Bank of America Buys a Big Chunk of the Shitpile
There are several things that concern me about the news that Bank of America has agreed to buy a big chunk of the shitpile. First, there’s this bit, which sounds to my non-expert ears like it could become a real problem.
By purchasing Countrywide, Bank of America would combine its 5,800 branches with the mortgage lender’s coast-to-coast network, helping Mr. Lewis achieve his goal of becoming the biggest player in every major consumer finance category.
Bank of America would brush up against a federal cap that prevents a bank holding company from controlling more than 10 percent of the nation’s deposits. Because Countrywide Bank is a federally insured savings and loan, the rule does not apply.
Seeking to ease any regulatory concerns, representatives for the companies were in Washington on Thursday to brief regulators.
Given the financial situation of this country, I’m not sure it’s a good idea for anyone to hold 10% of the nation’s deposits. Now match that detail with this speculation from Herb Greenburg, via Calculated Risk.
We’ll know it soon enough, but with the leak that Bank of America is near acquiring Countrywide, several things would appear apparent (at least while we’re playing the guessing game):
1. The Fed is behind the deal.
2. The Fed is behind the deal because the rumors yesterday of a near bankruptcy were probably true.
3. As part of the deal, the government likely agrees to guarantee BofA against Countrywide-related losses. Read more →