The costs of Bank of America's deal for Countrywide
So just how bad a deal was Bank of America's purchase of Countrywide?
People often refer to the bank's deal to buy Countrywide back in 2008 as one of the worst in history. Then CEO Ken Lewis thought he had the bargain of a lifetime when he paid $2.5 billion for a company that he thought would make Bank of America the preeminent consumer bank in the country. Obviously, it didn't work out, but exactly how much did it cost the bank?
People "close to the bank" have thought about, crunched some numbers and concluded that "the total costs from Countrywide to date...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."
$40 billion is a lot, and the kicker here is that the costs will likely go higher, as key pieces of litigation remain unresolved.
So what do you think? Is this truly the worst acquisition in history? It certainly ruined the reputations of Lewis and Countrywide founder Angelo Mozilo, who agreed to pay $67.5 million in fines in 2010 and accepted a ban from serving as an officer of a public company.
- here's the article