Investing
FBI Goes After Management Thugs At Countrywide (CFC), Bank Of America Deal May Be Troubled
Published:
The FBI is looking into whether Countrywide (NYSE: CFC) committed securities fraud by making false statements about the mortgage bank’s financial position.
The Wall Street Journal writes that a "potential issue facing the company is whether it has been candid in its accounting for losses. People familiar with the matter said that Countrywide’s losses may be several times greater than it has disclosed."
Aside from the potential civil and criminal issues at stake, the investigation could scuttle the planned buy-out of Countrywide by Bank of America (NYSE: BAC) It is not clear whether the mortgage company can survive as an independent entity if the big money center bank walks away. Clearly if auditors and the government determine that CFC losses are much greater than represented, it might drive the firm into insolvency.
The Bank of America deal is probably the only avenue for Countrywide shareholders to get any money for their shares. The company’s stock has dropped from a 52-week high of $42.24 to just above $5 which is not much above its 52-week low.
The disclosure of the FBI probe is likely to push shares lower. If new, significant losses have to be reported, the price may well go to zero.
Douglas A. McIntyre
If you want to retire before 65, pay attention. Study after study has shown that the longer you stay invested, the better your chances at an early retirement.
Every day that goes by without saving and investing for tomorrow means more to earn and save later. Don’t waste any more time and get started with Robinhood today. The app makes it easy to buy and sell stocks, mutual funds, trade options, and even cryptocurrencies.
Sign up today — click here to start your journey.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.