Bank of America \ Countrywide Deal

Well....I submited this yesterday and it showed up on Seeking Alpha this morning, so two things happened here. 1) I was right, CFC shareholders were not rescued. 2) I was wrong, BAC did do the deal and actually paid real money (if the deal closes) which is why I sold my BAC position today.

Don't invest in what you don't understand and I do not understand this deal.

Here is the article:

B of A Deal May Be No “Rescue” for CFC longs!

I am trying to understand this beyond just what it is doing to the CFC stock price. All I have is questions and not many answers and if you can’t answer my questions, stay away from this deal, at least on the CFC long side.

Questions:
Why would BAC step in to a firestorm and buy in to Countrywide’s problems?
I agree that BAC may be “strong” enough to get a deal done, but why not preserve that strength, let CFC fail and pick over the remains?
What does BAC gain in a CFC deal that it can’t gain in other ways?
Why double down on the mortgage market now at the cusp of a recession, when foreclosures are way up, the yield curve is inverted, and home sales are in the tank?
Where is the value in CFC? The people? The retail stores? The thrift? The loan portfolio (cough, cough)? The servicing business? What exactly would BAC buy?

I am absolutely certain that hundreds of analysts have BAC financials on one side of their desk and CFC on the other side and are furiously trying to piece the numbers together to see if this deal “works.” This is no normal merger rumor though as one side has all the chips. Don’t assume that whatever deal might get done will “rescue” CFC shareholders because BAC is no White Knight and they will do what is their interests.

I have been long BAC for a couple of weeks because I figured that BAC would benefit in the long run if CFC, WAMU and a couple of other players actually failed (and there is that nice dividend). BAC already has a significant chunk of the mortgage market, they are a strong commercial bank, they made a mint in China recently, and most of their competitors are having liquidity issues. BAC does not need CFC. I don’t know, maybe BAC does not buy CFC. Maybe they just take it?