Today, Bank of American announced intentions to purchase Countrywide for stock. Details will be worked out.
Wall Street is breathing a sigh of relief and so is the Federal Reserve because a Countrywide going bankrupt — the largest lending company in the United States — has severe implications to the credit and financial markets.
If you’re a Cubicle Warrior working for these two companies, you should be happy, right?
Not just yet.
Bank of America currently has a large home loan lending operation on its own. Countrywide has a division that operates as a bank. Whenever a merger between companies takes place, the same functions done at both companies gets cut — usually by the purchasing company eliminating the duplication of the purchased company.
That means most of the people working in Countrywide’s banking operation will be laid off. Most of the people working in Countrywide’s mortgage operations will be laid off as well. Considering that Countrywide has already laid off some 12,000 people, it means the 15,000 people continuing to work at Countrywide are still at a large risk of losing their positions.
If you currently work at Bank of America’s mortgage operations, you are at risk as well. Management will pick and choose what to keep and what to throw away and now is a great opportunity to take a hard look at current operations and make changes. So people working at Bank of America are at risk as well.
The purchase is projected to close in the third quarter, so people have some time to (continue) to look for positions in the tough mortgage market.
Some 150 companies have already gone bankrupt from the mortgage mess. A purchase of one large company by another is actually a good sign from an industry viewpoint — it means some have enough capital out there to buy totally weak balance sheet companies.
With this move by Bank of America, CEO’s of companies relatively unscathed by the mortgage mess (relative means a few billion in losses, not billions and billions of losses…) will be under pressure to look for other weak companies to to purchase. How many bargain basement stock prices are out there in the mortgage business? Quite a few.
If you work in these companies with known turmoil happening in the industry, it’s time to keep your head down and continue performing — and a time to keep your head up and look at what is happening in your neck of the woods and be prepared for anything.