B of A stocks are down almost to where they were before Warren Buffett put $5 billion into the bank, and it's got more layoffs coming—up to 30,000 jobs might be shed, which would be about 10 percent of the company's total employees.
The New York Times
Saturday, September 10, 2011
Accelerating the Death Spiral of Bank of America
Felix Salmon broke down the lawsuits into a table and pointed out that since Bank of America's two subsidiaries, Countrywide and Merrill Lynch, are named separately from B of A itself, the wobbly bank is by far the biggest loser in the lawsuit. Rep. Miller noted that nearly one quarter of the mortgage-backed securities in these lawsuits come from Bank of America.
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The New York Times pointed out that while the total damages in the suit have yet to be determined, a similar lawsuit brought in July by the FHFA against UBS seeks to recover $900 million in losses on $4.5 billion in securities—or 20 percent. “A similar 20 percent claim against Bank of America could equal a $10 billion hit.”
ReplyDeleteAnd “Tyler Durden” at Zero Hedge thinks it could be even bigger:
other words: this is a big mess for all of the banks named, a potential long-lasting expensive legal battle, but for Bank of America, teetering on the edge of disaster already, it could wind up pushing them over. Rep. Miller argued that the potential collapse of Bank of America, though, was not a good reason to stop the lawsuit going forward. “I know that there would be a great sense of injustice if they were given a pass on their legal liabilities on that basis,” he said. “Every small business in America knows if they have harmed someone they'll get sued for it and they'll have to pay.”
ReplyDeleteAnd Forbes noted, “An analyst from the other side of the Hudson River said that Bank of America may very well prove that no bank is too big to fail.”
Opening door for more lawsuits
ReplyDeleteWhatever happens with the FHFA's lawsuits—whether they're settled or litigated—there's every potential here for private lawsuits against the same banks to follow. The FHFA snuck in right under the deadline for the statute of limitations, and this could spur other investors to try to recoup losses. For troubled banks like Bank of America or RBS, this could be a chain reaction difficult to recover from.