Bank America Has to Protect It's Investment

In August Bank of America "infused" our good friend Countrywide with $2 billion in cash to help the sinking home lender. Today, news came out that Bank America is in talks that it may buy Countrywide altogether.

Why?

Uh, it kinda had to. Countrywide, even though they would deny it, was virtually bankrupt. The lender's servicing portfolio was struggling with foreclosures. It's origination business had dried up to the point that it was simply happy that December's originations exceeded November's numbers...even if they were down over 40% year over year. Nobody was buying their offerings. They had abandoned sub-prime lending for the most part. And only Fannie & Freddie would purchase their loans.

It was going under...fast.

Back in August when it was suggested that Bank America would eventually buy out Countrywide our good ambassador Angelo Mozilo said there was no possible way.

So much for that.

Countrywide's stock gain 50% today to close at $7.75. Which is a far, far, far cry from the value the stock traded at in Febuary of last year, $45. When Bank America infused their funds, they had an option to get stock at $18 a share. Got a ways to go for that money to make sense.

Countrywide's portfolio is gigantic portfolio of loans, somewhere around $1.4 trillion, is too precious to be sold off to a low bidder. Bank America had to make this move. They just had to.