There was a mad dash for cash on Friday and certainly no one should have been surprised by it.

In Countrywide Bets the Farm I noted that "Nearly 40% of the bank's $57.7 billion in deposits were not insured by the Federal Deposit Insurance Corp. as of March 31, according to the FDIC website."

My response was "Anyone that has any money at Countrywide Bank better be getting while there's still something to get."

And I am not the only one thinking that as Merrill Lynch analyst Kenneth Bruce warned investors "to sell their Countrywide stock, saying the company could go bankrupt if the worsening liquidity crunch gets bad enough."

Sure enough there was a mad dash for cash at Countrywide. Picking up the story was the LA Times with A rush to pull out cash.

Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.

Countrywide Financial Corp., the biggest home-loan company in the nation, sought Thursday to assure depositors and the financial industry that both it and its bank were fiscally stable. And federal regulators said they weren't alarmed by the volume of withdrawals from the bank.

At Countrywide Bank offices, in a scene rare since the U.S. savings-and-loan crisis ended in the early '90s, so many people showed up to take out some or all of their money that in some cases they had to leave their names.

Bill Ashmore drove his Porsche Cayenne to Countrywide's Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America.

"It's because of the fear of the bankruptcy," said Ashmore, president of Irvine's Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees.

"It's got my wife totally freaked out," he said. "I just don't want to deal with it. I don't care about losing 90 days' interest, I don't care if it's FDIC-insured -- I just want it out."

In a statement, the bank said: "It is very important to remember that Countrywide Bank is well capitalized, with FDIC-insured deposits, and is one of the largest banks in the United States, with assets over $107 billion."

The bank added that it had significant access to outside capital and was still highly rated by debt-rating firms.

Federal regulators said they weren't alarmed?

That's simply too hard to believe in light of panic action by the Fed cutting the discount rate an unexpected 50 basis points moments before futures options expiration on Friday. See Futures Fireworks and Moral Hazards for additional commentary.

What about Countrywide's statement "It is very important to remember that Countrywide Bank is well capitalized, with FDIC-insured deposits, and is one of the largest banks in the United States, with assets over $107 billion."

Hmmm.

Is that the same Countrywide that said on August 2: "It is important to note that the Company has experienced no disruption in financing its ongoing daily operations, including placement of commercial paper."

Is that the same Countrywide that said on August 9: "Countrywide Financial Corp. faces 'unprecedented disruptions' in debt and mortgage-finance markets that could hurt earnings and the company's financial condition, the Calabasas, Calif., lender said in a regulatory filing."

Is that the same Countrywide that tapped $11.5 billion in credit lines in one fell swoop late last week?

Why yes it is.

Well capitalized banks should not be tapping $11.5 billion in credit lines out of fear those credit lines may be shut off later.

And stating that Countrywide is "still highly rated by debt-rating firms" is sure stretching things given that Countrywide's debt rating was cut to 'Baa3' and retained on negative watch by Moody's.

"The downgrade of Countrywide's ratings reflects significant diminution in the company's liquidity and debt market access due to the stresses being experienced in a wide array of single-family mortgage markets -- stresses that have caused Countrywide to fully draw its committed back-up bank lines," Moody's said.

Baa3 is one notch above junk.

Does Countrywide have any credibility left? Of course not. But the CEO of countrywide is filthy rich. In between, August 2 and August 9 CEO Angelo R. Mozilo managed to unload 92,000 shares at a price of $28.74 for a total payout of $1,292,600 above his option price of $14.69. See "Unprecedented Disruptions" at Countrywide for more information.

But that is nothing compared to the grand total cashout of $536,348,378 by Mozilo (see Countrywide Bets the Farm).

Where else but the USA can you make a half billion dollars running a company into the ground?

Well, the Fed apologists got what they wanted Friday: another temporary bailout as the Fed slashed the discount rate by 50 basis points right before options expiry. But we're not going to bottom as long as the Fed interferes in the market. With Bernanke at the helm, this could be a very long wait.