Jan. 11, 2008: an important date for any American concerned about the federal government’s bailout of the banks under the Troubled Asset Relief Program (TARP). Jan. 11 was the day that Bank of America (BofA), the recipient of literarily billions of dollars in bailout money (which they have repaid), acquired Countrywide Financial. The purchase was originally expected to cost them $4 billion, entirely in stock, and was supposed to cement their position as the nation's top mortgage lender.
Reuters recalculated the $4 billion estimate and discovered that buying Countrywide Financial would only cost the banking giant around $2.5 billion. Upon even further scrutiny, it was discovered that, technically, the deal would cost them even less than that, because the purchase really represented an increase in their investment in the faltering California lender of about $2 billion.
However, as almost everyone knows, the deal did not turn out so well for Bank of America. The purchase was a disaster and ended up being one of the many things that cost American taxpayers billions in efforts to “correct.”
According to Business Insider, Countrywide's CEO Angelo Mozilo was later charged with fraud (in which he settled) because his company, the largest mortgage lender, underwrote so many of the toxic subprime loans that caused the financial crisis, and he allegedly was aware of it all along.
Now the unlucky owner of Countrywide, Bank of America, is in the process of trying to settle lawsuits from investors in those subprime loans, and they are being met with numerous obstacles. Blaze readers may recall that among one of the numerous issues hammering away at BofA is the fact that they are being sued by AIG.
Furthermore, dozens of investors and the New York AG have objected to an $8.5 billion settlement that would relieve BofA of its legal liability and cast the blame on Countrywide instead. The investor’s refusal to agree to this $8.5 billion settlement translates literally: “Expensive lawsuits are coming your way and they will not be letting up anytime soon, Bank of America.”
Brian Moynihan, the CEO of Bank of America, recently said on a conference call with investors, "Obviously, there aren't many days when I get up and think positively about the Countrywide transaction in 2008."
Bottom line: What was supposed to be a $2 billion purchase has mutated into a financial nightmare that is costing them nearly 15 times the original price. Writedowns and legal fees have pushed the estimated cost of the Countrywide purchase to more than $30 billion.
Business Insider once jokingly said that Moynihan must go to bed cursing the name Mozilo.
Is that perhaps letting him off too easy?