Everyone cheered when they heard BOA purchased two billion dollars worth of Countrywide's stock. But did anyone read the official press announcements?
BOA purchased $2 billion in "Preferred Stock" which is a very SAFE investment. Unlike common stock which shares profits or the risk of loss, preferred stock has a guaranteed return on the investment. If Countrywide declares bankruptcy, BOA will be first in line to get every guaranteed penney while the holders of common stock will loose most or all of their investments.
I suspect that this was a well organized public relations scheme with the objective of bolstering consumer confidence. If BOA was serious about helping Countrywide it seems like they would have taken control with a purchase of common stock. Instead, they simply gave Countrywide the safest, most secure $2 billion loan.
Everyone should avoid developing a "doom and gloom" attitude, but stay alert and question those things that aren't quite right.
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