The 2008 acquisition of Calabasas-based Countrywide seemed like a bargain at $2.5 billion, but when you add up real-estate losses, legal expenses, and settlements with state and federal agencies, the real price is closer to $40 billion, the WSJ reports, citing sources close to the bank And that doesn't include a 68 percent drop in the value of B of A stock. "It is the worst deal in the history of American finance," said University of North Carolina banking professor Tony Plath. From the Journal:
Bank officials say they finally have their arms around the many problems spawned by Countrywide and that it won't get much worse. Indeed, hopes that the worst is behind it on Countrywide and other fronts has propelled Bank of America's shares to a gain of more than 40% this year, making it the best-performing stock in the Dow Jones Industrial Average.
Countrywide saddled Bank of America with hundreds of thousands of delinquent borrowers, thrust it into the middle of a foreclosure-paperwork scandal and exposed the bank to countless lawsuits from mortgage-bond investors and insurers. The number of people handling poor-performing real-estate loans for Bank of America ballooned from 5,000 at the time of the Countrywide purchase to 50,000.
Let's also not forget the $67.5 million that Countrywide CEO Angelo Mozilo agreed to pay to settle a civil fraud case brought by the SEC, (though B of A wound up paying a good chunk of that amount). The Justice Department decided not to pursue a criminal case against Mozilo.