Letters to the Editor
-
Plenty of intrigue
Moody's upgraded Countrywide, after the BAC offer, then downgraded BAC. Moody's is 17% owned by Berkshire, and Berkshire has a sizable stake in BAC. The commentators were mostly incredulous. Why would BAC overpay for Countrywide? Probably because they knew they would realize an immediate benefit from the upgrade, as far the deal was concerned. BAC and Moody's are locked in a lovers embrace. According to the Economist Moody's and Fitch are about 80% of this market, and cross investment calls the integrity of these rating agencies into question. In the wake of the most recent meeting of the President's Working Group, the issue of government intervention also become an issue. Not allowing Countrywide to go bankrupt would send a message to the markets. Either BAC got the wink and the nod, or they feel pretty sure that the administration will cover their back. And as the article suggests, BAC could be the largest bank left standing, as some analysts feel pretty sure that Bear will go down this year, and Citi next. Enter Warren Buffett, who is not adverse to losing money. Recall JP Morgan put his fortune to work in the 29' crash, trying to put a floor under the market. It was a futile gesture.
-
And stock holders
I'm sitting on a 77% loss (I thought I was buying at the bottom!), and now the company is going to sell? I'll need to see the details, but I'll bet it's for cash, which will eliminate any chance of my "riding it out," waiting for the shares to go back up when the market eventually recovers.
Damn them.
-
Why?
I’m not a financial guru and I know that BoA and Countrywide have been dancing around one another for a few months now.
But why is it a good thing for BoA to buy a company that everybody expected to declare bankruptcy soon?
Seriously, how is this good for BoA? We still don’t know just how much exposure Countrywide has to the subprime mess. A cash infusion for BoA helps, but it’s not going to make all those bad loans go away.
The only thing I can think of is the ‘to-big-to-fail’ scenario and BoA is expecting the feds to come in big time and bail them out of the subprime mess by taking on the loans themselves and removing them from BoA’s books. So BoA is left with good loans and the government is left to cover the costs of the subprime loans.
-
Something different
This is about BAC being able to circumvent the 10% deposit limit and move into markets that it otherwise cannot enter, at least on a retail basis. This is a major step in fulfilling A.P. Giannini's dream of a nationwide Bank of America. BAC will now have the ability to conduct retail banking in all 50 states. That's what this is about.
-
ok
... it's being sold for BofA stock (0.18 BofA shares per Contrywide share) -- but does that stock have a chance of rising up enough to counter the loss? I think not.
So it's the same thing -- Countrywide is locking in the loss for its shareholders. Earlier this week, analysist were still saying Countrywide's intrinsic value is around $40/share. So BofA is getting an incredible discount. Good for them, bad for everyone else.
-
Is this a power play?
Shareholders are lucky they got this. Bankruptcy would not have been any kinder to them. I'm not sure what BAC is getting, the future of NINJA loans, and the entire go-go mortgage industry has been called into question. Those proposed Countrywide kiosks will disappear quickly. It may be that BAC is already sufficently at risk, being the originator of many of these loans. It may be that when the courts start assigning ownership and responsibilty for these loans, (BAC automatically assumes responsibility for its share of the loans) that holding the axe over other banks like Wells Fargo will provide them some benefit. There is also a question of who has first rights to liquidate the property in the loan portfolio, all a legal morass.
BAC owns Country, Country sues Wells Fargo, et al. . BAC gets top rating in huge class action suit, which otherwise may have never happened, with BAC's team of lawyers putting it to the rest of the banks?
-
@dcmeserve
In case you are unfamiliar with the way bankruptcy works, equity holders generally get absolutely nothing. So, I'd consider that Countrywide execs (that probably own far more shares than you do) may know something that analysts don't, and be grateful for the pittance you get.
Vulture investing ain't for the weak hearted.
-
"To big to fail"
Two points:
1) BofA isn't already "to big to fail?" I'd have to disagree with you there.
2) Why does the 10% rule necessarily make sense--most other countries go about their merry way with far fewer banks that cover the entire country. That's not to say that there shouldn't be smaller banks, but the UK didn't really have a bank run up until 2007 and their market is significantly more concentrated (as is Canada's and many others). 10% doesn't really seem like an overwhelming share of deposits.
-
Why not? BofA is buying at a discount and the USofA will help finance it.
The tax deductions BoA will enjoy are estimated to total $1.35 billion over the first five years, and starting in the sixth year they can deduct any Countrywide embedded losses over that $1.35 B estimate without limit.
-
A MODEST PROPOSAL......
My MODEST proposal? DISSOLVE Bank of America, Chase Manhattan, Citigroup, ALL of these CRIMINAL SOCIOPATHIC CANCEROUS HUGE FINANCIAL ORGANIZATIONS and RE-DESTRIBUTE THEIR WEALTH TOWARDS SOME USEFUL PURPOSE, LIKE CURING CANCER, DIABETES and OTHER CURABLE DISEASES, ENDING HUNGER IN AMERICA AND THE WORLD, and BRINGING ABOUT PEACE WORLDWIDE. WITH THESE CREEPS' COLLECTIVE MONIES, ANYTHING IS POSSIBLE!!!!! Don't FORGET to WITHDRAW all your money FIRST from these CRIMINALS if you patronize them CURRENTLY, and SEE TO IT that THEIR CRIMINAL CEOS like Angelo Mozilo and their CRONIES are JAILED FOR LIFE, or LIKE IN CHINA, EXECUTED FOR THEIR HIGH WHITE-COLLAR CRIMES!!!!!