Regulators say didn't push for Countrywide deal

By John Poirier and Patrick Rucker

WASHINGTON (Reuters) - U.S. financial authorities said on Friday they did not actively push Bank of America Corp, the second-largest U.S. bank, and top mortgage lender Countrywide Financial Corp to forge a deal.

Bank of America said on Friday it agreed to acquire Countrywide in a $4 billion stock transaction that may have saved the company from insolvency.

If Countrywide had failed, it would have dealt a damaging blow to the Federal Deposit Insurance Corporation, which holds a $50 billion purse in the event of bank failures. Because the deal could put Countrywide back on a sound footing, some analysts speculated that federal regulators might have pushed for it.

"The FDIC was protecting their backside," said Sean Egan, managing director of independent credit-rating firm Egan-Jones Ratings Inc. "The FDIC did not want to deal with the potential failure of Countrywide."

An FDIC spokesman declined to comment on the buyout but other regulators said that they were neutral on the deal.

The Treasury Department was "aware of the discussions" between the bank and the thrift but "was not actively involved" in encouraging the discussions, according to spokeswoman Jennifer Zuccarelli.

Countrywide's regulator, the Office of Thrift Supervision, said it kept tabs on the discussions and did not play an active role in the talks.

"We were monitoring it," OTS spokesman Kevin Petrasic said. "We were not participants of the negotiations and did not take an active role in the discussions."

A spokeswoman for the Federal Reserve, which would review the transaction between Bank of America as a holding company and Countrywide, declined to comment when asked if the Fed had any role in the discussions.

The Office of the Comptroller of the Currency, which regulates Bank of America's flagship business, also declined to comment.

William Isaac, who managed many banks in receivership when he headed the FDIC in the 1980s, said Bank of America has saved regulators a huge headache.

"Countrywide was clearly on the path (to receivership). If they had stayed on that path and things had not improved, the government would have had to take over," he said.

WASHINGTON WELCOMES DEAL

Lawmakers welcomed the buyout, which they said would stabilize a housing market rattled in recent months by failing subprime loans.

"The proposed purchase of Countrywide by Bank of America could be a positive development in the subprime crisis," said Barney Frank, chairman of the House of Representatives Financial Services Committee and a Massachusetts Democrat.