Bank of America chooses MSU style of accounting

MSU = Making Sh*t Up

Those wild-eyed radicals at Bloomberg detail the wobbly condition of BofA and its deranged attempt to pretend all is well.

The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet is that it’s largely impenetrable. Some portions, though, are so delusional that they invite laughter. Consider, for instance, the way the company continues to account for its acquisition of Countrywide Financial, the disastrous subprime lender at the center of the housing bust, which it bought for $4.2 billion in July 2008.

Here’s how Bank of America allocated the purchase price for that deal. First, it determined that the fair value of the liabilities at Countrywide exceeded the mortgage lender’s assets by $200 million. Then it recorded $4.4 billion of goodwill, a ledger entry representing the difference between Countrywide’s net asset value and the purchase price.

That’s right. Countrywide’s goodwill supposedly was worth more than Countrywide itself. In other words, Bank of America paid $4.2 billion for the company, even though it thought the value there was less than zero.

BofA has since dropped the Countrywide brand name, their home loan division is losing billions, yet they haven’t written off the goodwill yet. Why is this permissable under any accounting standard? Our government no longer enforces basic accounting rules or even the law itself against the big banks. This is – and there is no other word for it – criminal. And the Obama Administration is just as culpable as the Bush Administration.

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