Bank of America Deserves Countrywide

The big news on Friday was that Bank of America was buying Countrywide. Quite frankly, I think that they deserve each other. Of course, Countrywide is a train wreck. Due to all of their irresponsibilities in writing loans to consumers through the years, they find themselves in quite a financial mess.

Countrywide could be the poster child for sub-prime loans. They were a big part of an industry that put together these horrible loan packages for consumers. Now, consumers are paying the price of foreclosure.

You cannot tell me that the leaders of mortgage companies like Countrywide couldn’t look ahead and say:

“If we write loans for more than the house is worth, take no down payments, don’t verify incomes, give loans to people who were recently bankrupt, and use teaser rates to suck people in, do you think that might be a problem one day? Well maybe it will be a problem of some sort. For now, look at all of the money we are making!”

Then you have Bank of America. The “people’s” bank that wrote the same types of irresponsible mortgages and provided savings programs (Keep the Change) for consumers that pay a whopping 0.25% in interest. You have a bank that creates programs that encourage the use of debit cards. In this, consumers paid over $18 billion in late fees last year because of mistakes with these cards.

Then, of course, Bank of America is one of the biggest players in the credit card game where consumers are being victimized by the fine print.

So, these two definitely deserve each other.

The best part of it is the package that Angelo Mozila stands to get from Bank of America. It is estimated that he might receive as much as $ 115,000,000. I have a lot of respect for how Mr. Mozila built this company from scratch. At the same time, it is like rewarding someone for a business practice that has created billions of dollars of losses and caused hundreds of thousands of people to lose their homes.

I realize that no one held a gun to the consumer’s head and forced them to sign up for a sub-prime loan. Just like a drug addict, everyone has responsibility for their decisions. However, that doesn’t make the drug dealer innocent.

If Mr. Mozila were to do the right thing, we would take a good portion of that
$ 115,000,000 and give it to a fund to help people who have lost their homes. After all, I am sure that he doesn’t need it.

What are your thoughts?

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.