Christopher Whalen

Are Countrywide Financial Bond Holders Bankruptcy Remote?

Thanks Bluejay. The value of the liabilities of CFC are finite, the assets are not. A reasonable haircut on the conduit paper, etc held at the parent level might cause a mismatch of $10-15bn. More, don't assume that the extension of duration makes servicing a home run. LEH and others have been playing a game of marking up servicing without recognizing the significantly higher costs of managing such portfolios in a down market. Finally, the potentially huge liability on CFC from the flow of securitization over the past five years is a big question mark. What does a settlement on $1T in securitization cost?

Given your view, the real question is why BAC continues to make public statements that they are not willing to stand behind the CFC debt. All that Ken Lewis need do is lay that issue to rest.