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Post by unlawflcombatnt on Aug 23, 2007 3:27:27 GMT -6
from Yahoo News / AP: BofA invests $2 billion in Countrywide8/23/07 By ALEX VEIGA, AP Business Writer " Countrywide Financial Corp. said Bank of America Corp. made a $2 billion investment in the company Wednesday as the nation's largest mortgage lender tries to weather a credit crunch that's rocked Wall Street and the mortgage industry....
Under the terms of the deal, Charlotte, N.C.-based Bank of America acquired $2 billion in the form of nonvoting, convertible preferred stock yielding 7.25 percent annually, Countrywide said. The shares can be converted into common shares of Countrywide at $18 per share, with certain restrictions.
If Bank of America were to convert its shares under Countrywide's current share count it would hold between 16 percent to 17 percent of Countrywide shares...(making) Bank of America the company's largest shareholder. Currently, AllianceBernstein LP owns the most Countrywide shares — about 63.7 million, or 11 percent of the company — according to documents filed with the Securities and Exchange Commission....
Calabasas-based Countrywide said last Thursday it had borrowed $11.5 billion from several dozen banks so it could keep making home loans...." ________ Did this $11.5 billion ultimately come from the Fed's $101 billion "liquidity" injection? Did Bank of America's $2 billion investment come out of the Fed's $102 billion liquidity injection? Did the Fed's lowering of the discount rate facilitate any of this? Is the Fed bailing out subprimes by simply handing big banks the money to do it? That's certainly what it looks like.
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Post by jeffolie on Aug 23, 2007 9:23:14 GMT -6
I have read a number of posts on this subject and none of them were very optimistic for Countrywide. Countrywide has to payout 7.5% on this money which is pretty high given the discount window is open to Countrwide as a primary broker dealer to the Fed at 5.75% and fed funds are trading below the target of 5.25%. BoA gets to cherry pick the best assets in a liquidation if Countrywide goes under so its risks are very low.
The $11.5B did not come from the 'injection' repros, it came from among 40 banks with which Countrwide had 'lines of credit' available for emergency use. Countrwide was only able to get the $11.5 because the lines of credit were 'confirmed'. Countrywide used its entire available line of credit and can get no more from those 40 banks. It is tapped out from the 40 banks.
The Fed's discount window activity of $2B with 4 banks could be used as a bailout for subprimes and is limited to 30 days plus any extensions of that period. In fact, I read where the $2B can be used to buy yatches and whatever the 'customers' want.
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