« “Surprise Winners In Sub-Prime FIASCO: John Edwards…??” | Home | “Not So Surprise Winners In Mortgage Meltdown…” »
“Now Come the BAILOUTS…”
By Sherman Ragland | August 23, 2007
We knew they were coming, and now comes word that the first major BAILOUT from the Subprime fiasco is for none other than COUNTRYWIDE MORTGAGE.
This morning Bank of America (B of A) paid just over $2.0 Billion into Countrywide Mortgage to keep the company afloat after Countrywide BURNED THROUGH it’s entire $11.0 Billion lines of credit. As a key part of the deal, B of A gets an automatic 16% stake in Countrywide, making it Countrywide’s single largest corporate shareholder. Countrywide’s CEO Angelo Mozilo continues as Countrywides largest single shareholder, however, reports have been circulating that Mozilo has been dumping stock for several months now. The deal with B of A comes with STRINGS as it also gives B of A first right of offer to acuire the rest of Countrywide in the future.
What is most interesting about the injection of cash by B of A, is that Bank of America’s CEO, Kenneth D Lewis, has repeatedly said that “Bank of America has zero interest in acquiring Countrywide Mortgage…”. That is, B of A had “little interest” until the stock of Countrywide fell so low that the OPPORTUNITY could no longer be ignored. Specifically, at the price that B of A paid for what they got, if they were to break up Countrywide into little pieces they would probably get back at least their $2.0 Billion and an additional $1.2 to $1.5 Billion on top. Turns out that Bank of America’s CEO is no “ordiary banker”, but is an opportunist who when faced with an opportunity of a life time – took it!
“Never Steal in Slow Motion…”
Opportunist In Chief of Bank of America, Kenneth D. Lewis
Bank of America, however, has no interest in breaking up Countrywide. More likely is that B of A continues to invest more into Countrywide as the mortgage crisis subsides and then ultimately, acquires the remaining shares of Countrywide to integrate it into the Bank of America EMPIRE. Countrywide has a much larger network of storefronts and much deeper talent in the business of single family home loans. And since most (intelligent) people do not believe that the current credit crisis spells the “END OF THE WORLD” then making a stratgic investment in Countrywide when its back is up against the wall makes sense – it was a good play by B of A.
Likewise, real estate investors would be smart to look at the current crisis taking place as a “BUYING OPPORTUNITY” to buy good assets – CHEAP!
Like all things which happen on Wall Street, the current lending crisis is but a BLIP in the larger view of real estate investing. A significant BLIP in that this distruption to the market will cause a number of people who are on the edge to loose their homes. Just like many execs at Countrywide will lose their jobs. But savvy investors will see this jolt to the market for what it is, a great opportunity to buy good assets in distressed situations at a huge discount.
Bank of America is going to make a lot of money from its $2.0 Billion investment in Countrywide, becuase it “bought right”. Likewise, many savvy investors who have been waiting for a market correction, have their money together, or are getting it together quickly to also be able to “buy right” and take advantage of the temporary drop in prices to pick up good assets on the cheap.
Right now there is much discussion on how the Federal Government may change the RULES to allow for Borrowers in Distress to now be eligible for FHA loan programs – In otherwords, the Bush Administration is looking for a stealthy way to BAIL OUT the MILLIONS of individual homeowners now in severe financial crisis. Stay tuned…
Click on Picture to see entire interview with Angelo Mozilo, CEO Countrywide on CNBC.
Popularity: 5% [?]
Topics: Uncategorized | No Comments »
Tags: angelo mozilo, bank of america, countrywide mortgage, credit crisis, fiasco, kenneth d lewis, real estate investors, sherman ragland, subprime
Comments
You must be logged in to post a comment.