Mortgage Diaster Averted With $4 Billion Purchase of Countrywide Financial
On Friday, January 18th, Bank of America agreed to purchase Countrywide Financial Corp., a major Chicago lending institution that was rumored to be headed for bankruptcy. If Countrywide were to declare bankruptcy, it would serve to further alienate investors and consumers already disillusioned with the real estate market. Mario Greco was quoted in the Chicago Tribune as saying “A Countrywide collapse ‘would have had an immediate negative impact on the real estate market.’”
Bank of America not only helped Countrywide dodge the blow of Bankruptcy but also increased its own mortgage and lending capabilities in Chicago and the scope of its influence with the government. By rescuing a corporation whose collapse would have so adversely affected Chicago’s real estate market, Bank of America assumes a benevolent posture that will help raise its credibility with regulatory institutions. As a result, BoA may be more eligible for some benefits which include passage of certain mergers and acquisitions that otherwise “might not have passed muster,” tax-breaks, and/or raising the federal cap on the total US Bank Deposits. Most feel this will reinstate confidence for current and future investors of Countrywide, since bank of America is such a well established financial institution. “Bank of America is a strong-enough name that the consumer will take solace,” Greco told the Tribune. Bank of America has assured Countrywide patrons will benefit as well and that “Countrywide customers will gain access to a broad set of consumer products including credit cards and deposit services. “Home ownership is a fundamental pillar of the U.S. economy and over time it will be a key area of growth for Bank of America,” said Kenneth Lewis, an executive of BoA.
Original article from Chicago Tribune.