Is Bank of America About To Become THE Bank of America?

Bank of America‘s stock slid to a 20 year low today as investors became increasingly convinced that the bank would be nationalized. Share tumbled 18% early today, before climbing back up in the afternoon, says CNNMoney.

Bank of America announced that it would try to cut costs by selling 3 jets and an helicopter. Who exactly do they expect to buy these jets? Can Bank of America afford to offer jet financing to interested parties?

BofA (BAC, Fortune 500) is struggling to digest the acquisitions of Merrill Lynch and mortgage lender Countrywide, and nothing it has done lately has given investors reason to be hopeful.

On Wednesday, BofA said that to cut costs it would sell three of its corporate jets and a helicopter it inherited in the Merrill deal.

Meanwhile, pissed off investors are suing Bank of America for not protecting their interests when working out the Merrill Lynch deal.

Some are calling for [CEO Ken] Lewis to go next. Jerry Finger, an investor who owns more than a million shares of BofA through his Houston-based firm Finger Interests, has said in various interviews that he would like to see Lewis step down.

Finger, who could not immediately be reached for comment, is leading a class-action lawsuit against the company. In the complaint, the plaintiffs allege that Lewis and Thain failed to protect shareholder interests when hammering out the BofA-Merrill deal.

Bank of America or THE Bank of America? [CNNMoney]

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  1. Ash78 ain't got time to bleed says:

    It’s so weird to see these giant banks failing while a lot of community banks in my area are doing quite well. Under $1B in assets, usually 10 branches or fewer. Economies of scale sometimes only look good on paper, or in an investment banker’s presentation.

    • downwithmonstercable says:

      @Ash78: I agree with that. Three “big” local banks around my area – Banner Bank, Frontier Bank, and The Bank of Washington – are all doing awesome.

      It’s weird too that BofA is in this position. Six months ago, they were towering over all these failing banks, and were the strongest in the country. Now look at what’s happening…

      • B says:

        @downwithmonstercable: A lot of local banks have the advantage of not being in the secondary mortgage market, at least for buying. So they’re not stuck holding CDOs or MBSs, and any sub-prime loans they have are ones they made themselves. As long as the real estate market isn’t collapsing in your areas, the local banks should be fine.

        • downwithmonstercable says:

          @B: Yep exactly right. A lot of the local banks didn’t get into risky mortgages either. They all stuck with traditional 30 year fixed type deals. They trailed behind the big guys who were raking in the dough at the time, but I bet they’re feeling pretty good now.

        • Eyebrows McGee (now with double the baby!) says:

          @B: And if they made sub-prime mortgages, chances are they did it with someone for whom it was actually appropriate. Local lenders have a much better opportunity to know something about you and your situation and your real potential to repay, not just your on-paper numbers.

      • Tallanvor says:

        @downwithmonstercable: Yeah, my father’s bank in Southeast Washington is also doing fine – in fact the regulators just finished auditing them and said they’d be back in 18 months which means they consider the bank’s position to be very strong (normally banks get audited yearly, and banks that are in poor shape can see auditors every 6 months).

        Basically all of the banks that are having problems got into the CDO market. The smart ones saw right from the start that they were bad ideas and stayed far away from them.

      • Xkeeper says:

        @downwithmonstercable: Haha, Banner Bank. The Inlander ran an article two weeks ago about the bailout, and mentioned that Banner Bank was awesome for actually using the bailout money for its intended purpose (more credit in the market) instead of just sitting on it like some other banks in the region.

        If I hadn’t already gone with US Bank when I moved up here, I would’ve considered them :

        • downwithmonstercable says:

          @Xkeeper: US Bank was a good choice – they completely avoided the subprime loans and are now one of the top banks in the country, and are perfectly financially sound.

      • varro says:
    • plyhard13 says:

      @Ash78: It really does come down to greed. I have heard more than a few commercials from local banks announcing they are in great shape because they didn’t participate in the sub-prime mortgage debacle. The greed that contributed to these banks getting so massive is the same greed causing them to fail. To me, it doesn’t seem that much different than falling for the Nigerian scammers. They desperately want to be as rich as possible and they’ll do anything to get there, even if, in the back of their minds, they know it must be too good to be true.

    • lars2112 says:

      @Ash78: Community banks make loans to people they know, real people that walk into the branch and that have other accounts with them. The lendor knows the street they want to buy a house on, knows where they work and has a good ability to smell BS.

      BOA and the other big players have computer models that take basic information to determine your ability to pay.

      • failurate says:

        @lars2112: The smaller banks don’t manage too many of their own mortgages anymore. From my experience (worth?), they write the mortgage, then immediately sell it to a larger national bank. So they get to profit from the risk, without actually taking the risk.

    • Skiffer says:

      @Ash78: Enter the Community Reinvestment Act…

      For the past 20-30 yrs, in order for banks to merge, they needed a good approval rating from the CRA. They got this approval rating by promising to lend to low / middle income households – typically seen as high risk (subprime) – and we all know how the risk turned out.

      We had a regulatory culture that rewarded risky banks by letting them buy out other banks. Banks who avoided the higher risk could not merge…and remained the small “local” banks…that are now surviving.

      • Snarkysnake says:

        @Skiffer:
        I swear, If I hear another ignoramus blame the CRA for the plight of the big giant monster megabanks problems, I’m going to go postal.

        Get this through your thick skulls: The reason that these institutions are failing is because they were run into the fucking ground by the managements.You people blaming the CRA are just parroting the nonsense that you have been told to parrot by the talk show hosts that do your thinking for you. The CRA was passed in the fucking 1970′s .There were no subprime mortgages or CDO’s or Credit Default Swaps or third order derivatives back then. Mortgages had to have 20% (or more) down and reams ,REAMS , of paperwork to get done.When the risk from writing the mortgage was seperated from the loss on default is when the market went boom (via securitization). No bank has EVER been told to write a specific mortgage to anyone,anywhere.
        Even if they did,they could lay that mortgage off on the unsuspecting public via securitization. If they did write a loan that they didn’t like,they could sell the damn thing and be done with it.

        I am begging you, pleading with you, on my arthritic knees- Stop being so gullible and stupid and read something besides what you want to believe.

        • violettefay says:

          @Snarkysnake: It’s also important to note that EVERY bank has to follow the CRA — from the biggest of the big to the smallest community bank. They all do it, they all make loans to low and moderate income families, and yet the local banks don’t have the problems of the major banks. I can has logic?

        • lannister80 says:

          @Snarkysnake: Thank you!

        • mac-phisto says:

          @Snarkysnake: amen. this is starting to get around a lot (as in, it’s starting to hit my backwoods crappyass newspaper oped page) – who is peddling this nonsense?

          bankers want nothing more in this world than to eliminate CRA provisions altogether (except maybe the elimination of credit unions) – & b/c of a bunch of people that know nothing about banking, they’re going to succeed.

          • Snarkysnake says:

            @mac-phisto:

            “who is peddling this nonsense?”

            Okay, you asked, so I will name names.

            The dumbasses peddling this big lie are (in no particular order)

            Sean Hannity
            Rush Limbaugh
            Neil Boortz

            Of course there are others,but these three reach a lot of people daily.People that don’t want to take the time and effort to think for tehmselves.These guys have no accountability to anyone but themselves,soit’s easy to find a “them” to blame.In this case,it’s the low income borrowers that have benefitted from not being discriminated against.
            You need to know how these shows work. They VERY tightly screen callers to make the host look intelligent. If the caller starts making the host look like a liar or a fool,they “have to go to break” or the host starts talking and the caller “disappears” and is thanked. The people that believe this CRA BS are no better than the people that get their “news” from People magazine or Entertainment Tonight.

            Pick up a book,you zombies. Read. Learn.

            • hi says:

              @Snarkysnake: pick up a wikipedia and stop peddling your nonsense.

            • ADismalScience says:

              @Snarkysnake:

              Mortgages never “had to have” 20% down. Private mortgage insurance and the FHA have been used to originate low-equity mortgages for decades.

              It’s true that CRA was passed in the ’70′s, and that subprime/CDO’S/CDS’s didn’t exist then. Fair point. However, the creation of CDO’s and the CDS’s that insured their downsides interacted with that legislation to produce a regulatory culture of risk-taking. Subprime was incentivized by the Federal Government and in fact invented by it. The fact that the GSE’s had the underwriting advantage of an implicit Treasury guarantee exacerbated the risks undertaken by publicly-held banks as well.

              It hardly matters now. Debt assets are now failing irrespective of their quality. It’s become about far more than low-quality debt risk – it’s become about debt culture generally. A debt culture where, once again, the government is leading the charge of irresponsible practices and begging public banks to follow them into the abyss, taxpayer money in hand.

        • DaoKaioshin says:

          @Snarkysnake: Sigh. CRA was signed into law in the 70s originally but has been modified five or six times since then. Changes to it in the mid-90s do play a strong part in the financial crisis. No it’s not made up. No it’s not Republican conspiracy. Yes, there is question as to the extent of its influence as a cause.

          [en.wikipedia.org]

          • acknight says:

            @DaoKaioshin: Changes made in the mid-90s, per your link, only said that they had to use the same standards regardless of where the house/mortgaged entity was. Which included low-income housing and crappier neighborhoods.

            That’s not what caused us to get to where we are today – the large numbers of homes where it became profitable to walk away, because housing values plummeted in high flying neighborhoods, and where people lost their homes because they were lent more house than they could afford.

            No one said relax the standards to where everyone could buy a $500k+ home. Just use the same standards for everyone.

            • Snarkysnake says:

              @acknight:

              Right-O . If CRA had caused the meltdown we have seen, the first wave of these defaults would have begun in…About 1982-83. And there would have been multiple waves since then (after every revision). No,my friend,this crisis is a made on Wall Street disaster that all of the blaming it on the poor in the world won’t cover up.

              G-R-E-E-D . (Which ,when you takeout the hyphens,spells GREED) is what has caused this.

          • mac-phisto says:

            @DaoKaioshin: it’s true that there is a basis in fact here (don’t all great lies start with a basis in fact?) – GSEs set aside money specifically for CRA lending, but at no point were lending guidelines EVER reduced (nor were banks coaxed to relax standards) to meet CRA guidelines.

            i’ve been thru a CRA audit – let me tell you, it was a hell of a lot easier than most audits i’ve been thru. all you have to do is show “just cause” for denials (as in, ‘they didn’t met our lending guidelines b/c…’) & prove that you are soliciting business throughout the community (not just in the mcmansion district).

            now, i could see how the creation of a CRA pot at the GSEs could be used by unscrupulous lenders as a way to say, “great, let’s book a lot of shitty loans, pass them off to someone else & get our CRA gold star in the process!”, but what i don’t see is how that’s any different from an unscrupulous lender saying “great, let’s book a lot of shitty loans & pass them off on someone else!”

            i think it’s simply that a lot of loan offices were either filled with poorly trained people or people manipulating the system for approvals (regardless of a person’s qualifications or CRA considerations) for personal gain.

        • ideagirl says:

          @Snarkysnake: so well put you brought tears to my eye : )

        • Verucalise (Est.February2008) says:

          @Snarkysnake: No, really… why are these institutions failing??

          Just kidding. Thanks for the read, I didn’t even know about the CRA until this article sadly. I always assumed that greedy corporate mongrels approved shitty lending tactics and that’s how this country flew into a tailspin.

      • lannister80 says:

        @Skiffer: Lies. Entities like Countrywide, arguably the biggest offender in the entire subprime mess, weren’t bound by CRA since they aren’t traditional banks (or something like that).

    • varro says:

      @Ash78: Our house’s mortgage was with Homestreet Bank. 30-year fixed at 6.125% 3 years ago.

      Oh, and they actually checked our paystubs and tax returns as well as a credit report. No NINJA loans here.

      Funny how they’re still around…

      • Verucalise (Est.February2008) says:

        @varro: We just entered our first mortgage late 2007, they wanted EVERYTHING. Pay stubs, his military history, 3 years of tax returns, a year’s worth of cancelled checks to our landlord and a small blood sample to confirm identity. I’m sure I’m forgetting something, but pretty much all that.

        We got a 30 year fixed at 5.125%- We went thru SONYMA in New York. There was a special loan that combined a low interest regular mortgage that NYS was offering IF you had a VA certificate for a mortgage.

  2. theblackdog says:

    This makes me glad I jumped ship to USAA a few months ago because I was afraid of this.

    Now, if BofA would just send me my damn 1099 so I can do my taxes!!

  3. Yossarian says:

    Economy of scale seems to work OK for Wal-Mart, whether people like them or not.

    I’d tend to believe that the community banks were more conservative (i.e., sane) with their lending and acquisitions and that that is why they are doing well, rather than scale, as such.

  4. Yoko Broke Up The Beatles says:

    I don’t mean to tell BoA how to run their business, but if they stopped sending me (and the rest of America) applications for credit cards, they might save a few bucks on printing and postage.

  5. Corporate_guy says:

    That lawsuit is a joke, they are working for the share holder’s which is why they keep failing. The entire collapse of all the banks can be directly attributed to working for the shareholders. You think banks would have given out tons of crappy loans if they didn’t have to meet unattainable levels of growth to keep the stock high? NO. We should be suing the share holders of these banks for running all these companies in the ground because all anyone seems to be worried about is short term growth to keep stock always increasing. No one seems to cares if a 20% growth year means complete failure 2 years down the road.

    • Xkeeper says:

      @Corporate_guy: As opposed to executives who can make millions by pumping up values and then dumping the company soon after?

      Yeah, those $40,000,000.00 bonuses have no effect on how they have to run the company, no siree.

    • cromartie says:

      @Corporate_guy: I have bad news for you.

      If you have a 401k, IRA, or Mutual Fund, you are a shareholder by proxy.

      What are you going to do, sue yourself?

    • Anonymous says:

      disagree that they are working for the shareholders. It is thier greed for big bonuses that led them to taking these huge risks. Now, it’s the shareholders that are left holding the bag of crap, while they walk away with millions in bonus money.

  6. 269InchDiagonal_GitEmSteveDave says:

    Well, I guess I’m kind of glad they laid me off two years ago. I still wish I was with MBNA, but hey, what can you do.

  7. Blueskylaw says:

    They hit $3.77 a share at 9:50 in the morning. A year ago you could have bought it for $43.00.

    If the bank is nationalized, even the people who bought at $3.77 will most likely be wiped out.

    Imagine what your late fees/charges/expenses will be then.

  8. BonnibelDowell says:

    Let them fail.
    I know, I know, it will be bad. But will it be worse than being on the hook for a bad bank that lives on, zombie like? Controlled by politicians?

    • Anonymous says:

      @BonnibelDowell: Actually, that’s the last thing you want to do. 1 in 2 Americans banks with BofA (yes, it’s in an advertisement, but it’s actually true)– whether through credit cards, IRAs, mortgages, or plain old checking accounts. And think about the people who have relationships with Countrywide and Merrill– that probably covers a decent number of the people that DON’T have relationships with BofA directly. Think about the ramifications that would have.

  9. ClutchDude says:

    Actually, it’ll be the the THIRD back of America.[en.wikipedia.org]

    Thank goodness Andrew Jackson is not around to hear this. Or maybe it would be good if he was. I seem to remember him smacking the crap out of folks and promising to hang bank owners.

    Just don’t tell him that we still have Native Americans.

    • zark169 says:

      @ClutchDude: Also, I seem to remember some government regulation coming out of that event that essentially declared the US government couldn’t run or own any banks. I may be remembering completely wrong, though.

  10. thebluepill says:

    Lots of good points on community banks.. My two Local Banks wanted 20% down when I was looking for a mortgage several years back, a national bank only wanted 1% down..

  11. nicemarmot617 says:

    I will buy your helicopter for about $3.50, BOA. Call me!

    • tripnman says:

      @nicemarmot617: I’ll double nicemarmot617′s offer to $7, but if you pay late – FEES FEES FEES! Heck, I’ll even consider not closing my accounts if you throw in a jet (but I’ll need you to cover parking).

  12. shadydentist says:

    Maybe this will help BOA improve their craptastic service.

  13. mmcnary says:

    According to Mariner Kemper of UMB, there has been a ‘flight to quality’ from investors. They are looking for stability, not fast bux, and the local/regional banks that didn’t fall for the CDS and MBS scams are making out like bandits.

  14. Sebastian Krywult says:

    bank of america isnt even in the article you guys cited

  15. laserjobs says:

    NATIONALIZE THE BANKS NOW!!!

    Shareholders and bondholders should not be receiving taxpayer money.

  16. Mary Marsala with Fries says:

    What, you mean buying out everyone as quickly as possible ISN’T a sustainable business model? o.0

  17. ForrestWhitakersLazyEye says:

    Oh, the irony…

  18. Triterion says:

    Wait… so Bank of America is having trouble with their purchases of Merrill Lynch and Countrywide? Wow, that kinda sounds like a lot of Americans that have been buying up everything they could think of the last several years… maybe they should have frozen their own credit card in a block of ice.

  19. thetango says:

    Wasn’t the CEO of Bank of America on 60 Minutes just a few months ago touting his bank and saying that it didn’t really need the bailout money?

  20. hairyseaword says:

    How would this effect BOA customers?

    Is a nationalized bank going to cancel my credit card? Will bank tellers be replaced by armed federal goons? Will I have to put a quarter in the meter when I park?

    • humphrmi says:

      @hairyseaword: No, but it will make Hugo Chavez laugh.

    • jhwnissan says:

      @hairyseaword: It’s a very bad thing because government has a hard enough time regulating and operating itself. Then you try to give them control of the banks or any other companies, they WILL run it into the ground. AMTRACK, the IRS, even your local DMV or Secretary of State office is proof enough that having the government run a business or arm of itself seems great at the time but does nothing good in the long run.

  21. kwsventures says:

    Question: Why hasn’t the board fired Ken Lewis? What exactly does it take to get rid of someone that has driven BAC into the dirt? Moreover, Lewis should do the right thing and just quit.

  22. RogueWarrior says:

    What worries me about the go’ment owning controlling interest in the banks is that they can screw around with lending policy. “Oh, you’re a poor high-school dropout? Sure you can have a low-interest home loan and a 50-inch plasma TV.” “Oh, you’re a (supposedly) highly paid doctor, well you can afford a higher interest rate. Have a mint on your way out. No, I won’t validate your parking. You can afford it.”

    • orlo says:

      @RogueWarrior: Don’t worry, the government has always favored the wealthy. Banks for example can borrow through the govt. at near 0%; not much chance of drop-outs and doctors getting that deal. And if you’re a doctor and your W-2 shows more income than you are getting, I’d report your hospital to the IRS.

  23. vastrightwing says:

    I understand that a failing bank will hurt people, BUT I am very happy to see BoA fail big time like they tried to screw me several times. I kept hoping that BoA would fail and the top executives would also fail. I guess karma does eventually come around to those who deserve it. Greedy execs and corporations, now that you’ve scammed your customers, it’s time to face your own fates. I hope you loose all your possessions and end up in the street. There, I said it.

  24. Swizzler121 says:

    let them go through bankruptcy. a free market only works if you follow the rules.

  25. wrekxx says:

    So, I worked for BofA up until October. I spoke with management of my department and they assured me that we were not insolvent and that we were in a better position than other banks because even with the purchases of merril and countrywide the portfolio was diverse and the toxic debt that they had was taken off from the purchase price. Meanwhile the talk around the water cooler was that if it wasn’t for the purchase of MBNA that insolvency was a concern. An alleged 3 trillion in assets when I was first employed. Still have some friends that work there and they say that incentive pay and spirit points ( a type of point system where items can be bought like a store, points given as kudos for a job well done) are gone so any incentive to go above and beyond for the customer has evaporated. I was in fraud. The management… think high school but less mature. They are finding any reason to fire people in my old department without written warnings or writeups. Fraud is loss prevention and directly benefits the bottom line and this is the type of department they are making cuts in. Two possibilities, this is a great time to buy or abandon ship. I still hold accounts but they are plenty below the FDIC limit. Just thought I’d share a little about the corporate culture there. Funny thing is is that I used to be proud to work there. I thought we were about pleasing the customers which would please the shareholders which would pleas the employees. Then I learned that it was more about office politics CYA and doing as little as possible.
    step 1. Corruption
    step 2. Nepotism
    step 3. ???
    step 4. profit (or in this case loss of)

  26. Etoiles says:

    *sigh*

    I opened a linked set of checking and savings accounts at BayBank, in Massachusetts, in 1994.

    BayBank became BankBoston.
    BankBoston became Fleet.
    Fleet became Bank of America.

    And so far, my little checking and savings accounts have been hanging in there. I have 6 leading zeroes on my account number now, but it’s still there and it still works, and I still get surprisingly good service on it at the rare times when I need service. And my bank has been there for me in the 9 (!) states I’ve regularly visited, worked in, or lived in during the last ten years. And my bank has been there when my fiancé’s bank went under.

    Now do I have to jump banks, too? I am getting sick and tired of this bullshit.

    /rant

  27. Dan Seitz says:

    So, I’ve got to ask: if BoA gets nationalized, what happens to my credit card with them? Do I just owe ‘em the money and they’ll close the thing, will it go on as before, what?

  28. meechybee says:

    Alexander Hamilton must be giggling in his grave,