Well, the eventuality of Countrywide finding the end of its rope finally came. For those who are surprised by this, I would like to warn you that a large bright light will appear on the Eastern horizon in the early morning. Don't worry; it is supposed to happen. Seriously, this was as predictable as the sunrise.
Earlier this week, Countrywide was rumored to be preparing for bankruptcy. Naturally, the company officially denied it. A day later, Countrywide was in talks to be purchased by another likely insolvent puking dog - Bank Of America. This rumor was true.
I actually believe that the CFC BK rumor was genuine and they were preparing to file. It fits. It makes sense. We all know it. That's why The Tan Man looted the company over the past year. Actually, Countrywide is just the first bank in the conga line to federal bankruptcy.
Now, the press would want us to believe that Bank Of America sees value in Countrywide. Perhaps they see this in the servicing portfolio, but when you buy the company, you buy everything, including the crap and the legal exposure.
Why do this if you can get it cheaper in bankruptcy court?
Good question (if I say so, myself).
Well, if you are holding several tens or hundreds of billions of dollars of financial toxic waste on your balance sheet, and you just had your financial results certified for your upcoming annual report to the SEC, the ABSOLUTE LAST THING YOU WANT is for the value you assigned to your assets to be marked at 20% of what you say they are worth.
So, here is my theory on how the Countrywide buyout went down.
Try this scenario:
Countrywide General Council: Moz, we are in trouble, and we won't make it through the end of January. You gotta declare BK.
Tan Man: Getouttahere! We are just fine.
CWGC: Nope. Accounting says we are down to pawning our toner cartridges and your suits. Your suits only pawn in Miami and in Tijuana, so that leaves us with the toner.
TM: No kidding? Hmmm...
(places phone call to airport)
TM: Hey! This is Moz. Get my G-IV fired up. Destination? Hawaii.
CWGC: Moz, I don't think that will work. You are going to be the posterboy for the entire mortgage mess. Think Ken Lay...
TM (talking to airport): Hey! You still there? Make the destination Paraguay via the Caymans.
TM (to CWGC): Paraguay doesn't extradite, do they?
CWGC: How about dealing with the situation. You can reorganize the company, but you will probably be out.
TM: What then?
CWGC: You will probably be indicted on any number of fiduciary violations and SEC infractions.
TM: ...and?
CWGC: Does a public disembowelment mean anything to you?
TM: Prison?
CWGC: Possible. They didn't get Ken, so they are going to be looking for someone else.
TM: White collar?
CWGC: No. Federal "pound-me-in-the-ass" prison. No tanning bed, and I don't think you will like the pinstripes they wear in that place. (thinks to himself) Yeah, but the suit will be an improvement.
TM: No kidding?
CWGC: No kidding.
TM: Hmmm...I have an idea. (pages secretary) Get Paulson on the phone.
(5 mins elapse)
Secretary: Mr. Mozillo, Hank Paulson on line 2...
TM: Hank, how are you doing?
HP: T-t-t-ter-rr-rr-ible. Markets are going to crash next week when the financials report. We are out of tricks and Bernanke is being an academic.
TM: Hey, "we" have a problem.
HP: Skin cancer? Sorry to hear that.
TM: NO! you idiot. We are bankrupt.
HP: Yes, we have been bankrupt since the first Bush Administration.
TM: NO! Countrywide is bankrupt.
HP: Really? Can't you hide it?
TM (looking at CWGC who is shaking head): Uhhh...not this time. It's not like August.
HP (puts TM on hold and pages secretary): Can you get the Paraguayan Ambassador on the horn. I might need to move the family. Also, get me the customer service desk at Banco Cayman...and the Goldman Sachs Derivatives Desk on a scrambled line.
HP (takes TM off hold): S-s-sucks to be you.
TM: No, Hank. I don't think you get it. It sucks to be "you."
HP: How so?
TM: Picture this..."mark to market", "acceleration event," and "bank run." We got lots of stuff that is level 3.
HP: (silence)
TM: Are you hearing me? Is this going in, Hank? Do you understand what I'm talking about? If I go to BK, all my toxic waste gets marked to market, which is zero.
HP: (silence)
TM: You there? How would you like all the financials to report earnings and have marked their waste well above what I am about to report. It would ruin the entire industry.
HP: (big thud as he falls out of chair)
TM: How about this. You need to find someone to buy this crap and do it without using the open market. I've got an appointment at Malibu Tan, so I can't do it. Thanks, Hank, you are a pal.
HP: Th-th-that's n-n-not m-m-my j-j-j-j-job.
TM: OK Hank, have it your way. (hangs up phone)
TM (to CWGC): Float a rumor that we are about to declare BK. Do it in an unofficial way that we can deny.
CWGC: No problem. (leaves room)
TM goes to Malibu Tan.
[[later that afternoon]]
CW secretary: Hello, Countrywide Executive Offices, can you hold?
HP (shouting): I WILL NOT HOLD FOR ONE...
CWS: Thanks for holding, how can I help you.
HP: I need to speak to The Moz ASAP!
CWS: Whom may I say is calling?
HP: Hank Paulson. Page that overgrown pimp right now or the IRS will probe every orifice in your rotting corpse!
CWS: Please hold.
CWS (to Moz): Mr. Mozillo, Hank Paulson on line 2.
TM: Hank! Good to hear from you.
HP: You slimy, overaged, melonoma ridden pimp! What in the world are you doing with leaking that you are going BK? Did you see what that did to the markets? I've got more crap coming down the next two weeks than you can possibly fathom.
TM: Hank, calm down...Do we have a deal?
HP: Yes. I had a raging party out in the Hamptons and got video of Lewis and a goat.
TM: Convenient.
HP: Here is the deal. You "officially deny" your BK rumor and BoA buys your rancid company and keeps your trash off the street.
TM: I want IRS immunity...and $115million...and use of the G-IV...and free tans for life...and a gift certificate for "Guido's Custom Apparel of Brooklyn."
HP: I'M GOING TO GIVE IT TO YOU RIGHT IN YOUR....!!
TM: That's very unbecoming of you. Perhaps I should just retire right now...
HP: NO NO NO!!! OK, you win. You get the pimp suits.
TM: Thanks Hank. I always liked working with you. Tell Kenny Lewis that I want an up-front parking spot. Good day, bro.
-------------------
How likely is it that this was orchestrated to keep Tan Man's junk off the market? BOA would have lost a minimum 10X what they paid for CW if it was marked to reality. So would everyone else. The financials all report next week and their reports would have been a prelude to a system-wide bankruptcy, had they marked all their assets to market, rather than to the fantasy they now are valued.
This is a shotgun wedding, where Mozillo was wearing the wedding dress, but the BoA shareholders ended up being the bride.
Comments?
6 comments:
You totally crack me up!
Yeah, I like it. I wondered what would drive that behavior on BoA's part, but keeping Countrywide's assets from being marked to market (as opposed to marked to make believe) makes a lot of sense.
OMG that was HILARIOUS! And here I thought maybe BoA essentially got a call option to buy CFC 6months from now with no premium to pay for the option, not a bad move, but who really knows why this all went down. I definitely like your story best!
Hey Eleua,
Have you heard the CNBC rumors that JP Morgan may buy WaMu?
TJ,
Yes. The pump-monkeys are really loading that one up. WaMu climbed almost 40% in just 3 days on that action.
How bad must it be?
Could it happen? Sure. As WaMu is likely nothing more than Countrywide 2.0, it could be bought up to keep its assets from hitting the open market. It does have many things that are positive, but its mortgage book is just plain hideous - and they know it.
I expect everything to be done to keep the foul stench in the US banking system contained to the outhouse (legal and illegal), but make no mistake, this will get full discovery, and when it does...
BOOM.
WaMu is just one of the many grenades rolling around on the floor.
Wall street should get separated for the USA.
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