Calling All Homebuyers - The Future is Bright...or is it?

The recent acquisition of Countrywide Financial Corp. by Bank of America is a controversial one. On one hand, this is a very popular acquisition, being supported by shareholders and government entities who realize just how serious the subprime catastrophe has become. On the other hand, the issue of insider trading must be examined. Lastly, in the final analysis, I conclude that Bank of America's acquisition of Countrywide is the latest attempt to revitalize and bring stability to the economy that has been affected so greatly by the subprime industry and its counter parts.

One reason for my belief that Bank of America has the support of the government and its shareholders is based on the economic and financial implications. For one thing, Ben Bernacke, Chairman of the Federal Reserve, has tried many times to cut rates to no apparent avail. Ben and his team are surely applauding Bank of America because it makes their jobs easier. For another, Bank of America has its shareholders support because the stock price is rising. In other words, the shareholders are making money.

Before jumping on the Bank of American bandwagon, the issue of insider trading must be examined. For instance, did Bank of America start purchasing large quantities of Countrywide stock before this acquisition.? If so, how soon before did Bank of America make these purchases? It is no coincidence that Countrywide's stock jumped 51% over speculation of a deal. To examine this issue to a greater extent, it is beneficial to look at the large investment banks who performed the acts described above (ex: JP Morgan Chase & Co purchased large quantities of Rural Cellular before representing Rural Cel.)

Perhaps the most optimistic reason for Bank of America's recent acquisition is because it is just plain good for the economy. The value of property is decreasing at a rate of 15-20% per 12 months throughout the Metropolitan area. The economy could not take much more bad news without collapsing completely. With a need for stabilization and certainty, Bank of America has stepped up and taken a risk. Albeit, they have acquired Countrywide on the cheap and doing so immediately transforms them as the largest lender in the country.

2008 - Year of Change

It is difficult to argue against the matter that 2008 will be a year of change and uncertainty. For one thing, we have yet to determine who our political candidates will be, competing to serve as the next president of the United States. For another, it is uncertain how the United States will respond to the credit crisis. Lastly, it is unclear how the U.S. will respond to the slumping real estate market and the marginal returns on domestic stock indexes such as the S&P 500. Without being able to predict the future, the issues of change and uncertainty in the United States are prevalent.