"This environment is certainly not getting better," he said. "Something tomorrow could turn it around, but this is a first step in series of steps we're going to take."

Bank of America announced late Wednesday it would invest $2 billion in Countrywide Financial, helping shore up the company's finances as it has struggled with a liquidity crunch this month.

The nation's second-largest bank said it would buy non-voting preferred stock that yields 7.25% and can be converted into Countrywide common stock at $18 per share, 17.5% below Countrywide's closing price Wednesday.

"For a long-term shareholder, this is the best deal that they can have," Mozilo said in the interview. "To put Countrywide back on a strong footing so we can move forward. Both companies win here in a very big way."

Mozilo said Bank of America contacted him and and "said they would like to help" the company he founded in 1969 with the help of a $75,000 Bank of America loan.

Bank of America announced its investment just six days after Countrywide stunned investors by tapping an entire $11.5 billion credit line due to difficulties selling short-term debt.

Bankruptcy Speculation 'Baseless'

This raised concerns about whether the Calabasas, Calif.-based company might survive the mortgage and credit crisis afflicting a wide range of U.S. lenders.

Mozilo criticized a Merrill Lynch analyst report published earlier this month, which said Countrywide could face possible bankruptcy if market conditions worsen.

"It was totally irresponsible and baseless and affected the lives of 61,000 lives here at Countrywide and it was all caused by that individual at Merrill Lynch," Mozilo said.

The company is no closer to bankruptcy now, he said, than it was six months or six years ago.

"What doesn't kill you makes you stronger and we're a much stronger company today than we were a couple of weeks ago," he said. "A lot of what is driving this is a lack of confidence, it's panic. This is one of the greatest panics I've seen in 55 years financial services. Something has to be done to restore the confidence the market."

Housing Woes Could Lead to Economic Recession?

Mozilo said he continues to believe the housing downturn will take the U.S. economy into a recession.

"I still think so, I've been proven wrong so far," he said. "But I can't believe when you're having the level of delinquencies, foreclosures … that this doesn't have a material effect on the psyche of American people and eventually on their wallet."

"It seems to me, I don't see a light here at the moment," Mozilo added. "Something could happen that could change that overnight, but it appears to me we've got a way to go to work our way through."

Shares of Countrywide surged at the start of trading, opening with a gain of 10%, but pared gains by about 1.5% following Mozilo's comments regarding the housing industry. Bank of America shares traded slightly higher.

Citigroup research analyst Bradley Ball said the deal was a "win-win situation" and reiterated a "buy" rating on Countrywide Financial.