Bank of America's 90 day drop

[bga4444]

BOA has lost half of it's value in 90 days! What do the hedgefund guys know... we don't???

[jarhead1976]

They have 2 sets of books.

[Driftr]

Couldn't have happened to a nicer bunch of folks. OK, well maybe I'd prefer it were happening to GS, but they're almost as bad.

[maui1]

they bought countrywide for 4 billion, but its going to cost them 100 billion or more, when all is said an done.

they are stupid at best, and should have gone out of business, but, again, thanks to our gov't, they are now even more "to big to fail" and will be a drain on the american tax payer forever.

[smackdown]

Give it time... there's only so much ability for the atmosphere to absorb all that hot air. I actually thought Citi was going to fail first, then BofA, PNC and Suntrust next, then the gloriouys toxic implosion of Chaste, Molden Sacks, More-than Scamly and A.I.G. (Ain't It Goofy that we're still in business?). The latter is where Congress keeps it's loot, threaten it and my money would be on Total Absolute Clarity and Sober Cooperation Without Lobby Influence in Washington for the first time in decades. What do you think?

[usaone]

One of the few stocks I wont buy is BAC but if you can do it NOW IS THE TIME!!!!!!

[maui1]

i have bac accounts, and now they are managing there banks operations like they do their overall bank, which sucks.

they took on to much and to fast, on top of taking garbage like countrywide.

they need to fail, but they are now are largest banking institution, so they will continue to get gov't support.

[smackdown]

The problem with bank stocks with a Fed printing press is that they have no talent in the non-investment venues that used to be the crux of their stability. The likelihood out top-level flush-outs is pretty evident. The executives at the banks I used to work for- were accountants who couldn't grasp sales if their lives depended on it. We won't have a use for accounting majors well into the next decade if ever again. I'd put the odds at favoring divestiture of banks over their stock price pulling back up without free money and book cooking, doing it.

[blackcard]

Don't they have a special membership in the 2 Big 2 Fail Club?

[Virgil Showlion]

CDSs have BAC sitting at 25% risk of default, supposedly. If they are TBTF, the market doesn't realize it yet.

[smackdown]

"If they are TBTF, the market doesn't realize it yet."

We discussed this on the old board. I believe BoA is on their 5 or 6th legal team still trying to brief their way out of some pretty intense lawsuits. The cost of legalese can bring any giant to their knees. Add zero real growth and toxic asset reflux and you've got the ingredients for failure. The BoA branch in my town is closed and for sale.

[Virgil Showlion]

I agree with you that the BoA fundamentals are in the toilet, but what are the odds that their execs won't manage to finagle some kind of restructuring deal that purges their waste into a separate entity and then set it adrift? They might even manage to do it in a way that avoids a technical default, much to the chagrin of CDS holders.

They're one of the biggest consumer banks in the US. They have the name "Bank of America", which is more than a little symbolic. And who knows how much of their debt is held as an asset by other TBTFs. They'll just have to utter the word "contagion" and the Fed will pull some strings to relieve them of their toxic burden.

I just don't see them going down hard. Not that I endorse buying BAC in any way.

[smackdown]

Not so fast, my friend. Any type of deal/scheme would involve the liquidation of assets. That's 3 lit M80's duct-taped together and stuffed up their ---!!. The fact is, preferred stock redemptions need liquidity to be realized. They don't have it. None do. Decoy409 is pretty right-on when he talks about the exponential expansion of derivative obligations hitting nosebleed numbers. The obligations exceed priority status and cumulative balance, so even the preferred shares are worthless.
I scoffed at USAONE buying JPM yesterday. They're engaged in a Federal-level lawsuit, exposed about 80 times over their assets to derivatives, have too many branches, too much overhead and the average age of the staff (now that they terminated anyone with experience) is under 30. I thought Citi would go first. I'm not wrong about any of them.

[maui1]

the shorts are going to eat the rest of boas value and we will all pay the price of tbtf, which our f---ing gov't said just, 1 year ago, that this will never happen again.

[bga4444]

Naked shorts baby!! Short Forrest Short!!!!!!!!!

[usaone]

Aug 8, 2011 14:27:13 GMT -5 usaone said:

One of the few stocks I wont buy is BAC but if you can do it NOW IS THE TIME!!!!!!

Bac JUMPED 8% today.

[Opti]

Aug 8, 2011 13:52:42 GMT -5 Driftr said:

Couldn't have happened to a nicer bunch of folks. OK, well maybe I'd prefer it were happening to GS, but they're almost as bad.

;D

[Opti]

Aug 8, 2011 19:12:30 GMT -5 Virgil Showlion said:

CDSs have BAC sitting at 25% risk of default, supposedly. If they are TBTF, the market doesn't realize it yet.

Only 25%?! Stupid lawyers. Should be at least 50!

[bga4444]

The stock holders should be lining up to sue over the forced purchase of Countrywide..... It was one shi**y deal! A la Goldman-Sachs! It was the worse deal in history!!

[maui1]

they were not asked to buy countrywide...

they bought because they thought they were getting a good deal. that is how stupid lewis was.

boa was asked (told) to buy Merrill

[kent]

Aug 8, 2011 16:52:47 GMT -5 blackcard said:

Don't they have a special membership in the 2 Big 2 Fail Club?

[flow5]

Why is Bank of America’s Stock Cratering Yet Again? It’s the Extend and Pretend Endgame

Posted: 23 Aug 2011

Yesterday, the S&P 500 ended flat, yet Bank of America continued its truly impressive implosion, with its stock tanking 7.89%. It is now trading at a market cap of $65 billion, versus a book value of common equity of roughly $215 billion.

Market commentators were having so much fun discussing the meltdown that FT Alphaville even dedicated a post to the “The Bank of America Explanation Game.” This was its tally, and the post includes an explanation for each:

1. An analyst note suggesting BofA will need to raise $40bn-$50bn

2. Reports that BofA is keeping a stake in China Construction Bank

3. Yet more talk of snags in a broad mortage settlement deal

4. General market weakness and BofA’s susceptibility to HFT

5. Wikileaks has apparently destroyed some of its BofA data files

Henry Blodgett at Clusterstock endorsed the “BofA needs a lot more capital” view, and pointed out the obvious: the bank had had plenty of opportunity to sell equity when its share price was higher, and if it did need to sell stock now, it was going to be extremely painful for existing holders. Concerns about BofA’s ability to bolster its balance sheet are probably not helped by rumors that the bank is trying to unload Merrill and (not surprisingly) finding no takers.

Now narrowly, the trigger yesterday likely was the Jefferies view re Bank of America possibly needing to raise $40 to $50 billion. But that isn’t the most helpful way to frame the issue.

Think about it. BofA has $215 billion in book value of common equity. $40 to $50 billion is a huge number relative to that. For investors to react suddenly to one firm’s view (what, you own the stock and this is news to you?) points to something much more fundamental.

We are now seeing the downside to extend and pretend. Years of regulatory forbearance mean that investors know the marks on the balance sheet of a beast like Bank of America (and frankly all the other big banks) have a ton of air in them. And now that the economy is looking seriously wobbly and the odds of son of Credit Anstalt are well above zero, it means big banks are at real risk of getting seriously whacked in a major stress event. Worse, with Dodd Frank (supposedly) barring bailouts and Tea Partiers on an anti-bank, anti-Fed, anti-spending warpath, it might not be so easy for the authorities to rescue a big bank if a run started (not that I’m advocating a rescue, mind you, I’m looking at this from the vantage of a bank shareholder).

Steve Waldman set forth the basic issue in a very important post last year:

Bank capital cannot be measured. Think about that until you really get it. “Large complex financial institutions” report leverage ratios and “tier one” capital and all kinds of aromatic stuff. But those numbers are meaningless. For any large complex financial institution levered at the House-proposed limit of 15×, a reasonable confidence interval surrounding its estimate of bank capital would be greater than 100% of the reported value. In English, we cannot distinguish “well capitalized” from insolvent banks, even in good times, and regardless of their formal statements.

Now normally, investors accept the unknowability of bank equity because they have some faith in the system. Does anyone have any confidence in the system now? Financial regulators have shown themselves to be incompetent and/or badly captured by banks. Earth to base: letting off bank management easy is bad for investors in the long run. Being an investor in an overly risky bank looks swell until it suddenly isn’t.

Look at how the officialdom blew the bank stress tests. The sole purpose of that exercise was to goose bank stock prices so they could afford to raise new capital and rebuild their balance sheets affordably. What happened instead? Treasury let the banks sell pretty small amounts of stock and allowed them to “pay off the TARP.” Huh? The economic motivation for that was solely to escape pretty minimal restrictions on executive pay. And to compound the error, banks (BofA being one of the few exceptions) were allowed to resume paying dividends.

It is pretty easy to construct a list things to doubt on Bank of America’s balance sheet. Here are a few:

Second liens. Net of reserves, they are about $80 billion. That should probably be written down by 60%. That gets you to $48 billion, conveniently in range with the capital raise number bandied about today.

Commercial real estate loans. $182 billion, per the bank’s latest Y9. Probably at least some modest impairment there.

Goodwill. $78 billion. Countrywide has been written off, but Ken Lewis loved overpaying. The bank made a botch of its acquisition of US Trust, and given that it is rumored to be unable to ditch Merrill, query whether any goodwill booked in connection with Merrill is worth anything now. Some it not a fair bit of this number is probably vapor-y.

European exposures. Ooh, this is fun. No number here per se. Moynihan was asked in the seriously misbilled “we’ll take tough questions” conference call. He said BofA had $17 billion of European sovereign exposures and claimed it was hedged.

First, hedges of sovereign risk are wrong way hedges. The AIG credit default swaps against CDOs were classic wrong way hedges. An event that will lead you to put in an insurance claim is very likely to kill the insurer, which means your hedge is no good.

Second, sovereign exposures aren’ t likely to be the biggest risk BofA faces in Europe. What about its European bank exposures?

Notice how this list looks pretty bad and we haven’t even gotten to mortgage litigation losses. Not to worry, those are years away.

More immediate is what might happen to other exposures, particularly derivatives positions, in a market stress event. The poster child was Lehman. Pre-crisis, analysts focused on the asset side of its balance sheet. But the black hole in Lehman’s balance sheet has proven to be way beyond anything that could be attributed to either the asset side items that everyone had been watching or the “disorderly collapse”. While the derivatives counterparties grabbed collateral (as they are permitted to do), the bankruptcy judge can and has been contesting cases where the other side looked like it took more than it was entitled to. The open question is whether this sort of blowout was specific to Lehman (and the terrible mess in its derivatives books) or whether this is a more generalized phenomenon when a big trading firm crosses over the finance equivalent of an event horizon.

The point is that there is objectively a lot not to like about Bank of America. And now that investors have decided to start thinking critically, as opposed to blindly accepting bank equity as the faith-based paper that it is, one shouldn’t be surprised that they are getting cold feet. And the fact that the authorities have undermined the limited value of bank balance sheets via allowing all sorts of rosy accounting treatments is a self inflicted wound.

www.nakedcapitalism.com/2011/08/why-is-bank-of-americas-stock-cratering-yet-again-its-the-extend-and-pretend-endgame.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

[lifewasgood]

1.4 Trillion QE, slip 100 billion to BofA out the discount window to cover. Transfer toxic housing liabilities to HUD, Hud will hire to repair and rent and BofA will provide the capital to fix the rental properties with a guarantee 7% return.

Done, BofA saved!!!!!!!!!!!!!

Isn't this the new American way?

[decoy409]

"Why is Bank of America’s Stock Cratering Yet Again? It’s the Extend and Pretend Endgame"

flow,

[clubv]

decoy don't you worry. B of A is rolling out a new program

realestate.msn.com/blogs/listedblogpost.aspx?post=13298b2a-1025-44e4-bd89-26af00d05043>1=35000

screw grandpa and grandma. just like the health care industry

[smackdown]

There is a pattern to a TBTF bank going under. Take a trending look at National City. What seems to occur is the two steps backward, one step gain to balance the insider-trading and then two steps back to absorb the speculator monies. Invert the trend and you gain all the way to the bottom. Can we compare the two banks? Absolutely. BofA is on their fifth legal team now and losing on all settlement fronts. The staff let go are suing and the staff on board are wrangling to jump elsewhere (but can't see another ladder). Liquidating all the real estate loans is also liquidating all the capital reserves. By the time they actually fail, the likelihood of there being any assets at all are slim. The preferred stock takes what remains.

[flow5]

This seems to emasculate the thesis that a lot of large banks are easier for the FDIC to supervise & regulate than many small ones.

Just in: "The Federal Deposit Insurance Corp.’s list of “problem” banks fell in the second quarter for the first time since 2006 as the industry’s income improved and costs tied to bad loans eased"

www.bloomberg.com/news/2011-08-23/fdic-s-problem-bank-list-shrinks-for-first-time-since-2006.html


See also John Mason: "To me it is evident that things have changed in the financial industry. Over sixty percent of the commercial banking industry in terms of assets are in the hands of twenty five banks, and most of the activities of these banks are nowhere near what the activities of commercial banks were fifty years ago. And, most of this difference can be related to the advances in information technology"

=============

The commercial banking system functions like a black market - anything the bankers ask for almost always goes. If private profit institutions are to be allowed the "sovereign right" to create money, they must be severely regulated in the management of both their assets & their liabilities.

[flow5]

The FDIC should go after BOA just like it did when Continental Illinois National Bank and Trust Company (the seventh-largest bank in the United States) went bankrupt in 1984.

[jarhead1976]

Hidden lending! bloom.bg/qdCDuG#ooid=oxeXlxMjpO1fl5E4YuIP0yPylTZExZ-o

[usaone]

BAC up 11%. It's a great buy at 6.xx if you can stomach it.......