Here’s What Bank Of America Truthfully Paid for Countrywide
Technically, the deal cost them less, because the purchase represented an increase in Bank of America’s (NYSE:BAC) investment in the troubled California lender of about $2 billion.
So Reuters estimates that buying Countrywide in January cost BofA around $2.5 billion.
Wait until you see how much it really cost the firm.
As you’re surely aware, the deal has turned out to be a disaster. Short story: The company “turned the American dream into a nightmare for thousands of innocent borrowers,” in the words of Chuck Schumer. Countrywide’s CEO Angelo Mozilo was charged with fraud (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 owner of Countrywide, Bank of America (NYSE:BAC), is in the process of trying to settle lawsuits from investors in those subprime loans, and meeting obstacle after obstacle. Dozens of investors and the New York AG have objected to a $8.5 billion settlement that would put much of BofA’s legal liability because of Countrywide behind it, suggesting that expensive lawsuits will be in front of BofA for some time to come.
Brian Moynihan 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.”
That is putting it very kindly.
Writedowns and legal costs have pushed the estimated cost of that purchase to more than $30 billion.
Moynihan must be cursing Ken Lewis — the CEO of Bank of America (NYSE:BAC) at the time it bought Countrywide — in his sleep.
Courtney Comstock is a writer for Business Insider.