BofA boss has 'confidence' in deal to buy Countrywide

CEO mum on jobs fallout from mortgage lender deal
By LESLIE A. PAPPAS, The News Journal

Posted Tuesday, January 15, 2008

Bank of America CEO Kenneth D. Lewis spoke to a crowd of more than 1,000 people in Wilmington on Monday. (Buy photo)

The News Journal/FRED COMEGYS


Kenneth D. Lewis, CEO of Bank of America, said his company's deal for Countrywide is a good one.
(Buy photo)

The News Journal/FRED COMEGYS
Bank of America's buyout of the troubled Countrywide Financial Corp. shouldn't have an impact on Delaware's credit card industry or borrowers holding the company's loans, the bank's president said in Wilmington on Monday.

Kenneth D. Lewis, the Charlotte, N.C., bank president, chairman and CEO, swooped into town for a speech to state business leaders, drawing more than 1,100 people to the Center on the Riverfront.

During his keynote address to the Delaware State Chamber of Commerce's 171st annual dinner, Lewis side-stepped any mention of Countrywide Financial Corp., the troubled mortgage lender that Bank of America pledged to buy last week.

At a news conference before the event, he was more specific.

"I have confidence that we properly assessed the issues," Lewis said.

Bank of America said Friday it planned to acquire the ailing Calabasas, Calif.-based company for $4.1 billion in stock. Despite the fire-sale price, the deal has raised questions about whether BofA has properly assessed the risks associated with the struggling mortgage lender. Some also have raised concerns that deals worked out with struggling Countrywide borrowers may not be honored under Bank of America's watch.

The bank invested $2 billion in August to buy a 16 percent stake in Countrywide, back when the company's share price was in the double-digits. Today, buckling under a rapidly deteriorating portfolio of risky loans and finding itself unable to raise enough capital to keep business afloat, Countrywide has seen its market value plummet by more than 86 percent from a February high of $43. Countrywide's share price closed Monday at $7.40.

Lewis called buzz about Countrywide declaring bankruptcy "a malicious rumor" that didn't square with the company he saw, one with "the best origination and servicing platform of any mortgage corporation in the world" with "a very impressive liquidation plan" and "backup lines in place."

Any arrangements Countrywide had already made to help homeowners with unaffordable subprime mortgages would be honored after the merger, he added. "We wouldn't change any agreement."

Lewis didn't say how many people nationally might lose their jobs in the Countrywide deal. "At some point, we will address the issue of jobs but so far we haven't done that," he said.

Countrywide's well-oiled back and front offices, its national sales force, and superior technology is what attracted Bank of America to buy what was until recently the nation's largest mortgage lender, Lewis told The News Journal in an interview earlier that afternoon.

Bank of America's purchase of Countrywide "will probably look a lot like MBNA in that we will migrate our business onto their model," Lewis said.

Lewis said he "could not envision" that the Countrywide merger would affect Delaware's credit card operations and didn't think the transition would bring a significant number of jobs to Delaware.

Lewis would not say how many people Bank of America now employs in Delaware, saying only, "We're a national company. America is our region," and "political boundaries" are not so important. The News Journal estimates that Bank of America employs 7,500 people here, down from 11,700 when it took over MBNA.

Historically, Bank of America's acquisitions have led to job cuts. Bank of America cut 12,500 positions after it acquired FleetBoston Financial in 2004, and 4,500 more in the following restructuring. After announcing its merger with Wilmington-based MBNA Corp. in June 2005, the bank said it would cut approximately 6,000 jobs nationwide, many of which happened in Delaware. The bank plans to cut 4,000 jobs in this year's purchase of LaSalle Bank Corp.

Lewis didn't mention job cuts or the Countrywide deal in his speech to the Chamber audience, focusing instead on the credit crunch -- which he called a "seizure in the capital markets" -- and the country's economic future.

Alluding to proposed bail-outs of troubled mortgage loans, he said "flexibility often provides a higher long-term return than foreclosure" but cautioned against widespread mandates to renegotiate loan terms, saying it could result in a "decrease in funding opportunities for the entire market."

He called on America's small businesses to forge ahead and carry the economy through the current "environment of fear and risk-aversion."

"The real risk, as always, is that we overreact, and create the economic downturn we've imagined," Lewis said.