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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

downgrades. “The only option we had was to pull down those lines,” he told the
FCIC. “We had a pipeline of loans and we either had to say to the borrowers, the cus-
tomers, ‘we’re out of business, we’re not going to fund’—and there’s great risk to that,
litigation risk, we had committed to fund. . . . When it’s between your ass and your
image, you hold on to your ass.” 
On the same day that Countrywide’s board approved the . billion draw-
down—but before the company announced it publicly, the Merrill Lynch analyst
Kenneth Bruce, who had reissued his “buy” rating on the company’s stock two days
earlier, switched to “sell” with a “negative” outlook because of Countrywide’s funding
pressures, adding, “if the market loses confidence in its ability to function properly,
then the model can break. . . . If liquidations occur in a weak market, then it is possi-
ble for [Countrywide] to go bankrupt.” 
The next day, as news of Bruce’s call spread, Countrywide informed markets
about the drawdown. Moody’s downgraded its senior unsecured debt rating to the
lowest tier of investment grade. Countrywide shares fell , closing at .; for
the year, the company’s stock was down . The bad news led to an old-fashioned
bank run. Mozilo singled out an August  Los Angeles Times article covering Bruce’s
report, which, he said, “caused a run on our bank of  billion on Monday.” The arti-
cle spurred customers to withdraw their funds by noting specific addresses of Coun-
trywide branches in southern California, Mozilo told the FCIC. A reporter “came out
with a photographer and, you know, interviewed the people in line, and he created—
it was just horrible. Horrible for the people, horrible for us. Totally unnecessary,”
Mozilo said. 
Six days later, on August , Bank of America announced it would invest  bil-
lion for a  stake in Countrywide. Both companies denied rumors that the nation’s
biggest bank would soon acquire the mortgage lender. Mozilo told the press, “There
was never a question about our survival”; he said the investment reinforced Country-
wide’s position as one of the “strongest and best-run companies in the country.” 
In October, Countrywide reported a net loss of . billion, its first quarterly loss
in  years. As charge-offs on its mortgage portfolio grew, Countrywide raised provi-
sions for loan losses to  million from only  million one year earlier. On
January , , Bank of America issued a press release announcing a “definitive
agreement” to purchase Countrywide for approximately  billion. It said the com-
bined entity would stop originating subprime loans and would expand programs to
help distressed borrowers.

BNP PARIBAS: “THE RINGING OF THE BELL”
Meanwhile, problems in U.S. financial markets hit the largest French bank. On Au-
gust , BNP Paribas SA suspended redemptions from three investment funds that
had plunged  in less than two weeks. Total assets in those funds were . billion,

with a third of that amount in subprime securities rated AA or higher. The bank
said it would also stop calculating a fair market value for the funds because “the com-
plete evaporation of liquidity in certain market segments of the US securitization