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The Great Undoing of Bank of America

Friday - 5/24/2013, 4:29am  ET

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Bank of America  has been near-mortally wounded. But that may be good news.

B of A's evisceration came by its own hand. An unintentional seppuku attempt, if you will. You may have heard a bit about this already, but this all went down in January 2008, when the bank agreed to buy a little mortgage outfit known as Countrywide Financial. 

Believe it or not, at the time, there was optimism around the deal. One asset manager at the time was quoted as saying, "Buying Countrywide was a gutty move ... The whole concern about housing and the economy has been greatly exaggerated." Bank analyst Dick Bove was on the same page, claiming that an ugly quarterly report around the time of the deal was a "clean-up" quarter for Countrywide, continuing, "Bank of America is asking them to look into every place they can find to take losses, so when they become Bank of America, we don't see similar impacts."

But it wasn't to be. The "whole concern about housing and the economy" wasn't, in fact, overblown, and the decision to buy Countrywide was an abysmal one.

Of course, I'm far from the first to say that Countrywide was essentially a bought-and-paid-for cancer for Bank of America. This has been said to such an extent that some investors may wonder if Countrywide is simply the scapegoat for an overall ailing bank. But, rest assured, that's not the case -- the Countrywide acquisition was every bit as bad as billed.