Just wait until they see Countrywide unbalanced sheets.
I'll bet their number of Alt-A, no-doc, and even "prime" loans set to reset dwarfs their subprime.
I'm sure BofA already knows about the dirty laundry. After all, they did plunk a big chunk as an initial investment into CFC.
I just wonder if BofA is doing this so both banks and government can start to sweep the problems under the carpet, while BofA scores favors from the government over time.
->CFC needs a bailout of some sort. Government won't be able to bail them out directly. BofA buys them, and will writedown all the problems over an extended period of time.
->Government will give "special privileges" to BofA over time, by taking leaving this genormous problem in the private sector, while behind closed doors assist BofA in spreading out the problem over years to come. For example, as BofA goes on an acquisition spree, expect no inquiry from antitrust regulators (or at least they'll go through the handmotions but not raise any flags).
->BofA will emerge out of this as the largest US bank and will dominate.
It will be interesting to see when we look back to this period, if history can draw parallelism between BofA CEO Kenneth Lewis of today with J.P. Morgan back in handling the Panic of 1907. Almost eerie, our current situation is 100 years later.
See, it wasn't the first time Banks in the U.S. got into trouble. I guess for that reason, I have some degree of confidence that over time, we'll emerge from this ok. Which generation this will happen in, I don't know.
The Panic of 1907, also known as the 1907 Bankers' Panic, was a financial crisis in the United States. The stock market fell nearly 50% from its peak in 1906, the economy was in recession, and there were numerous runs on banks and trust companies. Its primary cause was a retraction of loans by some banks that began in New York and soon spread across the nation, leading to the closings of banks and businesses. The severity of the downturn was such that it eventually pressured the United States Congress to enact the Federal Reserve Act creating the Federal Reserve System in 1913. The 1907 panic was the fourth panic in 34 years.
One of the contributing factors of the Panic involved F. Augustus Heinze and his bank, Knickerbocker Trust Company. Heinze copied the speculation tactics of Charles W. Morse, who had obtained control of the Bank of North America and other banks to float consolidations and other schemes. In 1906, Heinze sold his shares in Montana copper mines for $12 million. He then moved to New York, bought Knickerbocker Trust and became a director in a national financial chain. Banking industry leaders, threatened by the developing trusts, staged a financial attack on Heinze's Knickerbocker Trust. Their motive was to sway public and congressional opinion against trusts.
In March 1907, over-expansion and poor speculation led to a stock market crash. Money became extremely tight. A second crash occurred in October 1907. This time, the crash was directly precipitated by Heinze's brothers, who had used money borrowed from Knickerbocker Trust in a failed attempt to corner United Copper. In the wake of the crash, Heinze was forced to resign as bank president. On October 21, the National Bank of Commerce ceased to honor checks of Knickerbocker Trust, causing a run on the Knickerbocker Trust. By the end of October 22, the National Bank of North America had failed and runs were sparked on nearly every trust in New York.
To bring relief to the situation, United States Secretary of the TreasuryGeorge B. Cortelyou earmarked $35 million of Federal money to quell the storm. Complete ruin of the national economy was averted when J.P. Morgan stepped in to meet the crisis. Morgan organized a team of bank and trust executives. The team redirected money between banks, secured further international lines of credit, and bought plummeting stocks of healthy corporations. Within a few weeks the panic passed, with only minimal effects on the country.
