quality prime loans” held in Countrywide Bank’s investment portfolio.

“As we carry out our plan, the company’s overarching focus is exactly where it has always been: to remain an industry leader in the U.S. residential lending business…” Mozilo said in the release.

But “focus” and position are two different things. While still the country’s largest lender, Countrywide has seen its stock nosedive 55% percent from three months ago, when all was seemingly well with the mortgage and credit markets. After the credit market turmoil erupted, Countrywide laid off 1,400 workers and tapped all $11.5 billion of its credit line.

And more bad news mounted yesterday (Monday), when AXA SA (AXA), one of Countrywide’s largest shareholders, cut its nearly 11% share of Countrywide down to 4.1%.

As most Money Morning readers know, we’ve been predicting that this was going to be a major worldwide financial problem since even before the major market declines and financial implosions began [Please see, “Never Trust an Investor With a Microscope,” “Sen. Dirksen: Allow Me to Introduce You to Standard & Poor’s,”

 

News and Related Story Links:

  • Corporate Press Release:
    Countrywide Announces Plan to Address Changing Market Conditions Including Workforce Reductions