Is Countrywide the next Fed bailout?

Mortgage lending giant Countrywide Financial is in serious trouble– its credit rating was cut to junk on Friday and there are new signs that Bank of America may walk away from its acquisition deal. (ht Calculated Risk) The problem for taxpayers is that Countrywide has direct access to the Federal Reserve’s balance sheet through the Fed’s lending windows. If Bank of America walks away from this deal and Countrywide folds, look for a multi-billion dollar hit on the U.S. Treasury. Alternatively, and perhaps more troubling, would be another JP Morgan Chase-Bear Stearns style intervention where the Fed guarantees some of Countrywide’s garbage assets in order to make the Bank of America deal happen.That scenario would avoid the immediate Treasury cost but would expand the Fed’s new role as private dealmaker. The moral hazard introduced by the Bear Stearns bailout is clearly present here…