Ring Ring…

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“Hi BofA, it’s your father the FDIC. Yes, I know its early, by OTS and I were talking and we think you and Countrywide have been having enough fun living together – it’s time that you made things more formal and tied the knot…. Yes, I know, but don’t worry, we can get around that silly ‘no more than 10% of the deposits in the U.S. ’ rule – don’t you guys have a different charter? Anyway, you two can figure out some drastic personnel cost-cost cutting measures later, but right now, but you’ve spent enough money. Besides, don’t you want to pick up $1.3 trillion of servicing on the cheap? Think of all that free credit card junk mail you can send out to the new addresses…”

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The BofA-Countrywide rumor turned into an official press release last night (soon followed by rumors of either Chase or Citi buying WaMu). There are also rumors about, since Moody’s downgraded over 30 Countrywide tranches of mortgage debt in addition to the company being near bankruptcy, that the Federal government will stand behind any Countrywide losses. Bank of America Corp., the biggest U.S. bank by market value, agreed to buy Countrywide Financial for about $4 billion in stock, five months after making their money-losing $2 billion investment. Countrywide shareholders will receive 0.1822 share of Bank of America stock, or roughly $7-something a share. (Not good for anyone who bought any above $7, but better than a bankruptcy!)

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Shares of Countrywide shot up almost 50% yesterday on the rumors. The press had the usual “A Bank of America spokesperson said the company did not comment on market rumors or speculation. Calls to Countrywide were not immediately returned.” As we all saw, earlier this week, shares of CW dropped to their lowest level since early 2000 following speculation it was planning to file for bankruptcy itself. We