Why, you might ask, would Bank of America want to pay $4 billion for Countrywide, which has come to be seen as the Enron of the subprime mortgage crisis?
Simple. As the adage goes, if you were a car manufacturer, would you invest in research to build a car that can run for 100 years? Of course not, because at an affordable price, that product would destroy your business. Similarly, despite all the bellyaching in the secondary mortgage market, and despite all the foreclosures caused by unscrupulous lending over the past few years, Countrywide originated $408 billion in new mortgages last year. Why put people in fixed rate mortgages when your financial success is based on how many people you force through the refinancing process each year? Even though Countrywide is losing money now, Bank of America just can't wait to get its hands on the 93% of Countrywide's mortgage portfolio that is still being paid on time.
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