What Happened to Bank of America?
Oct 6, 2008
Posted by Jody Eisenman | Filed under crisis
In a rather startling announcement, Bank of America announced after the close that they were cutting their dividend in half. B of A, along with Wells Fargo and JP Morgan, is considered to be one of the “safe” top tier banks in the world. In addition, the company announced earnings of 15 cents/share vs. analyst expectations of 61 cents. The stock, which fell 6.5% today, dropped another 10% in the after market. In order to shore up their balance sheet, B of A also announced a $10 billion raise through a secondary offering. The last large secondary offering in this market was by General Electric last week. Following that offering, GE dropped to an 11 year low.
The fact that one of the big three banks is feeling the heat is very worrisome to me. It reminds of when the New York Mets traded “the franchise”, Tom Seaver. As one of the players said later “If they’re gonna trade Seaver, what value do we have”? We might ask that same question today about the Bank of America.
October 7th, 2008 at 1:57 pm
I’ve got several hundred thousand dollars in small unmarked bills. Can you invest it for me. Remember….. I don’t like losses. Ciao
October 7th, 2008 at 2:50 pm
If BoA goes under will the Fed save them?
October 7th, 2008 at 6:55 pm
If you’re asking about money you have deposited there, then you are protected up to FDIC limits.
If you are asking about the stock, I think a bankruptcy by B of A would be catastrophic to the entire financial system. The Fed would be forced to find another bank to buy them. Absent that, it would probably make today’s market action look like a walk in the park.