Countrywide Done, WaMu On Deck, UBS & Merrill Starving

BofA Scoops Countrywide... The nations largest bank bailed out the nations largest home lender for $4 billion in stock at about $7.16 a share.

BofA gets 9 million borrowers and fees from servicing $1.5 trillion of mortgages with 7% of payments more than 60 days overdue, do the math.

Big risk, credit-default swaps tied to the bonds of Bank of America increased 12 basis points to 92 basis points.

BofA contracts have traded an average 17 basis points below Citigroup in the past three months.

The gap has narrowed to 1 basis point, meaning that investors now view BofA as risky as almost insolvent Citigroup, OUCH!

B of A plans to issue about $2 billion in capital and will need to write down the value of Countrywide's $209 billion in assets by as much as 10%, or $20 billion, because of lower housing values.

Chase to bailout WaMu? JPMorgan Chase, #3 US bank, and Washington Mutual, largest US thrift, have held "very preliminary" talks about a merger.

Amex joins Capital One...

American Express said that it will take a pre-tax charge of $440 million in Q4 because of slower consumer spending and higher delinquencies...

and increase its loan loss reserves to cover an increase in customer defaults. AmEx also warned that growth would slow this year CEO Kenneth Chenault:

"We did see some negative credit trends among U.S. consumers during December, particularly in California, Florida and other parts of the country most affected by the housing downturn."

Speaking of almost insolvent...

Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost double its original estimate...

prompting the firm to raise an additional $4 billion in capital from outside investors.

The US largest brokerage firm, is expected to disclose the huge write down when it reports earnings next week.

The loss far exceeds the $12 billion many Wall Street analysts had forecast and the $8 billion initially reported.

UB the judge... UBS, Europe's biggest bank by assets, and the worlds largest currency trader, after writing down 14.7 billion last year...

The CEO: "The problems that the financial industry faces have not evaporated with the turn of the year."

UBS still hold $16 billion in residential mortgage backed securities and $13 billion in AAA-rated structured debt.

Cash starved UBS plans to raise a total of $17.6 billion by replacing the cash dividend with stock...

and selling convertible shares to the Government of Singapore Investment Corp. and an unidentified Middle Eastern investor (Oman).

The Nattering One muses... the largess of the situation...

anyone notice in the above, Europes biggest bank, worlds largest currency trader, US largest brokerage firm, #3 US bank, largest US thrift, largest US bank and largest US home lender?

As reported late last night, the BofA bailout of Countrywide was somewhat of a shotgun marriage, but absolutely necessary to keep the house of cards up and running.

We withheld our "juicy" comments on WaMu last night, and expect more "unions" of this sort in the not too distant future.

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