Bank of America Is in Deep Trouble and There May Be Financial Disaster on the Horizon

[marmar]

AlterNet / By Joshua Holland

Bank of America Is in Deep Trouble and There May Be Financial Disaster on the Horizon
Its stock value has dropped 40 percent since April, and the bank is mum on what losses it's hiding on its $2.3 trillion balance sheet.

November 11, 2010 | Will Bank of America be the first Wall Street giant to once again point a gun to its own head, telling us it'll crash and burn and take down the financial system if we don’t pony up for another massive bailout?

When former Treasury Secretary Hank Paulson was handing out trillions to Wall Street, BofA collected $45 billion from the Troubled Asset Relief Program (TARP) to stabilize its balance sheet. It was spun as a success story -- a rebuke of those who urged the banks be put into receivership -- when the behemoth “paid back” the cash last December. But the bank’s stock price has fallen by more than 40 percent since mid-April, and the value of its outstanding stock is currently at around half of what it should be based on its “book value” -- what the company says its holdings are worth.

“The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet,” wrote Bloomberg columnist Jonathan Weil, “is that it’s largely impenetrable.” Nobody really knows the true values of the assets these companies are holding, which has been the case ever since the collapse. But according to Weil, some of BofA’s financial statements “are so delusional that they invite laughter.”

Weil points to the firm’s accounting of its purchase of Countrywide Financial -- the criminal enterprise at the center of the sub-prime securitization market. Bank of America, Weil notes, hasn’t written off Countrywide’s entire value. “In its latest quarterly report with the SEC,” he wrote, “Bank of America said it had determined the asset wasn’t impaired. It might as well be telling the public not to believe any of the numbers on its financial statements.” ...........(more)

The complete piece is at: http://www.alternet.org/economy/148817/bank_of_america_is_in_deep_trouble_and_there_may_be_financial_disaster_on_the_horizon/

[dgibby]

1. Oh, goody! They have my mortgage. n/t

[LittleGirl]

5. And ours.

do we root for them to go down or pray they survive?

[DCKit]

2. The other shoe. n/t

[Mr. Mustard]

3. Shrewd Business People They Are They

will probably increase checking and ATM fees, then require parking fees and fees to talk to employees.

They will then find more ways to encourage mortgage late payments where they can charge more fees, then pay someone to repossess the homes, and sell them for a third of what they are worth.

Then they will say it is all our faults for not being able to pay our mortgages and all the extra fees, as they drive their customers away.

But heaven forbid, they announce they will renogotiate all loans, stop foreclosures and give free checking and services to anyone who will open accounts with them. Then they announce no bonuses for 5 years and pay cuts for a management lower and upper levels while asking for reorganization and develop a plan to get out of debt.

This is the failure of capitalism which only us hippies will speak openly about. The short term gains of upper management prevents any long term thinking and planning.

Why would a manager take the long term approach if it will cost him his or her annual bonus?

The profit motive is the great disincentive just as it is the great incentive.

In the meantime trillions are lost and millions of living breathing honest people lose all their stuff, just so a few people can have more money than they need.

BOA has my mortage. Do I root for their failure or survival?

I hope they go down......in flames. I see no other way than for collapse. No one will hold them accountable, so it will never change.

[ladywnch]

4. couldn't happen to a better group of thieves. start the popcorn. n/t

[saras]

6. So what?

Could someone please explain to me in real-life terms, not religio-economic abstractions, why I should give a flying copulation whether the 'financial system' goes down in flames?

From all my study of economics and political science, it seems that it would be a good thing all around, with no negative consequences we couldn't buffer with a few sensible decisions (admittedly sensible decisions are in short supply, but that's a different issue).

[jaybeat]

7. I'm no expert, but...

It's generally explained in terms like:

• If banks collapse, individuals and businesses won't be able to borrow money, so they won't be able to buy things, so the people who make and sell those things won't have jobs.
  
• If the financial system collapses, the money in your paycheck may not be worth a predictable amount. (Hyperinflation, deflation, etc.) Uncertainty will mean those with extra cash will buy gold and stick it under their mattress instead of buying stocks and bonds which help companies manage cash flow, buy stuff and keep people employed.
  
• If the financial system collapses, the government may have trouble selling or maintaining its debt, which, if it ends up that the people who buy the debt decide to do something else with their money, and the government has to repay all the debt quickly (instead of endlessly rolling it over), then the government could go broke. If it prints enough money to pay its debts, then the danger is hyperinflation (where our money isn't worth anything).
  

That said, I agree that there are "sensible decisions" (not rewarding banksters for their crimes, government take over of troubled institutions, handling things like the S&L crisis was handled, etc.) that no one is talking about. Presumably that's because the goal for those in the top 1% is to maximize benefits for themselves, and screw the rest of us. Banana republic, disaster capitalism, etc. Like how they're trying to sell us the "solution" to government debt is to gut social benefit programs, when those programs aren't the problem.