Bank of America rolled the dice a few months ago when they committed two billion dollars to underwriting Countrywide’s short term cash flow problems. With that gamble, BofA was banking on a relatively modest recovery in the housing and mortgage market. Obviously, that has not happened. Had Countrywide’s stock improved, Bank of America had an opportunity to reap a massive profit, with the option to buy shares at $18 a piece. Unfortunately for them, the stock has continued to plummet into the six dollar range as of last week. So, Bank of America was left with no choice but throw more money into the black hole of Countrywide and purchase the entire operation. Otherwise, they would stand no chance of recouping their initial investment. Lets hope they don’t take the rest of the Banking and Mortgage industries down with them.
