Bank of America is trading up 4.5 percent and I'm pre-tay sure I know why. Why? I'll tell you why: 'cause they just wrote down $2 billion? No. 'Cause net income for the first quarter fell 77 percent to $1.21 billion? No. 'Cause everyone's so damn excited about owning Countrywide? No. (And yes.) No, people, Bank of America's stay in the motherfucking hizzeyheous hotel can only be attributed to this, the Mo Rocca-hosted (and Ken Lewis shot and directed) videos the firm just rolled out, which tout things like online banking and mobile alerts as being 'smoking' and 'sexy.' Behold, as MoRo asks, "Did you ever imagine that banking could be this hot?" and "Imagine if we were making out and you could mobile bank at the same time" and "What would you say if I told you could could transfer funds naked and check balances from bed?" Now, I know that after watching the spots, you might be thinking, "Those were, completely objectively, absolutely fucking atrocious," and more to the point, just plain dumb. But before you go and short the shit out of BAC, let me just say, as a BoA customer, I have often noted that there is no better feeling than being slammed by their infernal overdrafting charges over and over and over again. So...they might be on to something.

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Mo Rocca On Banking [Bank of America]

Yesterday, Lewis spent time at the annual meeting defending the Countrywide acquisition, and telling investors that both companies would be much more prudent with underwriting future mortgages.

BofA, So Good [NYP]

So much for the Bank of America securities players hoping to make it to the show. Their dreams ended today in the AAA club with Charlotte layoffs announced this morning. No word on severance, though employees are apparently being handed foam fingers as they're escorted out of the building.

How much fucking up can Bank of America do? About $6.5 billion worth of fucking up, apparently, minus what they’ve already done. We're no experts, but we can’t help thinking that number sounds high. Could they really screw things up that badly on investment banking and mortgage transactions alone? Dubious. They want to justify that 6.5, they're going to have to start hauling ass, in and outside the office. We crunched some numbers (6.5 billion divided by 31,000) and found that it comes out to about 200,000 7-diamond dawn to dawn packages. It’s highly unlikely the relatively bland management at BoA will be able to blow through it all, but if they start working now, a sizable dent could be made. Mozilo has pledged to make up the difference.

Bank of America May Face $6.5 Billion Loss [CNBC]

Bank of America’s chief executive Ken Lewis received $4.25 million in cash and $4.25 million in restricted stock for his 2007 bonus, less than half of his $18.5 million target. Know who else got screwed? Eliot Spitzer’s hooker, Kristen/Ashley. The intrepid entrepreneur was supposed to receive one million dollars to appear in a “non-nude” magazine spread and a “nude-nude” video clip for Girls Gone Wild, plus the possibility of joining the GGW tour bus. Founder Joe Francis took the money off the table when staffers informed him that after watching a few of their favorite DVDs over and over and over again, it’d come to their attention that they already had K/A’s ass on tape, so there was no need to cough up the cash ("It'll save me a million bucks," Francis told The AP. "It's kind of like finding a winning lottery ticket in the cushions of your couch"). Luckily, Hustler publisher Larry Flynt’s offer of a mill. to get naked still stands, and Lewis is reportedly in talks with Honcho to make up his gipped scratch.

Spitzer call girl already gone 'Wild' [Yahoo]
Bank of America Proxy Statement [SEC]

Dear Employee of Bank of America:

Based on your annual earnings, you may be eligible to receive the Earned Income Tax Credit (EITC) from the federal government. The EITC is a refundable federal income tax credit for low income working individuals and families. The EITC has no effect on certain welfare benefits. In most cases, the EITC payments will not be used to determine eligibility for Medicaid, supplemental security income, food stamps, low income housing or most temporary assistance for needy families payments....

Bank of America Personnel Center

From the e-mail bag:

"...equity sales received 20% of their expected commissions for 4q07,
everyone super-pissed and polishing CVs. Also, people with guarantees who were laid off received only $5k due to an out clause in the employment contracts."

*Apparently a gaggle of conspiracy theorists take pains to label Bank of America "BoA" (rather than B of A) because of the reptilian connotation associated with the former. It seems there is even an official policy on the proper acronymizing of the winding, carnivorous, cold-blooded financial institution. I guess certain higher-ups at the Bank absolutely fly off the handle if you provoke them this way. Since we are endlessly amused by the idea that the senior management can be distracted from returning to profitability this way, won't you join us in adding "BoA" to your iPhone auto-correct for "B of A" and "Bank of America"? (Right after you join us in shorting their stock.) K? K.

Is Bank of America’s acquisition of Countrywide in trouble? You wouldn’t think so if you’re looking at the spread between where the shares of the two companies are trading. The spread between the shares and the offering price has narrowed dramatically in the last few days, from a high of nearly 25% to the current 15% gap.

But today the Monaco-based hedge fund SRM Global Fund filed a 13D complaining that the merger plan does not deliver “sufficient value” to Countrywide shareholders. SRM has acquired a 5.19% stake in Countrywide.

Most commentary on the deal has focused on whether Bank of America might back out. It has been described as a “bailout” and Bank of America’s role as that of a “White Knight.” The idea that Countrywide’s shareholders would balk at the deal comes as a surprise.

SRM seems to specialize in troubled home lenders. They also have a major stake in Northern Rock.

SRM 13D [SEC]
Countrywide merger criticized, BoA names mortgage exec [Reuters]

Layoffs have begun to hit Bank of America. On yesterday's earnings call, Bank of America's chief financial officer said that the bank is planning layoffs in its corporate and investment-banking unit. Now we are hearing reports from a variety of sources that the layoffs are underway.

Last week, Bank of America announced it would cut 650 new job reductions. The bank has been conducting a strategic review and reportedly concluded that it should largely exit the investment banking business. The banks has announced 3,650 layoffs since October but more are expected.

On yesterday's call, CFO Joe Price said units that have been particularly hard hit by the credit crunch would see further layoffs. The capital markets and advisory group was named specifically.

"The headcount reductions will include the 650 front-office associates we announced last week, and there will be infrastructure reductions to come as well," Price said.

Got the inside scoop? Send more details to tips@dealbreaker.com or leave a comment below.

Merger arbitrageurs were widely expected to be even more concerned about Bank of America’s plan to buy Countrywide Financial yesterday but, surprisingly, they seem to have become more confident. In early morning trading yesterday, Bank of America stock slid 6 percent and Countrywide fell 12 percent. As both stocks hit their lows for the day shortly after 10 am Tuesday morning, the spread between the share prices of the two companies and acquisition price they agreed to more than a week ago grew to its widest level since the deal was announced on January 11th. But as the day wore on, shares of Countrywide climbed back for a gain of 7.86 percent and Bank of America climbed 4 percent, the share prices and the agreed acquisition price narrowed a bit.

We've been talking to our sources at Bank of America (a rapidly dwindling pool of investment bankers who have begun to carry their resumes with them at all times), trying to figure out what the business rationale for buying Countrywide might be. The best answer we've heard is that the deal reduces Countrywide's cost of funding. As a stand alone entity, Countrywide's borrowing costs had grown so high that it was going to be teetering on the verge of insolvency. But as a part of the ginormous BofA, it will be able to greatly reduce those costs to the extent that its business can be very profitable even in the short term.

Felix Salmon over at Portfolio talks to the sources inside his head and comes to a very different conclusion. Salmon thinks it is about Lewis's plan to concentrate on retail banking and get out of investment banking. "Bank of America has now, overnight, become by far the biggest and strongest and most important operator in the world of US mortgages. Over the long term, that status is going to be hugely valuable for Lewis, even if he has to take some write-downs along the way," he writes. "Finally, the Countrywide acquisition solidifies BofA's status as a consumer bank, and helps Lewis's decision to move slowly out of the investment-banking business look strategic."

Our political friends are already crying bailout. They expect there to be some sort of liability limiting move from Washington, DC as part of this deal. The conspiratorial minded set also believe that this confirms that Countrywide really was as close to bankruptcy as many thought yesterday.

But we first learned of this deal from our commenters, who tend to be our best sources for scoops and analysis. So don't let us tell you what to think on this. Let's do it the other way. Tell us what's going on. Why is BofA so hot to buy Countrywide? And would you buy Countrywide if you were Ken Lewis?

Update:Herb Greenberg says the Fed is engineering this deal and that the government will likely provide Bank of America with guarantees limiting the losses. He also quotes Jon Najarian of Optionsmonster.com, on the very, very suspicious options activity prior to the news of this deal breaking.

To say there was HUGE unusual activity in Countrywide Financial ahead of today’s news that Bank America was close to finalizing a deal to buy the troubled mortgage giant would be as surprising as seeing Dennis Kucinich end his presidential run! We show over 304,000 calls traded against 248,000 puts, but the interesting thing here is that the bulk, some 76 percent of these calls were bought before the announcement! To us this means the likelihood of someone being tipped off was quite high. Like Burj Dubai Tower high!

Why BofA Bought Countrywide [Market Movers]

Citadel is often described as an investment bank masquerading as a hedge fund. And it looks like it may be moving even further in the direction of becoming a full-fledged investment bank. This morning Roddy Boyd and Zach Kouwe report for the New York Post that Citadel is in talks to buy Bank of America's prime brokerage business.

It's not surprise that Bank of America wants to get out of its investment banking business. Ken Lewis made that clear earlier this year, and BofA has been shedding senior bankers ever since. According to the Post, both the head of the prime brokerage unit and the head of its fixed-income business have recently left.

But would hedge funds be comfortable putting their trades through with CItadel on the other end of the line? There is already resentment about the way some prime brokers take positions conflicting with those of their clients. JP Morgan has been sued by Amaranth over such conflicts and there are perennial complaints about Goldman Sachs. Still, both JP Morgan and Goldman make good coin with their prime brokerage business, so the talk about conflicts hasn't hurt them.

Still, there a plenty of folks who are suspicious of anything those boys with the white boards over at Citadel do. They have proven eerily apt at turning positions that ruin competitors into money makers. One hedge fund manager we spoke with this morning laughed out loud when we asked if he would run his trades through Citadel.

"Then again, they seem to know my positions and strategy anyway. So why not? Maybe they'll accidentally tip me off," he said.

Citadel, BofA In Brokerage Sale Talks [New York Post]

A quick follow-up to this morning's story about the Columbia asset management fund. It is saying that it is closing its enhanced, private-placement money-market fund but that investors are being offered the option of cash redemptions or of switching their assets into other Columbia-managed funds. Because what are the odds that two funds would go down at the same place?

Bank of America says closing money market fund [Reuters]

CNBC online editor Charlie Gasparino is reporting that his sources tell him that that Bank of American has frozen a money market fund tailored towards institutional investors.

The fund is called the Colombia Strategic Cash Portfolio. Apparently Bank of America has sent a letter to investors notifying them that the fund will no longer take subscriptions or redemptions. The fund is invested in debt securities that are caught up in the crunch. He says Bank of America has not yet confirmed the story.

Update: And now they have. Gasparino says Bank of America confirms the story of the fund freeze. Anyone know who has money caught up in this fund?

Update: Both CNBC and our commenters report that it's not a straight money-market fund but a fund intended to achieve money-market type results. It's heavily invested in SIV paper, we're told. Where's that MLEC thing when you need it?

Tonight’s parties are Citi at Paramount Bar (6 pm), BNP Paribas at South Street Seaport (7 pm), Jay Goldman & Co. (7:30 pm) at Del Posto, and Choice Energy at Bruno Jamais (5:30 pm) but WAY MORE IMPORTANTLY: SAC Capital in a tent behind the Stamford headquarters. We really feel like we should go but Jesus fucking Christ, Stamford? Additionally we don’t want go make the trek by ourselves and our roommate can’t go, even though we impressed upon her that this party is more or less her Everest. (The weak excuse? Tonight she has a date and afterwards will be knee-deep in planning her "big birthday orgy. Entry fee is waived for anyone who can prove yearly net income over $500,000. Oh, and Anal_yst is invited. And that guy from Hamilton.”)

In other news, the Lehman review:

“fid got off to a slow start. equities got started fast, then got too drunk to keep going. admins danced until the music died. damn dj. and then it emptied out to the after parties. fid was starting up at around 8 but then died fast too. everyone's nervous about bonuses. equities thinks they're gonna subsidize fid. fid is resigned to their fate. oh and no live band this year.”

Earlier: The Secret To SAC's Success?

We might give Citigroup a lot of shit for being the world's crappiest bank but that's just our way of showing affection. Because in truth, most days we really love Citi, today being no exception. Even though it has no CEO, no wiling candidates for CEO, no money, no women, no prospects, no action and no conceivable reasons at all for even getting up in the morning, Citigroup was reportedly downright offended to get a call from a prominent investment banker suggesting that perhaps it'd like to merge with Bank of America. Us? the world's crappiest bank, merge with Bank of America? Where the hell do you get off even thinking something like that? The board apparently called the approach (to say nothing of the actual proposition) "totally out of hand" and then looked around at its buddies as if to say, "You believe this guy?"

Financial Firms, Capital Depleted, Hunt for Cash [WSJ]

“Not so fast,” Bank of America said today to a bunch of analysts, who were hilariously projecting that the bank will earn $1.12/share in the fourth quarter, when it announced a $3 billion pretax loss stemming from standing in front of collateralized debt obligations for too long. Chief Financial Officer Joe Price cautioned that while 3 is the number we’re hearing now, the sky’s really the limit in terms of how much more money the bank could lose before last call, which is why more money has been set aside for other potential fuckups. ``Where valuations will be at the end of the year is anyone's guess given these variables,'' Price said at a Merrill Lynch & Co. banking and financial services conference, still stifling laughter over the idea of BoA not being a huge embarrassment to itself. Giggles aside, he was being dead serious-- whoever estimates Bank of America's fourth-quarter losses closest without going over will win an unpaid apprentice position with Deutsche Bank's Mike Mayo, and another date with John Carney (you're still paying).

Bank of America sees $3 billion loss on CDOs [Reuters]

He may be in charge of the firm who’s investment banking unit recently reported a 93 percent decline for the third quarter and a 32 percent decrease in overall net income, but Ken Lewis still cannot claim the title of biggest fuck up on Wall Street and for that, he deserves a prize—the finest E money can buy, courtesy of James Cayne (who actually prefers the love drug to weed, a little kernel of truth the Journal somehow glaringly left out this morning). Lewis is also being honored by the British-American Business Council with its Transatlantic Business Award this evening, according to DealBook, for his “outstanding leadership in advancement of the trans-Atlantic partnership.” Having obtained part of KL’s acceptance speech, the ‘Bookies note that the BoA CEO is expected to tout the firm’s investment banking arm, and give no indication of a retreat in that unit. Sort of surprising, since the last time we heard from Special K (his d of choice), he said investment banking just wasn’t as “fun” as it used to be, and, to the naked eye, washed his hands of the whole operation. Apparently, not so! You think this means the fired employees from Banc of America Securities are going to be rehired? Let us know.

BofA Chief Sees No Investment-Banking Retreat [DealBook]

Christopher Pesce, the global head of prime brokerage at BoA Securities, has apparently quit his job for greener pastures. We don’t know which pastures, just that they’re better. Since he’s coming from Banc of America, there are almost too many to choose from. Perhaps the minions he was instrumental in getting fired might know of his whereabouts? If one among you hasn't yet had your internet access cut off, get in touch.

BofA Prime Brokerage Chief Quits [FINalternatives]

500 laid off from structured finance and investment banking today. Severance has been paid, but no numbers on how much yet. We're going to go out on a limb and say more than Bear Stearns. Prove us right (or wrong, though that's highly unlikely).