Bank of America to Buy Countrywide

Ken “I Don’t Care If It’s Profitable” Lewis, CEO of Bank of America, finally pulled the trigger with Countrywide. While some in the financial sector were hoping the trigger was attached to something aimed at Countrywide’s Angelo Mozilo, it laid to rest the rumors that have surrounded these two lending giants for almost a year.

The deal is for $4.1 billion in stock. Critics argue that Countrywide carries to much baggage, but there are long term upsides that Lewis is banking on.

Bank of America is nearing the Federal cap that limits banks to no more than 10% of U.S. deposits. Since Countrywide is a thrift, their deposits don’t count against B of A’s deposit cap.

Secondly, B of A acquires CW’s back office. According to CreditSights senior analyst David Hendler, “The technology platform, the people who run it, the hedging, the facilities, the mortgage servicing rights, the origination platform, you know, they are all state of the art.”

Most importantly, this move buys stability, which the lending industry desperately needs. A Countrywide failure would have a far reaching effect that impacts everyone. The options were pray for a government bailout, which wouldn’t fly during an election year, or hope for a saviour. Enter Lewis. With $1.5 trillion in assets, Bank of America is in the best shape to take one for the team. It also buys him more than a few markers.

Sources did deny that the buyout was made possible by earlier cost cutting measures that eliminated hand soap and free soup and crackers for their NYC based employees.