Risk Management, PRMIA

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May 14, 2008

Exposure at Default: What Will Happen With Countrywide Financial?

First, on Thursday May 20, 2008, RGE Monitor (www.rgemonitor.com) is sponsoring a roundtable discussion at the NY Athletic Club on the subprime crisis, fair value accounting and defective market structure. Speakers include author Martin Mayer, Nouriel Roubini, Sylvain Raynes, Alex Pollock and Josh Rosner. I will talk about the role of market structure in causing the collapse of the OTC market for complex structured assets, some of which contain subprime mortgage loans. This event is free and PRMIA members are most welcome.

For additional information or to RSVP, please contact: rsvp@rgemonitor.com

Over the past several weeks, we have published a series of articles about the situation facing Countrywide Financial (NYSE:CFC) and Bank of America (NYSE:BAC). The former agreed to be acquired in January 2008 for $7 per share, but since then BAC has made several statements in filings with the SEC suggesting that it will not stand behind CFC's liabilities, even after closing an acquisition.

Simply stated, our view is that CFC cannot be acquired by BAC or any other bank w/o a restructuring of the company's current and contingent liabilities. CFC is facing hundreds of lawsuits, civil inquiries by the SEC, and criminal probes by the DOJ and state attorney's general. BAC rightly is reluctant to pull the trigger on this deal given the uncertainty regarding the valuation. Our view is that the stock is worth $0.

Click on the links below to read the items in The Institutional Risk Analyst, starting with our first comment back in January:

'Are Countrywide Financial Bonds Bankruptcy Remote?', January 22, 2008

'Update: Are Countrywide Financial Bond Holders Bankruptcy Remote?', May 1, 2008

'An Involuntary Transaction: Why BAC + CFC May Never Close', May 6, 2008

Comments? Questions?

Posted by whalenc at May 14, 2008 07:57 AM

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