Alright, I have a mea culpa here. Check out this quote from June 2008:
Bank of America’s Ken Lewis is trying to crack a big nut in taking on Countrywide Financial to its balance sheet. To date, BofA has been fairly successful in limiting its writedowns during this credit crisis, but there are any number of problems attendant with the Countrywide transactions. I thought surely BofA would recognize these risks and back out of the Countrywide deal. But, it looks like full steam ahead. Some of these may cause BofA to be exposed to major financial losses in the future.
It’s three years since I wrote that now and I think we are definitely seeing this was the right call. Here’s the thing though: In August – two months later – I wrote:
Basically, the LA Times is showing that Countrywide represents the most obvious case of mortgage fraud, predatory lending, and other ills that caused millions to take on loans they would otherwise not have. As mortgage lending is at the core of the problems facing the U.S. economy, doing a few Countrywide perp walks would be a coup in any politician’s book.
But, then there’s Angelo Mozilo. He is a man who made hundreds of millions of dollars while the mortgage market fell apart and people lost their homes, dreams, and life savings. The U.S. government, the state governments and many an Attorney General will do everything they can to be the first to arrest Mozilo to parade around before the U.S. public. This is what politicians do — Attornies Generals are politicians too.
And, remember, Mozilo was also the originator of IndyMac, which spectacularly went bust this past month.
Why Bank of America took on this kind of open-ended legal risk is beyond me. But, one thing is for sure: we will see convictions at Countrywide.
Did you get that last sentence: “But, one thing is for sure: we will see convictions at Countrywide.”
That was dumb. Now I know that the best way to rob a bank is to own one.
P.S. – I am updating this (at 1130 EDT the next day) to say I remember being amazed the Countrywide deal was still on as more bad news spilled out. I was convinced the government forced $BAC into it. This could be the case because I had similar thoughts about Citigroup asset sales in 2009 as well and we have gotten confirmation that they were forced to do them by the Obama Administration.
P.P.S – in the naked capitalism version of this post, I said: “watch Bill Black regale you with tales about the Great American Bank Robbery. That may put some context around how very wrong I was – and also why the President will pay at the polls for high unemployment despite what some polls say. I think James Carville would say: It’s the bailouts, stupid.”