Thousands of Ventura County jobs are in jeopardy after Bank of America announced a massive $1.79 billion fourth-quarter loss, the largest in nearly two decades.
The report came almost exactly one year after Bank of America announced it would buy Countrywide Financial Corp., a Calabasas-based mortgage giant that had faltered badly amid the housing crisis. On Jan. 11, 2008 Countrywide employed roughly 4,000 people in Ventura County, with the bulk of its jobs concentrated in Simi Valley, Thousand Oaks and Westlake Village.
When the sale closed last summer, Bank of America instantly became one of the largest tri-county employers by inheriting the Countrywide workforce. But now uncertainty abounds in Ventura County as fallout from the credit crunch and Bank of America’s subsequent purchase of Merrill Lynch fall into the region’s lap.
Though Bank of America representatives declined to comment on the issue, Dan Hamilton, director of economics at the University of California, Santa Barbara, Economic Forecast Project, said operations will most likely be consolidated to other places where Bank of America has offices.
“The vast majority of those employees won’t have jobs in Ventura County because those jobs have been consolidated,” Hamilton said. “This contraction of operations leads to a reduction in workforce, as seen in Ventura County. They’re scaling down business dramatically, just like any other residential real estate company. It’s not pretty.”
The sobering fourth-quarter earnings report, which marked the bank’s first loss in 17 years, was released shortly after Charlotte, N.C.-based Bank of America inked a deal for a $20 billion infusion of government money to help it digest acquisitions Merrill Lynch and Countrywide.
The new federal funds come as an addition to the $25 billion it received from the government last year.
Reports said the Treasury Department decided to dip into its $700 billion Troubled Asset Relief Program to help Bank of America a second time because it feared that a failure would further affect the stability of U.S. financial markets.
The Treasury Department and Federal Deposit Insurance Corp. also agreed to help Bank of America absorb losses from an additional $118 billion in troubled assets, most of which stem from Merrill Lynch.
Even after receiving last year’s TARP infusion, the bank’s chief executive, Kenneth Lewis, told regulators in mid-December that the deal it signed two months earlier with Merrill Lynch was on the rocks.
Too fast, too quickly
According to widely circulated reports, Lewis told the Treasury Department and others that Bank of America was unlikely to complete its purchase of Merrill Lynch because the brokerage firm had suffered larger-than-expected losses in the fourth quarter.
At that time, many experts also decided to weigh in, expressing concern that Bank of America may have grown too fast by buying both Merrill and Countrywide.
On Jan. 11, 2008, Bank of America announced that it would buy Countrywide Financial for $4.1 billion, giving the bank a substantial market share of the mortgage business.
The acquisition was widely heralded as a move to prevent Countrywide’s potential bankruptcy, though at the time the company denied that bankruptcy was an issue.
“Bank of America will most likely consolidate to its headquarters in North Carolina because it’s more efficient to do it that way,” Hamilton said. “It’s typical that companies do this when taking over smaller companies.”
Just two months after purchasing Countrywide, Bank of America announced its intentions to purchase Merrill Lynch & Co. in an all-stock deal worth approximately $50 billion, about 86 percent of the Bank of America stock price at close.
The bank closed its acquisition of Merrill on Jan. 1, making it the largest bank in the country with about $2.7 trillion in assets.
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