Re: 高铁使用无缝铁轨，如何应对热胀冷缩 (转载)# Joke - 肚皮舞运动
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The real issue around Bank of America is not whether it survives, but
whether it sacrifices Countrywide to save itself. More specifically, will
Bank of America put Countrywide into bankruptcy? And will this stem the
bleeding?
¶The Countrywide acquisition will go down in history as a deal from
hell. It has already cost Bank of America tens of billions of dollars in
litigation settlements, let alone losses resulting in a $20.6 billion charge
to earnings in the second quarter. Bank of America has already announced
that it expects another $5 billion charge for earnings, and American
International Group said this week that it would sue Bank of America for $10
billion, mostly for loans issued by Countrywide. It appears that $5 billion
is the floor.
¶These mounting losses have raised the question whether Bank of America
might be overwhelmed by Countrywide’s liabilities. Bank of America could
be the first candidate for the new insolvency regime put in place by the
Dodd-Frank Act.
¶But the issue is much more complicated than this. The reason is that
the losses of Countrywide are not those of Bank of America. Only if Bank of
America took steps after the Countrywide acquisition to assume these
liabilities is there a problem.
¶Let me explain.
¶Bank of America acquired Countrywide, but it did not assume its
liabilities. Instead, the assets and liabilities of Countrywide were held
separately in the formerly public company Countrywide Financial Corporation.
¶The only change was that instead of Countrywide Financial stock being
held by the public, it was now held by Bank of America. Because of limited
liability laws for corporations, public shareholders of Countrywide
Financial are not liable for Countrywide’s debts, and neither is Bank of
America.
¶This is standard procedure in a merger. Limited liability means that a
company’s owners are not ordinarily liable for the debts the company
incurs. When a company is acquired, its new owner usually just obtains
ownership of the company’s stock. But this does not make the new owner
liable for the target company’s liabilities.
¶Companies use limited liability laws to plan and structure their
operations, often using hundreds of different subsidiaries. For instance,
there was talk last year of bankruptcy for BP, the British energy giant. But
this was overstated, because BP’s North American operations were run by a
wholly separate subsidiary corporation, which held the company’s Mexican
Gulf operations. The real risk of bankruptcy was to this subsidiary.
¶When Bank of America acquired Countrywide, it did not become
responsible for its past misdeeds and any litigation liability. This is true
even though it is now clear that Countrywide was insolvent at that time.
Even so, Bank of America could have had Countrywide Financial put into
bankruptcy and cordoned off these liabilities. It could still have done this
today had it continued to operate Countrywide as a separate company.
¶Unfortunately for Bank of America, it didn’t keep things so neat when
it acquired Countrywide. Instead, Bank of America engaged in a number of
complex transactions to consolidate Countrywide into its operations.
¶The complaint filed by A.I.G. against Bank of America describes these
transactions: On June 2, 2008, Countrywide Home Loans, a subsidiary of
Countrywide Financial, sold Countywide Home Loans Servicing, another
subsidiary, to NB Holdings, another subsidiary that was wholly owned by Bank
of America. Bank of America paid Countrywide Home Loans for this sale by
issuing it a note for $19.7 billion. Countrywide Home Loans Servicing was
the actual subsidiary of Countrywide that serviced almost all of Countrywide
’s mortgage loans. Countrywide Home Loans also sold a pool of residential
mortgages to NB Holdings for $9.4 billion. On Nov. 7, 2008, Countrywide Home
Loans sold the rest of its assets to Bank of America for $1.76 billion.
¶Separately, Bank of America also acquired notes worth $3.6 billion
from Countrywide Financial’s bank and the equity in a number of other
Countrywide subsidiaries. Bank of America also assumed $16.6 billion of
Countrywide’s debt and guarantees.
¶If the A.I.G. complaint accurately describes these transactions, it
means that the net effect was to leave Countrywide Financial and Countrywide
Home Loans without assets, except the $11.16 billion payment and the $19.7
billion and $3.6 billion notes ($34.46 billion total). Countrywide’s
liabilities stayed with the Countrywide.
¶Bank of America turned Countrywide into a shell with assets of $34.46
billion, part of it in the form of loans from Bank of America. Once the
settlements exceed this amount, Countrywide is out of money. Again, the
exact amount is uncertain and this is an approximation, but it appears that
Countrywide’s remaining assets are rapidly being subsumed by litigation
claims and other liabilities related to the financial crisis.
¶The best strategy for Bank of America would appear to be to throw the
old Countrywide into bankruptcy.
¶Normally this would be the end of the matter and Bank of America would
not be liable for any of Countrywide’s debts.
¶However, in any bankruptcy proceeding, anyone with claims against
Countrywide will argue that Bank of America fraudulently transferred out
Countrywide’s assets. And there are other legal arguments, including that
Bank of America should be liable for Countrywide’s debts because of these
transfers. The A.I.G. complaint against Bank of America, for example, makes
a similar claim, arguing that Bank of America is a successor in interest to
Countrywide by virtue of these transfers.
¶The validity of these claims is hard to assess and will depend on how
careful Bank of America was in transferring the Countrywide assets. If a
court finds that Bank of America underpaid for these assets, Bank of America
may be liable for some of Countrywide’s debts.
¶Bank of America thus still has residual exposure to Countrywide in a
bankruptcy and a hefty litigation bill to fight off such claims.
¶Bank of America’s lawyers are likely poring over these transfers and
assessing any liability in anticipation of just such a bankruptcy filing.
The bottom line is that, unless Bank of America’s lawyers really messed up
the transfers, Bank of America is far from insolvency itself, having the
option of cordoning off this liability to a large extent through a
bankruptcy filing. If nothing else, a Countrywide bankruptcy would tie this
up in litigation for years if not a decades.
¶Boy, did Ken Lewis really blow this one.
whether it sacrifices Countrywide to save itself. More specifically, will
Bank of America put Countrywide into bankruptcy? And will this stem the
bleeding?
¶The Countrywide acquisition will go down in history as a deal from
hell. It has already cost Bank of America tens of billions of dollars in
litigation settlements, let alone losses resulting in a $20.6 billion charge
to earnings in the second quarter. Bank of America has already announced
that it expects another $5 billion charge for earnings, and American
International Group said this week that it would sue Bank of America for $10
billion, mostly for loans issued by Countrywide. It appears that $5 billion
is the floor.
¶These mounting losses have raised the question whether Bank of America
might be overwhelmed by Countrywide’s liabilities. Bank of America could
be the first candidate for the new insolvency regime put in place by the
Dodd-Frank Act.
¶But the issue is much more complicated than this. The reason is that
the losses of Countrywide are not those of Bank of America. Only if Bank of
America took steps after the Countrywide acquisition to assume these
liabilities is there a problem.
¶Let me explain.
¶Bank of America acquired Countrywide, but it did not assume its
liabilities. Instead, the assets and liabilities of Countrywide were held
separately in the formerly public company Countrywide Financial Corporation.
¶The only change was that instead of Countrywide Financial stock being
held by the public, it was now held by Bank of America. Because of limited
liability laws for corporations, public shareholders of Countrywide
Financial are not liable for Countrywide’s debts, and neither is Bank of
America.
¶This is standard procedure in a merger. Limited liability means that a
company’s owners are not ordinarily liable for the debts the company
incurs. When a company is acquired, its new owner usually just obtains
ownership of the company’s stock. But this does not make the new owner
liable for the target company’s liabilities.
¶Companies use limited liability laws to plan and structure their
operations, often using hundreds of different subsidiaries. For instance,
there was talk last year of bankruptcy for BP, the British energy giant. But
this was overstated, because BP’s North American operations were run by a
wholly separate subsidiary corporation, which held the company’s Mexican
Gulf operations. The real risk of bankruptcy was to this subsidiary.
¶When Bank of America acquired Countrywide, it did not become
responsible for its past misdeeds and any litigation liability. This is true
even though it is now clear that Countrywide was insolvent at that time.
Even so, Bank of America could have had Countrywide Financial put into
bankruptcy and cordoned off these liabilities. It could still have done this
today had it continued to operate Countrywide as a separate company.
¶Unfortunately for Bank of America, it didn’t keep things so neat when
it acquired Countrywide. Instead, Bank of America engaged in a number of
complex transactions to consolidate Countrywide into its operations.
¶The complaint filed by A.I.G. against Bank of America describes these
transactions: On June 2, 2008, Countrywide Home Loans, a subsidiary of
Countrywide Financial, sold Countywide Home Loans Servicing, another
subsidiary, to NB Holdings, another subsidiary that was wholly owned by Bank
of America. Bank of America paid Countrywide Home Loans for this sale by
issuing it a note for $19.7 billion. Countrywide Home Loans Servicing was
the actual subsidiary of Countrywide that serviced almost all of Countrywide
’s mortgage loans. Countrywide Home Loans also sold a pool of residential
mortgages to NB Holdings for $9.4 billion. On Nov. 7, 2008, Countrywide Home
Loans sold the rest of its assets to Bank of America for $1.76 billion.
¶Separately, Bank of America also acquired notes worth $3.6 billion
from Countrywide Financial’s bank and the equity in a number of other
Countrywide subsidiaries. Bank of America also assumed $16.6 billion of
Countrywide’s debt and guarantees.
¶If the A.I.G. complaint accurately describes these transactions, it
means that the net effect was to leave Countrywide Financial and Countrywide
Home Loans without assets, except the $11.16 billion payment and the $19.7
billion and $3.6 billion notes ($34.46 billion total). Countrywide’s
liabilities stayed with the Countrywide.
¶Bank of America turned Countrywide into a shell with assets of $34.46
billion, part of it in the form of loans from Bank of America. Once the
settlements exceed this amount, Countrywide is out of money. Again, the
exact amount is uncertain and this is an approximation, but it appears that
Countrywide’s remaining assets are rapidly being subsumed by litigation
claims and other liabilities related to the financial crisis.
¶The best strategy for Bank of America would appear to be to throw the
old Countrywide into bankruptcy.
¶Normally this would be the end of the matter and Bank of America would
not be liable for any of Countrywide’s debts.
¶However, in any bankruptcy proceeding, anyone with claims against
Countrywide will argue that Bank of America fraudulently transferred out
Countrywide’s assets. And there are other legal arguments, including that
Bank of America should be liable for Countrywide’s debts because of these
transfers. The A.I.G. complaint against Bank of America, for example, makes
a similar claim, arguing that Bank of America is a successor in interest to
Countrywide by virtue of these transfers.
¶The validity of these claims is hard to assess and will depend on how
careful Bank of America was in transferring the Countrywide assets. If a
court finds that Bank of America underpaid for these assets, Bank of America
may be liable for some of Countrywide’s debts.
¶Bank of America thus still has residual exposure to Countrywide in a
bankruptcy and a hefty litigation bill to fight off such claims.
¶Bank of America’s lawyers are likely poring over these transfers and
assessing any liability in anticipation of just such a bankruptcy filing.
The bottom line is that, unless Bank of America’s lawyers really messed up
the transfers, Bank of America is far from insolvency itself, having the
option of cordoning off this liability to a large extent through a
bankruptcy filing. If nothing else, a Countrywide bankruptcy would tie this
up in litigation for years if not a decades.
¶Boy, did Ken Lewis really blow this one.
