Nov. 26 (Bloomberg) -- Countrywide Financial Corp. fell more than 10 percent in New York Stock Exchange trading after U.S. Senator Charles Schumer urged the regulator of the Federal Home Loan Bank system to probe cash advances to the largest U.S. mortgage lender.
Schumer said he was alarmed by the volume of advances the system's Atlanta bank has made to Countrywide considering ``the rapid deterioration'' in the credit quality of some of the Calabasas, California-based company's mortgages. Schumer expressed his concerns in a letter sent today to Federal Housing Finance Board Chairman Ronald Rosenfeld.
The Atlanta bank has made $51.1 billion in advances to Countrywide as of Sept. 30, representing 37 percent of the bank's total outstanding advances, Schumer wrote, citing U.S. Securities and Exchange Commission filings.
The Federal Home Loan Bank is a quasi-non-governmental organization. Although it isn’t legally backed by taxpayer money, it’s widely perceived as having an implicit federal guarantee. This appears to be another example of using the taxpayers’ trust to bail out one of the major contributors to whole the subprime mortgage disaster. Companies like Charter don't deserve to bailed out by the FHLB or anyone else. They have been a bad faith player in the mortgage industry and they and their stockholders should pay the ultimate price for their activities.
This is especially true when you consider just how bad a financial position Charter Communications really is in. You have to ask yourself why they are being propped up like they are.
Charter Communications (CHTR) Charter now has over $19 billion in debt and a market cap of only $486 million. It stock has recently fallen from $4.93 to $1.20. In the last quarter, Charter had $105 million in operating income on $1.525 billion in revenue. Interest expense was $452 million. Charter is up against increasing competition from satellite TV and telecom companies. It does not have the capital it needs to upgrade its infrastructure to stay in the competitive game.
If you're interested you can read a little more over at nakedcapitalism.com
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