Was the “worst merger in Wall Street history” a merger at all?

A judge’s answer to that question will go a long way towards determining if the more than $40 billion (and counting) that Brian Moynihan & Co. have already paid in penance (and write-downs and legal fees, etc.) for the albatross that was and is the “world-class” company known as Countrywide is enough, or if MBIA is entitled to some billions of its own.

In a two-day hearing Wednesday and Thursday, BofA argued it structured its 2008 deal with Countrywide in a way that allowed it to avoid liability for certain Countrywide assets, branded “too toxic” in one internal bank email….

During the proceeding, Bank of America has maintained that the Countrywide deal was structured as a purchase of assets rather than a merger, and that it paid a fair value of more than $45 billion for the assets it acquired, leaving plenty of cash and viable assets in what remained of Countrywide to satisfy creditors’ claims.

“Bank of America was not liable for Countrywide’s debts when it bought Countrywide’s assets,” Walter Dellinger, a partner at O’Melveny & Myers in Washington, D.C., who is representing the bank, said in court. As to whether BofA intentionally designed the deal that way to avoid liability, Mr. Dellinger said: “Of course it did.”

Too bad Brian, his predecessor, the immortal Ken Lewis, and other BofA execs. couldn’t keep their mouths shut.

MBIA said the deal was in fact a merger in which BofA absorbed 19,000 Countrywide employees, technology and operations to enhance its mortgage capabilities. The insurer introduced videotaped deposition testimony from executives including former Chief Executive Ken Lewis and current CEO Brian Moynihan to bolster its case.

“The objective was to present a common set of products and a common brand to our combined set of customers,” Mr. Lewis said in an April 2012 deposition aired in New York state Supreme Court in lower Manhattan Wednesday.

“We combined operations,” Mr. Moynihan said in his own May 2012 deposition played in court. “I don’t know what [Countrywide] businesses are in what legal entities.”

This most recent round of the mudslinging contest that is MBIA v. BofA comes just days after BofA ponied up $11.6 billion to make nice with Fannie Mae. But, according to BofA, Fannie was willing to play ball; if MBIA would stop throwing its temper-tantrum, it’s sure a deal is there to be had.

“We have established a pattern of settling legacy matters with reasonable parties, including other insurers, when it is in the best interest of our shareholders,” said Lawrence Grayson, a spokesman for Bank of America. “That remains our approach.”

In Court, Bank of America Seeks to Avoid ‘Toxic’ Countrywide Liabilities [Dow Jones via Fox Biz]

12 comments (hidden to protect delicate sensibilities)
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Comments (12)

  1. Posted by Guesticle | January 11, 2013 at 2:59 PM

    Why did you post a picture of Christine Lagarde's husband?

  2. Posted by Guest | January 11, 2013 at 3:33 PM

    That's Shazar's mom

  3. Posted by BAC biz plan | January 11, 2013 at 3:51 PM

    1) buy shitty company
    2) integrate shitty company
    3) tell shareholders about all of the untraceable "value" you will create.
    4) settle shareholder & AG lawsuits for tens of billions of dollars.
    5) Profit??

  4. Posted by Guest | January 11, 2013 at 3:51 PM

    Knock knock…..

  5. Posted by Sucker | January 11, 2013 at 4:22 PM

    Who'se there?

  6. Posted by VonSloneker | January 11, 2013 at 4:23 PM


  7. Posted by Guest | January 11, 2013 at 4:37 PM

    I have a strange urge to go to Taco Bell

    –Guy who wonders if the "Sponsored Content" is working

  8. Posted by Guest | January 11, 2013 at 4:49 PM

    I embarked upon this article under the assumption that it was penned by our own Matt.

    I don't know why I thought it was his work.. perhaps the creative title, perhaps the use of an image.. Matt had covered this topic before, I recalled.

    It certainly wasn't Bess'.

    As I page-downed through the post, my greedy hunger for charts was.. unsatisfied? No, that couldn't be right.. Matt, how unlike you to phone it in on a Friday afternoon, I thought. I hit the home key to start reading. "Matt Shazar."

    If only I had taken a moment to over my mouse cursor over the picture. Such a simple thing.. I've done it countless times. If only.

  9. Posted by Guest | January 11, 2013 at 5:02 PM

    I can understand why Jon was called up from the minors. Matt wants to "follow his passions"(i.e., charts). That's fine, I suppose. But at what cost?

  10. Posted by Yes | January 11, 2013 at 5:25 PM


  11. Posted by John Thain | January 13, 2013 at 6:47 PM

    I sold my shitty company to that country bumpkin

  12. Posted by Ratios are Fun! | January 14, 2013 at 11:42 AM

    The quoted material:written material ratio should have been another tip-off.