Doomers undoubtedly are aware by now of Bank of America’s pending takeover of Countrywide, but did you know that you are helping to finance the deal?
June 25 (Bloomberg) — Bank of America Corp.’s $3 billion takeover of Countrywide Financial Corp. will be financed by 138 million tax-paying Americans.
Bank of America, led by Chief Executive Officer Kenneth Lewis, can use tax write-offs to pay for Countrywide, the country’s biggest mortgage lender, said Robert Willens, a former managing director at Lehman Brothers Holdings Inc. who now runs his own accounting firm. Taxpayers may pick up about $5 billion of Countrywide’s losses over 20 years, he said. Countrywide shareholders vote on the sale today.
“Ken Lewis got a break,” Willens said. “What these losses do is reduce the effective cost of the deal so the headline price isn’t really what they’re paying. It’s entirely possible that the entire equity purchase price could be financed by tax savings.”
We may not be doing Bank of America any favors though. Take for example the suit by the attorney general of Illinois against Countrywide:
Today, the attorney general of Illinois plans to sue Countrywide and its chief executive, Angelo Mozilo, contending that the company engaged in deceptive trade practices in lending.
The complaint, reports Gretchen Morgenson of the New York Times, accuses Countrywide of "relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its heavily advertised ‘no closing costs loan.’"
"People were put into loans they did not understand, could not afford, and could not get out of," the Illinois attorney general, Lisa Madigan, told the Times, "This mounting disaster has had an impact on individual homeowners statewide and is having an impact on the global economy. It is all from the greed of people like Angelo Mozilo."
The attorney general is seeking that any mortgages that used deceptive practices be rescinded or modified in some way.
The Illinois investigation is one of a number into the company’s practices and into stock sales by Mozilo. The potential liability for Bank of America—in terms of both public image and legal costs—appears to be huge.
Don’t you just love to see your taxes at work?
Sorry- not in keeping with editorial standards.
Twist
I’m a “suburbanite”. I get quite upset when they use taxpayer money - from those of us smart enough not to buy into the housing bubble - to cover these losses. Of course, what’s really angering is that the money is REALLY going to save the bonuses and paychecks of the executives who run these companies. They should should be the first ones to cough up the cash.
My scummy, trashy suburbanite opinion. And aren’t you the same guy who in one sentence talks about corrupt homeownership, then in the next spouts some nonsense about stopping evictions - in other words, have everyone in the US stop making mortgage payments overnight? That’s not even corrupt, that’s simply theft. And since alot of this is happening BECAUSE people have stopped making house payments, there’s some sort of weird, circular argument with yourself going on here..
What’s wrong with writing off losses? Profits are taxed, so losses should be deductible. Have you never sold a stock at a loss and taken it off your taxes? If so the taxpayers “helped finance” your trading losses.
Don’t you all know it’s the new Captialism?
We Privatize the Profits, But Socialize the Losses. Suck it up America, it’s a Win/Win for the Bosses!
Brucewho is 100% correct.
It’s so sad what Bernanke did by taking OUR money and exchanging it with toxic debt. $30 B to be exact. The FEDs later bought up another $300 B in toxic debt to provide more liquidity to un-named financial institutions.
This highly illegal activity is all going on right under our noses, and there isn’t a thing we can do about it. All of that toxic debt made a few people very rich when they were selling those toxic loans. They got rich, and WE are paying for it. It’s very disturbing.