The Pacman Syndrome

The Pacman Effect:  The Strong Gobbling up the Weak. 

Today, it was announced that Bank of America gobbled up Countrywide Bank for $4B.  Is this good or bad for the industry?  Probably a little of both.  There were rampant rumors that Countrywide was facing foreclosure.  I personally believe if Countrywide failed, the resulting backlash and uncertainty would result in the financial market and economy spiraling downward into a long cold economic winter.  But, is it good for any industry to have one giant who can control the markets?  What about the small guy.  Will the markets be free?  But from a positive perspective, Countrywide borrowers facing foreclosure may be bailed out.  Bank of America's may use its deep pockets to prevent the predicted widespread foreclosures of Countrywide's sub prime loans. 

For those who work for Bank of America and especially Countrywide, I would start planning an exit strategy just in case.  There will be a lot of change in the banking industry and in especially the mortgage market after purchase has been approved but before the brands merge.  Countrywide has a lot of garbage and duplication that Bank of America does not need or want.  I predict that Bank of America will "cherry pick" Countrywide's assets and sell what it does not need.  And, if you work for Bank of America, be careful that the Countrywide assets that Bank of America keeps do not displace you. 

Does this buyout mean stability for the credit market?  Maybe.  But, keep looking over your shoulder!