When the subprime mortgage collapse gathered speed two weeks ago, Eric Sieracki at Countrywide Financial (CFC - Cramer’s Take - Stockpickr - Rating) sought to calm his investors’ nerves. "This is the pain phase of a healthy cycle," the CFO said at an investment conference in San Francisco. "We’ve been through these kinds of cycles before and we’ve seen another day. … We’re a top-conditioned athlete." Doubtless that’s why his fellow executives and directors are throwing stock overboard on a heroic scale.

Insiders at Countrywide, the nation’s largest mortgage lender, have sold $314 million worth of shares in the company just since August. That’s according to regulatory filings tracked by Interactive Data Corporation. The sales include a staggering $94.5 million by chief executive Angelo Mozilo, and $17.5 million by mortgage division chief David Sambol.

Naturally insiders are perfectly entitled to sell shares, and in the case of Countrywide Financial, the stock price has, at least, held up — sort of. It’s only fallen a fifth from its peak to $35.22. But it hardly makes you feel confident. It should be added that this is not something new. Insiders were also dumping stock heavily through 2004 and 2005. As they often have to exercise options before selling the stock, what they have pocketed will be less than $314 million.

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When home prices stopped going up 12-18 months ago, the frustration was palpable but hardly fear inducing. Timelines were stretched for ROI, ‘we’ll use it as a vacation home’ rationales started flooding forth, and travertine backsplashes suddenly went wanting. But things are different now, measurably so. And that difference is not just that the demand for credit to speculate on housing has declined. It’s that supply is now contracting. And when a credit cycle starts seeing supply contract (liquidity declining), all sorts of things start to happen: speculation gets robbed to pay a tax to prudence.

But, really, what has changed? What has really changed?

It’s not as if bankers don’t have money laying around to extend or sweeten the terms of the new loans these home speculators now need. Hell, the Fed and Treasury just need to print it into existence. And certainly Senator Dodd has played his cards: he thinks Congress should help 2.2 million home owners who are getting squeezed from buying a home they couldn’t afford in the first place (and apparently who are not English speakers also because existing federal regulations demand that every possible term and contingency in lending be laid out for borrowers). .

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