So why was it again that Bank America wanted to buy Countrywide? Was it this?
"The Illinois attorney general's office, which began an investigation into the business practices of Countrywide Financial Corp. last fall, says it has found enough evidence of wrongdoing that it plans to file a civil suit against the mortgage lender and its chief executive, Angelo Mozilo.
....
In an interview, Illinois Attorney General Lisa Madigan said Countrywide "broke the law and we plan to hold them accountable for that." She added that Countrywide's actions have led to widespread foreclosures in her state and have wrecked havoc around the world. "The impact on individual homeowners and communities and the country and the global economy is unbelievable.""
Oh that's rich. And Bank of America is still going to proceed with their acquisition?
Now remember folks, this acquisition is voluntary. Bank America could repudiate this deal. By deciding to proceed while they are now on notice that the firm is going to be sued they are effectively ratifying the practices of the firm and making the public statement that they believe that the actions of this company are and were defensible.
Oh by the way, the relief requested is that Countrywide be forced to repurchase all of the unfair and deceptive loans.
Is Lewis really crazy enough to acquire Countrywide under that threat? How many tens (or hundreds) of billions of dollars of forced repurchases could be involved here?
Late update (10:18 CT) - looks like California may be joining the party; there was a flash on them suing as well. This could quickly turn into a "pile on" and make consummation of the deal entirely untenable.
Oh, and both Fannie and Freddie's "expanded balance sheets"? They haven't done jack to promote what Congress told them to do:
"Instead of using powers granted by Congress to buy jumbo loans for the first time, Freddie Mac and Fannie Mae are purchasing their own mortgage-backed securities, helping reduce losses, company filings show. The large loans, above $417,000, made up almost a third of the U.S. market last year, according to the Mortgage Bankers Association."
Told 'ya so. $500 says that Congress won't grow a pair and rescind the increase. In fact, the $300 billion boondoggle bill that The Senate has passed by a veto-proof majority will make those changes (that Freddie and Fannie aren't using to do what Congress told them to do) permanent.
Is there a Friends of Fannie in the House and Senate somewhere?
By the way, if you think this mess is/was limited to Countrywide, I have a bridge to sell you. In fact, it would likely be possible to list the lenders without similar problems over the last few years using your fingers - if both of your arms had been blown off.
Enjoy the FOMC today - I'm going to chuckle watching Bernanke dance on the head of a pin while juggling jars of nitroglycerin.
Couldn't happen to a nicer guy.
Economics
