BoA Buys Countrywide - You Get the Bill
Today’s announcement that Bank of America will buy Countrywide Mortgage takes the recent housing bubble/sub-prime loan mess and elevates it from bad to absolutely obscene.
As JLP at All Financial Matters reports here, Countrywide’s CEO will be paid $110M as a result of the sale. Here’s another CEO being rewarded for destroying his shareholders’ company. It’s a scene now so common that people don’t even react anymore.
Guess what? You’re going to pay him.
That’s right. You.
It doesn’t matter if you’re a shareholder in either company. If you are a taxpayer in the U.S., you get to foot the bill. How’s that, you ask? Taxes.
See, companies can carry forward losses for tax purposes. It’s similar to how people are told to sell losing stocks and mutual funds to lock in the capital loss. It’s part of what makes Countrywide attractive to Bank of America. BoA now gets to reduce its tax bill by hundreds of millions of dollars.
Congratulations. You get to pay the bill for Bank of America’s purchase of Countrywide. Or more correctly, your children and grandchildren will.
January 11th, 2008 at 4:11 pm
so the best thing to do, then, is to by BofA (BAC) stock.
January 13th, 2008 at 2:06 pm
I believe the number is $670 million in after-tax cost savings…