Over the last decade, an aggressive series of acquisitions, Bank of America transformed itself from a regional institution into a national powerhouse. In 2003, for example, it paid $48 billion for FleetBoston Financial, which gave it the most branches, customers and checking accounts of any United States bank. In 2005, Bank of America became the biggest credit card issuer when it bought MBNA for $35 billion.
On Jan. 11, 2008, the bank announced that it had agreed to pay about $4 billion in stock to acquire Countrywide Financial, the troubled lender that became a symbol of the excesses that led to the subprime mortgage crisis.
The deal will significantly bolster Bank of America’s position in the mortgage market while rescuing Countrywide from the jaws of possible bankruptcy. Amid higher financing costs, mounting losses and lawsuits over its lending practices, the mortgage lender’s survival has been in question for months. The acquisition also further entrenches Bank of America in the consumer economy at a time when the housing market has weakened and analysts project much slower economic growth in the months ahead.
Bank of America's chairman, Kenneth D. Lewis, acknowledged the challenges the purchase carried. But over the longer term, Mr. Lewis said that Countrywide would enhance the bank’s mortgage-underwriting and payment-collection abilities and greatly expand its distribution network, helping it grab a bigger share of the market.
By purchasing Countrywide, Bank of America would combine its 5,800 branches with the mortgage lender’s coast-to-coast network, helping Mr. Lewis achieve his goal of becoming the biggest player in every major consumer finance category. It will also acquire Countrywide’s 700 loan offices and 200 banking centers, with a presence in nearly every state. Bank executives said they may use Countrywide’s underwriting systems and are considering its brand name.
source: http://topics.nytimes.com
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