The Fed, at the expense of every current dollar holder, will payoff Bank of America to buy the bankrupt Countrywide. Bank of America, like all fractional-reserve commercial banks, is bankrupt at the best of times, and would go under in a minute without federal backing. But it is even shakier than normal now. Bernanke, as Ron Paul pointed out last night, is attempting to cure the recession with more of what caused it in the first place: easy credit. The result will be an even worse recession, perhaps for a very long time.
...and from the reference he cites - the Herb Greenberg blog at Marketwatch...
We’ll know soon enough, but with the leak that Bank of America is near acquiring Countrywide, several things would appear apparent:
1. The Fed is behind the deal.
2. The Fed is behind the deal because the rumors yesterday of a near bankruptcy were probably true.
3. As part of the deal, the government likely agrees to guarantee BofA against Countrywide-related losses.
4. Lost in the in the noise yesterday was that Moody’s downgraded the ratings on 30... tranches of Countrywide’s mortgage debt... They did something similar before American Home Mortgage filed for bankruptcy...
7. Rule of thumb with bankruptcies: Stocks often double on their way to zero.
8. BofA gets a free bank and a put to the government.