11 January 2008: Bank of America agrees to buy Countrywide
Bank of America agreed to buy Countrywide Financial, the largest US mortgage lender, in an all-stock deal worth about $4 billion, a fraction of its value a year earlier. It looked like a bargain-bin purchase of a fallen giant. Instead Bank of America inherited a mountain of toxic loans, lawsuits and settlements that ultimately cost it many times the purchase price. Cheap is not the same as good value.
The lesson: A low price cannot rescue an acquisition when the liabilities you inherit are bigger than you can see.
What it meant for investors
$1,000 in Countrywide at the start of 2008 → $444 today, vs $4,626 in the S&P 500.
We start the clock at the start of 2008, the year it happened. That is a loss of $556, while a plain index fund over the same years made $3,626.
What Countrywide teaches: Rapid growth in lending often means loosening standards; in finance, the fastest growers in a boom are frequently the first casualties in the bust.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2008 | $9.00 | $444 | $4,626 |
| 2010 | $4.00 | $1,000 | $6,071 |
| 2012 | $4.00 | $1,000 | $5,312 |
green = beat the S&P 500 · red = lost money
What if you bought Countrywide? Every starting year and the full story →
More Countrywide history
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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