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Bankruptcy could still be in the cards for Countrywide.
At least that’s what a Bank of America official said while testifying in court yesterday — that placing mortgage mess Countrywide Financial into bankruptcy is still a possibility for BofA if its settlement is rejected in court.
“We’ve always explored and have on the table the bankruptcy of Countrywide Financial,” Terry Laughlin, a risk officer at BofA told a court yesterday, defending BofA’s 2011 agreement to pay $8.5 billion to cover the souring pile of mortgage bonds underwritten by Countrywide, which then-CEO Ken Lewis scooped up in 2008 for $2.5 billion.
In roughly five hours of testimony, Laughlin defeded the bank’s negotiating tactics with trustee BNY Mellon and institutional bondholders, including BlackRock and Pacific Investment Management Co. in hammering out a settlement.
The BofA official clarified remarks made by PIMCO official Kent Smith last week, who recounted a meeting Laughlin held in 2011 when he threatened to put Countrywide into bankruptcy if the institutional investors didn’t lower their $25 billion in damages.
Yesterday, Laughlin noted that although he had not discussed such a move with regulators, as Smith had intimated in his testimony, BofA felt that its main regulator — the Office of the Comptroller of the Currency — would have supported such an action to protect the parent from the potential hit to the bank’s balance sheet.
“[We were] absolutely not bluffing,” Laughlin added, answering a question posed by Larry Pozner, an attorney representing settlement objector American International Group.
Laughlin’s testimony marks the second week of trial during the hearing over whether New York Judge Barbara Kapnick should approve the controversial settlement.
Laughlin is the only high-ranking BofA executive to take the stand so far.