Bank of America announced today that they will cut 7,500 Countrywide workers over the next two years. The long anticipated merger should be finalized on Tuesday costing Bank of America $4 billion. Over the past few months Countrywide's stock has been significantly devalued. Analysts believe the company is currently worth just under $3 billion.
The job cuts are expected to be from the combined mortgage, home-equity and insurance units of Countrywide however a spokesperson for the bank declined to name which locations would be affected. Most losses will occur where Bank of America and Countrywide overlap in staff. Job losses are expected to start during the third quarter of 2008.
Countrywide CEO Angelo Mozilo has been under increased scrutiny over the last few weeks as details of a "Friends of Angelo" VIP program have slowly been revealed. The program includes two Senators, former heads of mortgage financier Fannie Mae, professional athletes and family and friends of business associates.
Senator Chris Dodd, (D-CT) a member of the "Friends of Angelo" program currently chairs the U.S. Senate Committee on Banking, Housing, and Urban Affairs and is currently attempting to push a mortgage relief bill through the Senate. It's estimated that the Senator has save over $75,000 in interest as a result of his beneficial loan through the program.
Despite the growing concern among House and Senate Republicans and a Presidential veto threat, the bill is expected to pass which could cost the taxpayers upwards of $300 billion and provide federal backing of some of the nation's riskiest mortgage loans.
Some industry experts have questioned whether the Bank of America/Countrywide merger would even happen. Rising foreclosures, lowering stock value and more uncertainty in the market had threatened the deals survival but all signs from the banking giant indicate it still intends to purchase the beleaguered mortgage company and thus create the U.S. largest home loan lender.
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