Utah Real Estate

Bailout!!! Glad to see the government is helping out!

!!Warning you may find the following article very disturbing!!

For those of you worried that troubled homeowners would get some sort of bailout from the Federal government, you don't have to worry any more. It's now clear the bailouts are going to those who need it the least and deserve it the least. Bank of America completed it's purchase of Countrywide Home Loans today in a $4 billion dollar stock deal, effectively doubling down the $2 billion convertible deal it brokered in August. Countrywide gets to continue operations and its stock (CFC) will converted to Bank of America (BAC) stock - Shareholders of Countrywide will receive 0.1822 of a share of Bank of America stock in exchange for each share of Countrywide. The deal is expected to close in the third quarter and to be neutral to Bank of America earnings per share in 2008 and lift earnings per share in 2009, excluding buyout and restructuring costs. Now here's where the bailout takes place and there's not a damn thing that can be done about it. Bank of America is a solvent and profitable company. Countrywide is not. Now B of A gets to write off Countrywide's existing and pending losses, robbing the Treasury coffers of $270 million dollars per year over the next half decade. After that, it could be more. The Countrywide tax break isn't in that league, but it would still be worth a lot of money. Willens estimates that Bank of America will be able to deduct $270 million of Countrywide's losses annually for the first five years it owns the firm.

Here's where the real disconnect takes place. Countrywide CEO Angelo Mozilo gets paid $115 million to walk away from a company he already unloaded $100 million from in the last year. Adding insult to injury, Mozilo gets to use the corporate jet and B of A will pay his country club dues for a few more years. Remember the public relations campaign Countrywide launched last year? It was a two pronged affair called "Protect Your House" for consumers and "Protect Our House" for employees. What Mozilo meant to say was he interpreted it as "Protect My Ass" and he'll take his hundreds of millions and leave everyone else to pick up the pieces. Countrywide is so huge, it's involved in almost every bad deal out there. Failed flipper Casey Serin had loans with Countrywide. River bottoms scandal? Countrywide. They've been notoriously difficult to work with as foreclosures rise. Countrywide is even on the short list of subprime lenders the city of Cleveland is suing for blighting their city. Instead of a prison sentence, or accountability, Angelo Mozilo is getting a golden parachute of $115 million and American taxpayers are given the bill both for his bonus and to care for the foreclosed families left in his wake. Unsurprisingly, BofA chief Ken Lewis told investors Friday that he doesn’t expect Mozilo to stick around for long: “I would want him to stay until the deal gets done,” Lewis said on a conference call, Reuters reports, “and then probably I would guess that he would then want to go have some fun.”

This article was reprinted from slcrealestate.blogspot.com