By Bill George 8/22/2014 Page 1 of 2

Bank of America Countrywide Financial and the Mortgage Bubble

The government did give Bank of America incentives to take over Merrill Lynch. I don't
recall the government exerting any pressure on BofA to buy Countrywide Financial.

I was watching Countrywide fairly closely at the time of its demise. The stock had been
recommended by an analyst as a BUY because of the massive stock buyback program
the company was engaged in.
(1)
After a quick review, I realized that the buyback was
supporting the stock price while Countrywide Financial CEO, Angelo Mozilo unloaded
his huge inventory of optioned stock so, I was watching for entertainment purposes,
rather than as a potential investment.
(2) (3)

As I recall the BofA deal, it was mentioned (at the time) that BofA had been a significant
long-term investor in Countrywide bonds (debt) and toward the end of Countrywide's
independent existence Mozilo claimed the company was in great shape. Then Mozilo
asked BofA for an increase and an extension of a line of credit BofA had given
Countrywide. BofA granted the increase and the extension - and Mozilo grabbed the
whole amount immediately. The story went on for a few days, then Mozilo admitted
Countrywides problems. Almost immediately BofA bought Countrywide, seemingly to
protect its significant loans to Countrywide.


It's interesting to note that Jerry Browns sister Kathleen Brown was on the Board of
Directors at Countrywide Financial.
(4)
This was at the same time that Jerry Brown was
serving as the Attorney General of California. Former Housing and Urban Development
Department Director, Henry Cisneros was also on the board. Both Kathleen Brown and
Henry Cisneros quit the Countrywide Board after the handwriting was on-the-wall.


[Henry Cisneros
(5)
was Bill Clintons first HUD Director and he was deeply involved in
the enforcement of Clintons Affordable Housing Initiative.
(6)
Clintons second HUD
Director was Andrew Cuomo.
(7) (8)
]

You might find a brief document on some of the history of Countrywide Financial and
the predictability of the mortgage crisis interesting. The document is Those Valley
Boys.
(9)


You might also find it interesting that the rating agencies are federal government
created oligopoly (Nationally Recognized Statistical Rating Organizations - NRSRO's)
this oligopoly was created by Congress in 1975.
(10)
The NRSROs are supposed to be
regulated by the Securities & Exchange Commission. Unfortunately, the SEC didn't
have a regulatory regime in place to audit the NRSRO's during the bubble. See,
YouTube video-clip of December 15, 2010 Financial Crisis Inquiry Commission
testimony provided by Moodys CEO, Raymond McDaniel Too Little, Too Late . . .
(11)





By Bill George 8/22/2014 Page 2 of 2
Footnotes:

1. The BuyBack Letter - David Fried Asset Management, at:
http://www.buybackletter.com/about_editor.asp
2. Timeline of Events Leading to Countrywides Buyout by Bank of America - pub. Associated
Press January 11, 2008, at: http://legacy.utsandiego.com/news/business/20080111-1147-
bankofamerica-countrywide-optional-timeline.html
3. Directors Disappoint by What They Dont Do http://billsplace.posthaven.com/tag/put%20back
4. The Tragedy of Countrywide Financial and Angelo Mozilo By Gary Jacobson pub. Muckety
June 26, 2008, at: http://news.muckety.com/2008/06/26/the-tragedy-of-countrywide-financial-
and-angelo-mozilo/3712
5. The Reckoning: Building Flawed American Dreams By David Streitfeld & Gretchen Morgenson -
- pub. New York Times October 18, 2008, at:
http://www.nytimes.com/2008/10/19/business/19cisneros.html?pagewanted=all&_r=0
6. In a 1998 PBS NewsHour interview Bill Clinton describes how he adapted Jimmy Carters
Community Reinvestment Act to become his Affordable Housing Initiative. Watch the one
minute YouTube video-clip, Bill Clinton: Laying the Foundation for The House of Cards at:
http://youtu.be/_8SEi6KFKTI?list=UUhXJDKmhI2Gd3NUuy5Bzq2Q
7. Andrew Cuomo and Fannie and Freddie How the youngest housing and Urban Development
Director in history gave birth to the mortgage crisis By Wayne Barrett The Village Voice
August 5, 2008, at: http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-
birth-to-the-crisis-at-fannie-mae-and-freddie-mac/
8. New Study Finds CRA Clearly Did Lead to Risky Lending By Paul Sperry - pub. Investors
Business Daily - December 12, 2012 at: http://news.investors.com/ibd-editorials-
perspective/122012-637924-faults-community-reinvestment-act-cra-mortgage-
defaults.htm?p=full%C2%A0
9. Those Valley Boys By Bill George - pub. Scribd.com February 1, 2010, at:
http://www.scribd.com/doc/189634508/Those-Valley-Boys
10. The Nationally Recognized Statistical Rating Organizations - pub. Wikipedia, at:
http://en.wikipedia.org/wiki/Nationally_recognized_statistical_rating_organization
11. Too Little, Too Late . . . a YouTube video-clip of December 15, 2010 Financial Crisis Inquiry
Commission testimony provided by Moodys CEO, Raymond McDaniel, at:
http://youtu.be/XiDYVFBqdWg?list=UUhXJDKmhI2Gd3NUuy5Bzq2Q
Extra Credit: Watch a video-clip from a November 1, 2011 Town Hall Meeting in which then Mayor
of New York City, Michael Bloomberg answers a question about Occupy Wall Street and the
mortgage crisis, at: http://billsplace.posthaven.com/wall-street-didnt-cause-the-mortgage-crisis-
congress-did