Countrywide Financial announced a buyback plan of $2.5 billion last November.

This from their most recent 10-Q (through 6/30/07):

In November 2006, the Board of Directors authorized a share repurchase program of up to $2.5 billion. In connection with this program, the Company repurchased 60,143,388 shares of its common stock for $2.4 billion.

That breaks down into:

• $1.5 billion spent on 38,639,876 shares - average price of $38.83/sh in Q4-2006.
• $0.9 billion spent on 21,503,512 shares - average price of $40.39/sh in Q2-2007.

Meanwhile, Chairman and CEO Angelo Mozilo has been dumping shares. Lots of them. Many tens of millions worth in fact. Of course, the defense is that these are all option sales as part of existing 10b5-1 plans. However, just spend the time to pull up all the Form 4’s for Mozilo during this time frame and find the small print at the bottom to determine when these plans were adopted. Here’s the most recent Form 4 (August 13, 2007) and the first one starting in November since the plan was announced to get you started. Or you can click on this Yahoo finance link and just total them up here on one page( warning: it’s a long one.) I am not sure when the sales will stop but I guess if CFC had declined to less than the $14.69 option exercise price it would have ended already. Do some more homework on your own and find out when these options would have expired. Hint: Not quite yet.

So let’s sum up here: Countrywide announces a buyback plan last fall and investors cheered. You gotta love those buybacks!! The buybacks were not paid out of cash using the “this is the best use of cash / excess cash flow” excuse. Instead, the company issued debt - junior subordinated debentures as a matter of fact. How would you like to be holding those right now? Through 6/30/07 the company repurchased $2.4 billion of stock under the plan at an average price of $39.38 per share. As of today’s $21 close, that comes to a 46% decline and a loss of $1.1 billion for shareholders. Meanwhile, the CEO was selling shares (legally) and netting tens of millions in the process. And by the way, he wasn’t the only insider selling - just the one with the best tan and biggest role at the company.

FYI - a few lawyers are already filing the shareholder lawsuits. This one is going to get ugly. Here’s a good sample:

Lerach Coughlin Stoia Geller Rudman & Robbins LLP announced that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of Countrywide Financial Corp. common stock during the period between January 31, 2006 and August 9, 2007. The complaint charges Countrywide and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. As a result of defendants’ false statements, Countrywide stock traded at artificially inflated prices during the Class Period, reaching a high of $44.94 per share, and certain of the defendants were able to sell over $440 million worth of their Countrywide shares at artificially inflated prices. On July 24, 2007, defendants were forced to publicly disclose that Countrywide was recording hundreds of millions of dollars of impaired losses in addition to those recorded in the first quarter of 2007, causing its stock to drop to $30.50 per share. Later on August 9, 2007, upon the filing of the Company’s Form 10-Q for the second quarter of 2007, Countrywide’s stock dropped to $24.71 and then, as the market began to appreciate the extent of Countrywide’s problems, to below $20 per share.

Mr. Mozilo can complain all he wants about the “reckless” Merrill Lynch analyst that questioned the company’s viability. I’d be surprised if he tries to sue them. After all, maybe the analyst just looked at Mr. Mozilo’s stock sales.

I know it’s easy to cheer all the buybacks that have been announced and are supposedly improving the fundamentals of this market when the shares are actually purchased. But that is exactly what was said in November about CFC and their plan. So as CFC got bailed out this week, the market cheered once again. I am about as impressed this time as I was last November.