Bank Of America And Countrywide: "It Was The Worst Deal In the History Of American Finance, Hands Down!"

WSJ Video - Behind the Numbers on BofA and Countrywide

At one time Bank of America's megalomaniacal CEO Ken Lewis thought he was picking up Countrywide Financial for the bargain price of $2.5 billion.  Now with BofA's stock down approximately 70% since the takeover was struck in the Summer of 2008, the WSJ reports the deal has cost BofA $40 billion, and still counting.

"Obviously, there aren't many days when I get up and think positively about the Countrywide transaction," Mr. Moynihan said in August 2011.

"It is the worst deal in the history of American finance," said Tony Plath, a banking and finance professor at the University of North Carolina at Charlotte. "Hands down."

The total costs from Countrywide to date, according to people close to the bank, include $34.5 billion chewed up by a combination of consumer real-estate losses since mid-2008 and funds set aside to pay back investors who allege Countrywide wasn't honest about the quality of mortgage-backed securities it issued before the crisis. Additional legal costs from various settlements with federal and state agencies and the initial Countrywide purchase amount push total costs over $40 billion, these people said.

And the tally could go higher.

Bank of America, like all insolvent TBTF banks is required to submit a 'living will' to regulators.  Those plans are due by Monday.

Here, in an invoice no M&A professional should ever want duplicated, is how Countrywide has cost BofA more than $40 billion:

$2 billion – Amount BofA paid for minority stake in Countrywide in August 2007.

$2.5 billion – Amount BofA agreed to pay to buy the whole company in January 2008.

$40+ billion – Total real estate losses, settlements with government agencies and amounts pledged to investors who purchased poor-performing Countrywide mortgage backed securities.

$67.5 million – BofA paid more than half of the settlement of a government fraud suit targeting former Countrywide CEO Angelo Mozilo in 2010.

$5 billion – Possible future losses that could be attributed to Countrywide.

68% – Drop in Bank of America’s share price since the Countrywide deal closed.

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Related stories:

Ken Lewis Defends His Purchase of Countrywide - CNN

Ken Lewis tells Maria Bartiromo why BofA's acquisition of Countrywide is a good deal

Comments

[DailyBail]

IT NEVER ENDS - U.S. Bancorp Sues Bank Of America Over $1.75 Billion Pool Of Fraudulent Countrywide Mortgages

http://dailybail.com/home/it-never-ends-us-bancorp-sues-bank-of-america-over-175-billi.html

[Cheyenne]

Worst deal for whom? I must ask.

It's crossed my mind more than once that the real reason companies like Countrywide and AIG weren't allowed to go bankrupt may have been to avoid the kind of rigorous autopsy results that we saw in the report by the Lehman Bankruptcy Examiner, Tony Valukas. That document stands as the Bible of Modern Wholesale Financial Fraud, what with its orgy of repo-105 transactions and rigged stress tests.

So, back to the question at hand: it was certainly a good deal for Mozilo and his ilk, hiding (or at least sweeping under the rug long enough to run out the statute of limitations on fraud) billions upon billions of dollars of criminally fraudulent acts.

For ordinary investors and taxpayers, the deal was an atrocity. But since when do ordinary people and the rule of law get in the way of rewarding a fraudulent loser like Angelo Mozilo with hundreds of millions in stolen loot?

[DailyBail]

It's crossed my mind more than once that the real reason companies like Countrywide and AIG weren't allowed to go bankrupt may have been to avoid the kind of rigorous autopsy results that we saw in the report by the Lehman Bankruptcy Examiner, Tony Valukas.

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Yet Lehman and Fuld, Callan, and others faced no punishment for what Valukas uncovered. Holder's DOJ just won't punish. I posted this link last week. It explains Holder's conflict nicely.

http://www.thedailybeast.com/newsweek/2012/05/06/why-can-t-obama-bring-wall-street-to-justice.html

[Pitchfork]

"Casting Romney as a plutocrat will be easy enough. But the president's claim as avenging populist may prove trickier, given his own deeply complicated, even conflicted, relationship with Big Finance.

Obama came into office vowing to end business as usual, and, in the gray post-crash dawn of 2009, nowhere did a reckoning with justice seem more due than in the financial sector. The public was shaken, and angry, and Wall Street seemed oblivious to its own culpability, defending extravagant pay bonuses even while accepting a taxpayer bailout. Obama channeled this anger, and employed its rhetoric, blaming the worldwide economic collapse on 'the reckless speculation of bankers.'"
--

Not quibbling with the Bail here, but this Beast writer is out of his tree -- Obama's relationship with Wall St. isn't "complicated" or "conflicted" at all. Would that it were. Nor did Obama EVER "channel [America's] anger" over the bailouts.

Ordinary Americans who haven't followed the GFC as closely as Bail readers have -- and this includes most journalists -- still believe that Obama is really a nice guy who really would like to do the right thing on X, Y and Z, but for whatever reason there's always some "deeply complicated" or "conflicted" relationship that mucks things up. Bullshit. Obama is sometimes just clueless (see Larry Summers appointment), but he's always a willing tool. And he don't work for us.

[Pitchfork]

Don't get me wrong, that Beast article was otherwise fantastic. Regardless of the very objective tone of the article, the facts they lay out are just plain brutal.

[Cheyenne]

Holder and that simpering minion under him, Lanny Breuer, were both partners in Covington & Burling, a white shoe firm that does criminal defense work for many of the criminal banks that they now refuse to charge despite massive evidence of criminal fraud, e.g., selling the same promissory note multiple times. The AAA defense (well, the ratings agency said the note was AAA) does not and cannot apply to a multiple sale. Indeed, there is no defense at all to such a crime. And yet Holder does nothing while that window dressing milque toast Breuer invents excuse after excuse for why his firm's clients can rob people with impunity.

Back to Lehman, though. That story may never be told. Indeed, it's been fascinating to watch Bankruptcy Examiner Valukas's position on criminal prosecutions shift like a nose of wax.

In April, he told Steve Kroft of 60 Minutes that wrongdoing by Lehman executives was "CERTAIN":

Q. This is really deception to make the company look healthier than it really was.
A. Yes.

Q. Deliberate?
A. Yes.

Q. How are you so sure of that?
A. Because we read the emails in which we observed the people saying that they were doing it. We interviewed the witnesses who wrote those emails, or some of those emails, and asked them why they were doing it. And they told us they were doing it for purposes of affecting the numbers.

Q. Do you think Lehman executives knew that this was wrong?
A. For some of them, CERTAINLY.

http://www.cbsnews.com/video/watch/?id=7406224n&tag=contentBody;storyMediaBox (8:33)


That’s in sharp contrast to what Valukas told PBS on the Wednesday before last Thanksgiving on a panel with Yves Smith.

Q. Why have there been no high-ranking prosecutions to date?
A. I think the underlying factor is the complexity of many of these cases where you have the failure of a major corporation and you are now looking to identify individuals who are responsible. To a large extent what you find is that responsibility is diffused. So a chief executive is able to say, ‘I relied on my accountant,’ the accountants are able to say, 'We relied on the lawyers,’ and if you’re NOT ABLE TO ESTABLISH THAT AN INDIVIDUAL HAD CRIMINAL INTENT, then you can’t bring the prosecutions in the first place.

http://www.nakedcapitalism.com/2011/11/we-speak-on-pbs-newshour-about-why-no-bank-executives-have-gone-to-jail.html (1:30)

No wonder the public's trust in the financial system AND the judicial system has been totally annihilated.

[Pitchfork]

"Holder and that simpering minion under him, Lanny Breuer, were both partners in Covington & Burling..."

Beuer was there, too?! I had no idea.

[DailyBail]

Putting a Covington partner--he spent nearly a decade at the firm--in charge of Justice may have sent a signal to the financial community, whose marquee names are Covington clients. Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and Deutsche Bank are among the institutions that pay for Covington's legal advice, some of it relating to matters before the Department of Justice. But Holder's was not the only face at Justice familiar to Covington clients. Lanny Breuer, who had co-chaired the white-collar defense unit at Covington with Holder, was chosen to head the criminal division at Obama's Justice. Two other Covington lawyers followed Holder into top positions, and Holder's principal deputy, James Cole, was recruited from Bryan Cave LLP, another white-shoe firm with A-list finance clients.

http://www.thedailybeast.com/newsweek/2012/05/06/why-can-t-obama-bring-wall-street-to-justice.html

But some suggest there is also the potential for conflicting interest when the department's top officials come from lucrative law practices representing the very financial institutions that Justice is supposed to be investigating. "And that's where they're going back to," says Bill Black. "Everybody knows there is a problem with that." (Two members of Holder's team have already returned to Covington.) A spokesperson for Covington was not available for comment. (Newsweek uses the firm as outside counsel.)

[Pitchfork]

Yep, totally missed that. Reading quickly, my mind scanned that as "[Holder] had co-chaired the white-collar defense unit at Covington...." Just wow. It's like you don't even need lobbyists if you effectively own Treasury and Justice.

[DailyBail]

What I wonder is whether Obama planned it this way from the beginning.

Sure, he wanted Holder for a variety of reasons, but was he really aware that by appointing Holder, Breuer and others was he effectively deciding at that moment NOT to prosecute bank fraud? And I think the answer has to be 'yes.'

But we've also learned from author Ron Suskind that Geithner and Summers actually were running the show. And we know they had no interest in prosecuting Wall Street as they both would then have been guilty SOBs by implication given their roles in regulating/perpetuating the bullshit.

http://dailybail.com/home/dylan-ratigan-with-author-ron-suskind-tim-geithner-ran-the-w.html

[Cheyenne]

"And we know they had no interest in prosecuting Wall Street as they both would then have been guilty SOBs by implication given their roles in regulating/perpetuating the bullshit."

Jesse calls this phenomenon "the credibility trap" and has been harping on it a lot lately. I think most regulators and elected officials only see the thin edge of the wedge they embark on when they first get captured by the banking industry, and fail to anticipate the endless and increasingly huge stacks of lies, fictions, frauds and other crimes they've actually bought into.

One lie begets another, and it is a very slippery slope that can't end well for uneasy co-conspirators...

http://jessescrossroadscafe.blogspot.com/2012/07/barclays-bob-diamond-threatens-uk.html

[robertsgt40]

Memo to those that deal in finance: There is no honor among theives