BofA

It won't surprise (m)any of you, but I hate the B of A deal with Countrywide. First of all, I don't think it was much of a bargain. Sure, they paid $4 billion for a bank with a book value of $12 billion but, really, who can be sure what the true book value of this pig is?

Second, why buy it now? If they were really interested in the business, why not wait until Countrywide files Chapter 11? It would have delayed the transaction by what, a week? Two?

Third, I understand that Countrywide owns something like 1 in 5 mortgages in the US, and B of A is not (was not) a major mortgage player. I also understand that B of A is anticipating having that portfolio once the housing market turns around. What I fear (for them) is that by the time the market turns, they may still be a smaller player in the mortgage market, but a huge landlord.

Many are pointing to this deal as evidence that the market works, that companies are able to find their own fixes and government need not "interfere with the market". The cynic in me believes that Ken Lewis had a long and fruitful discussion with both Hank Paulson and Ben Bernake before agreeing to take the plunge here. Let's see what happens once the write downs begin in earnest.

I guess the one upside of all of this is for B of A retail banking customers - they will probably enjoy some seriously good rates on deposits as B of A ramps up the funding mechanisms to feed the Countrywide pig.

Thoughts?