Anniversary of Bank of America-Countrywide deal


The Bank of America purchase of Countrywide is about to mark its fifth anniversary.

People love to rank the deal as one of the worst ever, right up there with Time Warner's deal with AOL. The bank was able to buy the ill-fated mortgage company for $4 billion, which then CEO Ken Lewis touted as a terrific value. But the transaction has already cost the bank about $45 billion.

Boston Business Journal notes that, "A case could be made that (the cost) it's far more than that...The biggest hit BofA has taken is to its reputation. It's hard to put a price on that. But it's fair to say the bank's market capitalization, which rose drastically in 2012 as it looked like BofA was getting closer to being out of the woods, would easily be $10 billion to $20 billion higher without all the litigation and negative publicity,"

Indeed, the opportunity costs are truly lamentable. The mortgage market is starting to percolate, and some big banks are benefitting. Wells Fargo, for example, now owns the largest market share with about one-third of the market. Bank of America, which one was number one, is now down to fourth place.

The problem is that the legacy mortgage and foreclosure issues have left Bank of America in a tough position regarding new opportunities. The bank simply does not have the infrastructure to deal with its legacy issues and take advantage of the hot market at the same time. It will likely continue to lose ground.

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