The Bank of America, America's largest bank, with more than 10% of ALL US deposits and with a valuation before yesterday of over 2 trillion dollars, plummeted 20% in yesterday's trading. By my math, that's actually closer to a 400 billion dollar loss, but I will defer to Bloomberg on this (in a moment).
The precipitous nose-dive was partly due to a lawsuit, announced yesterday by AIG, who is suing the megabank for mortgage-backed securities fraud.
From Bloomberg:
Bank of America Corp. (BAC)’s $33 billion plunge in market value over the past week has stoked concern that Chief Executive Officer Brian T. Moynihan needs to raise capital even as his options for finding it narrow by the day.
The lender declined 34 percent in New York trading from Aug. 1 through yesterday amid signs it may face more expenses tied to soured mortgages, and that a stagnating U.S. economy will curb revenue. The firm traded at 32 percent of its book value, the lowest among the 10 largest U.S. lenders, reflecting doubt about the true worth of Bank of America’s assets.
http://www.bloomberg.com/...
According to Bloomberg, the AIG lawsuit says that Bank of America and businesses it took over created more than $10 billion in losses on $28 billion in securities.
You can now buy a share of Bank of America for seven bucks and change! In 2006, they were trading at over $52 per share. (h/t qannabbos)
One humorous result of this is that because of the lawsuit, AIG and Bank of America are now accusing each other of reckless greed. Pot meet kettle.
From the San Francisco Examiner:
American International Group and Bank of America began volleying accusations of reckless greed at each other after AIG announced it is suing Bank of America for $10 billion. BofA denied selling AIG fraudulently overvalued residential mortgage-backed securities and charged that AIG “recklessly” chased high-return investments and knew the risks. AIG countered that is “disappointing but unsurprising” that BofA continues “to blame others for its own misconduct.”
http://www.sfexaminer.com/...
(big h/t to bubbanomics for the image)
UPDATE 1:
The US Market REGAINED TWO-THIRDS OF YESTERDAY'S LOSSES, today, closing up 429.92 points. Bank of America only rebounded a fraction of what it lost yesterday. Those jerks are still down tens if not hundreds of billions of dollars over the past 48 hours. Today's rebound is a nice BWAHAHAHAAHAAA to S&P, by the way, only cementing their partisan irrelevance. Cheers.
(h/t Shahryar)
UPDATE 2:
Bank of America tanked yesterday for another reason: It was the day an uber-successful, highly respected hedge-fund manager cashed out his 17 million shares of B of A. From CNBC (I swear the caps are not mine!):
WANTED TO FOLLOW-UP ON SOMETHING WE HAD BEEN MENTIONING EARLIER NAMELY HEDGE FUNDS BIG OWNERS OF THESE FINANCIALS AND BIG SUPPORTERS. ONE OF THOSE HAS BEEN APALOOSA RUN BY DAVID TEPPER. NOW THE NOTORIOUSLY QUIET SECRETIVE SO TO SPEAK TEPPER NOT HAVING ANYTHING TO SAY IN TERMS OF MY INQUIRIES. HOWEVER I CAN TELL YOU THAT I AM HEARING THAT THEY HAVE SOLD OUT OF ALL OF ITS BANK OF AMERICA SHARES. IT WAS A 17 MILLION SHARE POSITION
http://www.cnbc.com/...
According to other articles about the 'Tank of America', heh, having such a well regarded hedge-fund guru completely divest is a really, really bad sign to investors.