posted by admin on Jun 5

By MARTIN CRUTSINGER

WASHINGTON — The Federal Reserve has given approval for Bank of America
Corp. to purchase distressed subprime mortgage lender Countrywide
Financial Corp.

The Fed board approved the deal in a 32-page order issued Thursday.
Countrywide had said previously that it will hold a special meeting of
shareholders on June 25 to approve the proposed sale.

In its order, the Fed board said that after the proposed deal Bank of
America would remain the largest depository institution in the country,
controlling approximately $773.4 billion in deposits, which represent
10.9 percent of total insured bank deposits in the country.

When the deal was first announced in January, Bank of America said it
would pay about $4 billion in an all-stock deal for Countrywide,
exchanging 0.1822 shares of Bank of America for each share of
Countrywide outstanding.

In recent months, some analysts have speculated that the deal may be
completed at a lower price because of further deterioration in the
mortgage market and a continued rise in mortgage delinquencies and
defaults.

Experts have said that the deterioration of the mortgage market and
Countrywide’s loan portfolio could lead to costly write-downs and
create a drag on Bank of America’s earnings.

But on Monday, Ken Lewis, the chief executive of Bank of America, told
analysts on a conference call that he believed buying Countrywide was
still a good deal even though the housing market had continued to
falter since the deal was announced.

Lewis said he believed that housing conditions would improve by early
next year. He said that Countrywide and its professional sales force
would give the bank a boost as it pushes to increase market share in
the mortgage sector.

In a statement commenting on the Fed decision, Bank of America said
that it expected the sale to close in the July-September quarter.

“This transaction represents a rare opportunity for Bank of America to
significantly gain market share in the mortgage business, allowing it
to expand in a cornerstone financial product,” Lewis said in a
statement.