Bank of America to buy ailing lender

NEW YORK, Jan. 11 (UPI) -- Bank of America tossed an apparent lifeline to Countrywide Financial by agreeing to buy the ailing mortgage giant in a reported $4 billion all-stock deal.

Countrywide shareholders are reported to get 0.1822 share of Bank of America stock for each share they own. The deal, which Bank of America doesn't expect to affect 2008 earnings, was expected to close in the third quarter.

The move was aimed at protecting one of the biggest casualties of the mortgage default crisis from collapse, a lender said to service about one of every six loans in the United States.

A Countrywide failure would create a major risk to the U.S. economy, The Wall Street Journal reported. The company was forced to deny this week that it was headed for bankruptcy.

The bank expects to see $670 million in cost savings but doesn't expect to fully realize them until 2011. The combined company plans to avoid originating subprime loans, a key cause of the continuing credit crunch.