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KAI RYSSDAL: Economies of scale might be a good way to describe what's going on here. Because that's as good an explanation as anything else for Bank of America's decision to sink another $2 billion into Countrywide. For a total of $4 billion overall Bank of America's going to become this country's biggest mortgage lender. It'll handle one in every four home loans. What we don't know yet is how BofA...and the whole industry is going to digest the billions of dollars in sour loans that're already out there. But maybe in bad times bigger really is better, because Countrywide wasn't the only bank deal being talked about today. Our Washington bureau chief John Dimsdale reports.
JOHN DIMSDALE: CNBC reports JP Morgan Chase has begun "very preliminary" talks about buying another big mortgage lender: Washington Mutual. Industry consultant Bert Ely says this bonanza of bank buying is a direct result of the housing downturn and mortgage loans gone bad.
JACK ELY: Anytime there are problems in any kind of industry, the weak get acquired by the strong. This is kinda like who's going to have a seat when the music stops. And I can assure you the investment bankers are falling all over themselves trying to put deals together.
Bank of America executives say they got Countrywide's mortgage business at a good price since the company's stock value has fallen nearly 90 percent over the past year. But analyst Jane D'Arista at the Financial Market Center says Federal Reserve regulators should be worried that bigger banks could become an even bigger liability as the Fed continues to lend them cheap cash.
JANE D'ARISTA: The unintended consequences could be quite substantial in terms of too big to fail. I mean, they're moving closer into the bosom of the Fed as it is. Is the Fed really able to deal with the financial crises at these levels? Over time it may be that the Fed is not able to be there for them in the way that it has in the past.
And the President of the Service Employees International Union, Andy Stern, today called on the government to nix the deal.
ANDY STERN: The bigger the banks get, the worse it gets for people in communities. Higher credit card rates. It's meant higher fees. It's meant financial schemes like subprime mortgage.
But by taking on Countrywide's bad loans, Bank of America could be saving regulators the huge headache of a taxpayer-financed bailout. Even though the government has been working with banks to ease the mortgage crunch, the Treasury Department today denied it encouraged Bank of America to take over Countrywide.
In Washington, I'm John Dimsdale for Marketplace.