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BofA Director: Countrywide Deal 'Worst Deal We Ever Made'

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The Huffington Post   First Posted: 06/30/11 02:58 PM ET Updated: 08/30/11 06:12 AM ET

When Bank of America bought Countrywide Financial for $2.5 billion in stock in 2008, it must have seemed like a good deal.

The troubles with Countrywide, then the nation’s biggest mortgage lender, were known at that point -- defaults and foreclosures were piling up, and there were rumors that bankruptcy could be around the corner. But Kenneth Lewis, then Chairman and CEO of Bank of America, maintained an optimistic tone.

“Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation's premier lender to consumers,” Lewis said in a statement when the deal was announced.

In hindsight, not only does the deal not look good. It might be one of the worst purchases ever.

This week, Bank of America announced it would pay out a combined $20.6 billion in fallout costs related to Countrywide, including an $8.5 billion settlement to investors who lost money on mortgage-backed securities -- the largest such settlement a bank has ever paid.

The deal also includes a $5.5 billion allocation to reserve funds for future buy-backs, and a $6.6 billion component for other charges, including lawsuits and a write-off of the Countrywide investment.

All of which makes Lewis’s 2008 statements -- including in January of that year when he called the Countrywide purchase “very attractive” -- seem a bit incongruous, in retrospect.

“It turned out to be the worst deal we ever made,” said one Bank of America director, quoted on Thursday in The Wall Street Journal, who’d voted in favor of the Countrywide acquisition in 2008.

Bank of America, along with JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, is under investigation at both the federal and state level for allegedly foreclosing illegally on borrowers and mishandling the foreclosure process more generally.

Between October 2008 and September 1010, roughly 86 percent of the claims submitted to the Federal Housing Administration by Bank of America were loans that originated from Countrywide Financial. In total, Bank of America asked for $5.7 billion of taxpayer money.

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