More potential credit crisis fallout this week, again involving Countrywide. Bank of America and Countrywide are the #1 and #2 home mortgage lenders in Massachusetts, so it could have ramifications for us locally.
From Banker and Tradesman/Associated Press article by Rachel Beck:
The people who did the deal that a strong bank would rescue a weak one. But the deal’s structure may have only delayed the inevita-ble -- Countrywide still could face bankruptcy or a federal takeover potentially involving taxpayer dollars.
We aren’t facing either yet, but it would be naive to count them out.
“This deal is so rancid and unpredictable,” said Christopher Whalen, managing director at the consulting firm Institutional Risk Ana-lytics. “Bank of America’s executives can’t even articulate what the total liabilities from this deal are.”
Let's hope that they can get their act together and find a way out of this mess (that they got themselves into in the first place) without relying on the taxpayers. I am not so confident in that though, with the track record of the financial sector lately, and according to a recent complaint filed by countrywide debtors:
The complaint also states that the structure of the deal gives Bank of America “the power, in the service of its own corporate interest, to cause Countrywide to engage in acts or transactions detrimental to the business and financial condition of Countrywide.”Sounds ominous. All I can say is stay tuned.