In January of 2008, Bank of America announced their offer to purchase Countrywide Financial, the largest mortgage lender in the country. With the fall of a multitude of lending firms, the federal government feared the imminent collapse of mortgage lenders nationwide, and through agreements and coercion, is rumored to have convinced Bank of America to acquire Countrywide as a subsidiary. This merger and acquisition deal brought significant debt to Bank of America’s front door in the form junk bonds and mortgage-backed securities that were created through subprime lending, but also provided a massive client base and network for future loans, investments, and financial products. This prevented the collapse of mortgage lending for many homeowners throughout the nation and also gave Bank of America leverage and support from the federal government in case financials took a turn for the worse. Now, Bank of America stands to become one of the largest, most successful companies in existence.
In addition to the acquisition of Countrywide Financial, Bank of America also moved to expand their banking empire through purchasing the troubled Merrill Lynch, the world’s largest brokerage and a premier wealth management firm. The acquisition of these two massive businesses makes Bank of America the largest U.S. banks in terms of assets under management, offering “everything from fixed-income trading to credit card lending,” further providing them influence with the federal government. At the time, the imminent threat of a collapsing economy made the bank an invaluable asset to the federal government; its failure would mean financial distress for millions upon millions of Americans.
When the financial distress began to affect major corporations during the crisis, the federal government made it imperative to keep Bank of America afloat. This also extends to the current day, even though most major issues that created the financial crisis have been absolved. One of the larger controversial issues was the allocation of taxpayer money to banks to give them enough capital to survive the economic depression, also known as the Troubled Asset Relief Program, or TARP. Bank of America received 45 billion dollars in protection for acquired debt and “troubled assets” such as Merrill Lynch and Countrywide.
Today it was announced that Bank of America was successful in winning a dismissal from a lawsuit seeking reparations from damages wrought by mortgage-backed securities sold through Countrywide prior to its acquisition. This allows for the avoidance of a large settlement and continues to permit for Bank of America to minimize the issues brought on by its purchases, slipping through loopholes and gaining the necessary government support to return the business and the economy to the status quo.
With the fading pseudo-protection of the federal government and enormous growth of Bank of America through the duration of the financial crisis, they stand to post ridiculous monetary gains once their subsidiaries are completely recovered. They now act as one of the nation’s largest lenders, a considerable firm in investment banking, and the largest wealth manager. Seeing as they have a hand in essentially all necessary financial processes that take place in the market, the company’s stock valuation can only increase in the future. Dramatically.
