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MARKETS | January 10, 2013, 5:20 p.m. ET
BofA Seeks to Avoid 'Toxic' Countrywide Liabilities
By CHRISTIAN BERTHELSEN
Bank of America Corp. has been fighting in a New York court this week to avoid as much as $3 billion in liability for defaulted Countrywide mortgage securities, but the bank's courtroom adversary, bond insurer MBIA Inc., is wielding the bank executives' own words in its attack.
In a two-day hearing Wednesday and Thursday, Bank of America argued that it structured its 2008 deal with Countrywide Financial Corp. in a way that allowed it to avoid liability for certain Countrywide assets, branded "too toxic" in one internal bank email.
MBIA maintained the deal was a merger in which Bank of America absorbed 19,000 Countrywide employees, technology and operations to enhance its mortgage capabilities. The insurer introduced videotaped deposition testimony from executives including former Chief Executive Ken Lewis and current CEO Brian Moynihan to bolster its case.
"The objective was to present a common set of products and a common brand to our combined set of customers," Mr. Lewis said in an April 2012 deposition aired in New York State Supreme Court in lower Manhattan Wednesday.
"We combined operations," Mr. Moynihan said in his own May 2012 deposition played in court. "I don't know what [Countrywide] businesses are in what legal entities."
Barbara Desoer, head of Bank of America's mortgage business, said the Countrywide acquisition made the bank "America's leading mortgage provider," according to comments she made at a September 2008 investor presentation cited in court.
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