According to the Associated Press, the Federal Reserve has approved Bank of America Corp’s move to purchase Countrywide Financial Corp.
The 32 page order was issued on June 5th and Countrywide plans to hold a special meeting with its shareholders on the 25th in order to finalize the sale. According to the Fed board, Bank of America will control approximately $773.4 billion in deposits once the deal is closed, which means it will remain the nation’s largest depository institution with 10.9% of the insured bank deposits in the country.
Bank of America had initially stated it would pay approximately $4 billion for Countrywide and would exchange 0.1822 shares of its stock for each share of outstanding Countrywide stock. Over the past few months, however, analysts have began speculating that Bank of America may close the deal at a lower price because the mortgage market has continued to deteriorate. In fact, many experts have predicted that obtaining Countrywide will have a negative impact on Bank of America’s earnings.
The chief executive of Bank of America, Ken Lewis, is not quite so concerned. He has stated that he believes the purchase is a good deal for Bank of America and that he believes housing conditions will improve next year, which will help the bank increase its market share within the mortgage sector.