As a glut of global capital gave way this year to a financing drought, Bank of America Chairman Kenneth Lewis was on the watch for deals.
Bank of America, with one-tenth of all U.S. bank deposits, had plenty of money. Lewis saw that there might be a chance to buy into smaller financial companies that had been hit by rising mortgage loan defaults and other problems.
"Ken had told people for several months to be on the lookout," BofA spokesman Robert Stickler said. "We have plenty of liquidity, and it looked like there might be chances to put it to use."
The opportunity arrived this month when executives at mortgage giant Countrywide Financial Corp., suddenly struggling for cash to fund loans, "decided they needed a partner and were looking around," Stickler said.
An accord announced late Wednesday, in which BofA agreed to invest $2 billion for a potential 16% stake in Calabasas-based Countrywide, was a vote of confidence in the home-loan company. It also could lead to closer operational ties between the two financial institutions.
"There's nothing firm here yet, but if you look at the operations of both companies strategically, there's a lot that can be done," Countrywide Chief Executive Angelo R. Mozilo said in an interview Thursday, depicting Wednesday's transaction as a win-win deal between old friends who are logical partners.
He suggested that Countrywide, the nation's No. 1 mortgage company, could originate home loans and collect payments more efficiently than Bank of America. And Charlotte, N.C.-based BofA, by far the largest retail bank, has a host of services that Countrywide customers might want.
"They service mortgages, which is a very complex business. We do that as well -- a lot more of it," Mozilo said. "They have bank customers like we do, but they have checking accounts and we don't. When you start looking where the holes are, you see a lot of efficiencies."
Mozilo said it was too early to discuss in detail how any strategic ventures would work.
It's clear that Countrywide could use a new start after falling victim to the global credit crunch. The crisis began with a surge in delinquencies and foreclosures that drove dozens of sub-prime mortgage specialists out of business in late 2006 and early this year, then spread to the broader credit markets.
