June 6, 2008 / 11:06 AM / in 9 years

Federal Reserve approves Countrywide purchase

WASHINGTON (Reuters) - The Federal Reserve Board on Thursday approved Bank of America Corp’s (BAC.N) acquisition of Countrywide Financial Corp CFC.N, the nation’s largest mortgage lender.

Bank of America agreed in January to pay $4 billion for Countrywide, a California-based firm that helped fuel a multi-year housing boom that went bust when risky loans to shaky borrowers began to fail.

In a statement, the federal regulator said it considered many comments for and against the bank buyout and “has considered carefully the financial factors of the proposal.”

The Fed also said that it vetted about 770 individual comments on the proposed takeover and the views of many other stakeholders.

The Fed “has reviewed carefully the competitive effects of the proposal,” it noted.

During the housing boom, Countrywide specialized in so-called subprime loans, which helped fuel an overheated housing market. Bank of America has said the troubled lender still has valuable infrastructure.

Countrywide and its outspoken founder, Angelo Mozilo, have in recent months become emblems of an overheated housing market and reckless lending.

In late April, Countrywide posted a surprisingly large $893.1 million first-quarter loss which contributed to calls for Bank of America to abandon the deal.

Earlier this week, Countrywide urged its shareholders to approve the deal while shares of Bank of America fell to a five-year low as analysts expected the acquisition to be a drag on earnings.

Bank of America, with $1.7 trillion in consolidated assets, is the largest depository institution in the United States. Countywide, with $199 billion in assets, is the 17th-largest depository institution, the Fed said.

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