The US learned from the UK Northern Rock debacle and avoided a massive bank run by orchestrating BofA's $4 billion all-stock takeover of lowly Countrywide and its epitome of executive corruption and greed, Angelo Mozilo.
Now ask yourselves, why would BofA pay $1 for a company that would have gone bankrupt if they hadn't? True, it's at over 80% off vs. its high, but still why pay billions for a company worth nothing (at best)?
Maybe because if Countrywide went bankrupt, it would have cost BofA more than $4 billion?
It'll be interesting if this deal actually goes through. It might just be BofA looking to prop up the value of CFC as they dump shares. But if BofA buys it and it closes, then THEY own the CFC toxic loans that NOBODY will buy and which have NO value on the open market. Can you say BofA write-down? And mark my words, this one will cost BofA CEO Kenneth Lewis his job, even though he'll be laughing all the way to the bank.
Bank of America saves Countrywide from bankruptcy
Bank of America has saved Countrywide, one of the major players in the sub-prime mortgage crisis, from bankruptcy.
It announced this morning that is has agreed to buy America's biggest mortgage lender for around $4bn (£2.05bn) in stock.
The lender is widely viewed as one of the main culprits behind America's sub-prime mortgage crisis. It was a leader in peddling loans to low-income home buyers and is under investigation by US prosecutors for allegedly misleading customers about repayment commitments.