Bank of America Buys Countrywide

By Scot Herrick | Job Performance

Jan 11

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.

Consolidation mergers

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.

Market impact

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.

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About the Author

Scot Herrick is the author of “I’ve Landed My Dream Job–Now What???” and owner of Cube Rules, LLC. Scot has a long history of management and individual contribution in multiple Fortune 100 corporations.

  • Kumar says:

    Hi,

    Very good information.

    I have a curious question. If you would answer this it would be great for many IT persons.

    Both Bank of America and Countrywide are running their IT services in India independently. If this acquisition got over..what will be happen to the workers in Countrywide India, ie) CFC India services Pvt. Ltd.

    Is Bank of America will layoff all the employees of CFC India? Is it is a real threat to CFC India employees..

    This is very urgent for many of CFC employees in India.

    Hope you understand the problem.

    Thanks,
    Kumar.

    • Scot Herrick says:

      @Kumar
      The short answer is yes, there is a good chance there will be layoffs in India. The interesting piece about it is that if Bank of America has Indian operations for their home loans business, there is also a good chance that there will be layoffs for them. Countrywide has a very good proprietary home loans processing system and if I were Bank of America, I’d seriously look at the system as the one to use in the Bank.

  • […] announced that, with the acquisition of Countrywide, there would be about 7,500 layoffs. In a comment on a previous Bank of America post, I was asked if the acquisition meant layoffs for Countrywide IT […]

  • Raj says:

    I currently hold an offer from CFCI for a middle management position (Sr Manager)…do u think i should give it a thought or should drop it given the crisis in Banking space & fear of layoffs when BOA takes over CFCI operations early next year.

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