William Eichler

BofA Left to Clean Up Countrywide's Mess

For those worrying about the BAC or Countrywide mortgages you should check out the FHA Housing Stabilization and Homeownership Retention Act of 2008 (still to be voted on). Especially Sec.257 (c) (6)(A)(i) which provides for the refinancing of such existing mortgages in an amount not greater than 90% of the current appraised value of the property involved.

A mortgage was obtained at $200,000 to cover the original appraisal.
Time passes and it drops 25% to $150,000. Take 90% of 150K and
the FHA will buy it for $135,000; for a 32.5% loss for the bank.

The bank was stuck with a non-performing loan or, a very hard to resell house. Now it has capital. Sound good to me.

Bank of America: Earn 6.5% While You Wait

OK...shoot me...one more change:

Tier1 + Tier2 Capital equal 10% to be "well capitalized;" and BAC is at 11.02% [10-K, 02/28/08].

The point still stands...between yield and call money BAC makes fro an interesting financial stock.

Bank of America: Earn 6.5% While You Wait

Forgot to add this to above:

A bank is "well capitalized" if Tier1 capital equals 6% and Tier 1 + Tier1 capital equals 10%; BAC is at 11.02% [10-K, 02/28/08].

The Credit Bubble: Deregulation Gone Wild

The financial stocks have paid...via large, price declines. Bear Stearns
especially...it is gone. Perhaps the government will bankrupt the issuers of the debt it took on from private parties...one can hope.

Obviously some new rules need to be established...perhaps over-
sight should be concentrated. As always, the S&L scandal being the poster-child for this, government aid for failure but no limits on economic behavior eventually leads to disaster.

This is inherent to free-market testing of economic behavior. It is not a condemnation of Capitalism that extremes are reached [that would be like complaining about your weather because it got too hot or too cold]. It is something to be aware of and to be avoided...not an easy task, for regulators or Capitalists.