Signup for our free newsletter:

Bank of America "Rescues" Countrywide--Again

Written By Brian Hicks

Posted January 11, 2008



"The Cheshire Cat"….Soon there will nothing left but the grin.



Well after nibbling on Countrywide Financial for the first time in August by acquiring a 16% stake in the troubled lender for "only" $2 billion, Bank of America has now decided to take on the whole meal.

According to reports, the banking giant will now pick up the remaining 84% of the Mozilo Empire for the "bargain" price of only $4 billion. And while that’s not quite carcass-based pricing, its close enough I guess for Bank of America CEO Ken Lewis.

Lewis, by the way, is described as an "aggressive deal maker".

Of course, whether or not the deal turns out to be a good one in the long run is a question that can only be answered in due time. Aggression sometimes has it price along with its rewards.

But for now at least the ticking time bomb that was poised to blow Countrywide Financial into oblivion has been taken away. Not defused-mind you-but simply moved to another time and place.

And while Countrywide’s servicing and origination businesses are obviously the diamonds in the pile, Mozilo’s toxic portfolio of banking fantasies are what makes this deal still so dangerous–even for a heavy weight like Bank of America.

Here’ the early–and I stress early–breakdown of the deal.

I say that because somehow, I have got to believe that Ken Lewis and Company were smart enough to protect themselves from some of that toxic waste. A government guarantee maybe?

Why else would anyone in their right minds be willing take on those types of liabilities–especially in the face of a recession and as Mozilo himself called it " the worst housing market since the Great Depression"

It just doesn’t add up—-yet.

From the AP by Ieva M. Augustums entitled: Bank of America to Buy Countrywide

"Bank of America said Friday it will buy Countrywide Financial for $4.1 billion in stock, a deal that rescues the country’s biggest mortgage lender and expands the financial services empire of the nation’s largest consumer bank.

The acquisition will make Charlotte-based Bank of America Corp. the nation’s biggest mortgage lender and loan servicer.

Bank of America said it initially plans to operate Countrywide separately under the Countrywide brand, with integration occurring no sooner than 2009.

The transaction represents a 7.5 percent discount to where Countrywide shares ended Thursday after they soared on news that a rescue plan was in the works. It also effectively leaves Bank of America with a big loss on its $2 billion August investment in Countrywide Financial Corp. during the height of the summer’s global credit crisis.

An aggressive dealmaker who has already snapped up behemoths FleetBoston Financial and MBNA, Bank of America chief executive Ken Lewis this time isn’t buying a financial winner. Delinquencies and loans in pending foreclosure are rising in Countrywide’s loan portfolio, and Lewis said Friday "there are near-term challenges" in the nation’s housing market.

There was no immediate work on job cuts, but analysts said they expect some among the ranks of Countrywide’s 15,000 employees. Lewis said he would like Countrywide chairman and chief executive Angelo R. Mozilo to stay with the combined companies until the deal is done.

"Angelo has told me that he will do anything that we want him to do," Lewis said. "I would guess that he’ll want to go have some fun. I will talk with him next week about his personal desires. Many of the senior people will have big operating roles in this company."

So there you have it. Countrywide is going down the memory hole now and the man that sold it the whole way into oblivion is off now to have some fun.

Everyone else, of course, is nothing but a bag holder. Finely tuned athlete huh?

Nice work Angelo…..maybe your next move should be into politics.