Sometimes things are hidden in plain sight.
Bank of America (along with Wachovia) goes to the Federal Reserve discount window, typically the lender of last resort for banks in trouble. Both banks said they used the window to borrow $500 million each in order to remove the stigma of doing so and generally to help build confidence that the financial sector had checks in place to ensure the continued flow of credit after weeks of rough going.
Then BofA turns around and buys about 16 percent of Countrywide Financial, the troubled mortgage lender, for about $2 billion. Coincidence? I think not.
The New York Fed is far more wired into Wall Street than most people understand. It is not far-fetched to imagine a series of meetings in which the feds strongly indicate that it would be extremely helpful for someone to step up and take on the chunk of Countrywide.
Let’s see if Wachovia takes a similar stake somewhere.
