Bank of America

Article Index

166 Trillion Reasons Why Bank Stocks Are So Cheap

By , Global Credit Strategist, Money Morning • @MichaelELewitt -

My continuing search for sectors of the stock market that are trading cheaply and offer the potential for gain has led me to a controversial slice of the market: bank stocks.

Looking at the "Big Four" in the U.S. banking sector, it's easy to conclude that the sector is undervalued...

But that conclusion may be a bit misleading.

Make no mistake - by traditional measures banks look cheap, and their stocks could do fine until the next financial crisis.

But that's the problem. Looking at banks that way ignores the elephant on their balance sheets, and the potential damage to our portfolios.

Here's what's really driving this critical economic sector into a "buyer beware" investment category...

That Warm Air You're Feeling Is the Big Banks' Stinking Bad Breath

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

I can't figure out where that warm breeze is coming from.

Oh, it's the air of confidence wafting over me knowing everything's as it should be with our too-big-to-fail banks, and that they're not going anywhere.

The big banks are safe, they have a handle on their assets and liabilities, and the Fed's stress tests are a warm blanket that lets us all sleep well at night.

What, you're still worried?

Bank of America (NYSE: BAC): Someone from This Fraud Machine Needs to Go to Jail

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

Last week Bank of America (BofA) got slammed by the Consumer Financial Protection Bureau for fraudulent marketing and sales of "add-on" products.

The CFPB found that they had ripped off credit card customers by selling them identity theft protection and credit protection programs, without ever actually providing much of anything.

Read all about BofA's shady marketing practices... the other banks that have also engaged in fraud...

and why someone needs to be locked up for it...

CHART: The Ridiculous Amount of Money Big Banks Spend in Settlement Costs

By , Associate Editor, Money Morning • @TaraKateClarke -

The amount of money big banks have spent on settlements in just the last four years will blow your mind - and these totals are about to get higher.

In December, U.S. Attorney General Eric Holder told Reuters the Justice Department plans on bringing civil mortgage fraud cases against "several financial institutions" sometime in early 2014.

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Bank of America and JPMorgan, Oh How Illegal Activity Pays

By , Managing Editor, Money Morning -

What a surprise. The big banks are not playing by the rules -- the rule of law, that is.

News last week revealed that Bank of America Corp. (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM) are dirty, dirty, dirty.

The Justice Department announced that it is pursuing a civil lawsuit against Bank of America on the grounds that the bank lied about the quality of the mortgages underlying its mortgage-backed securities (MBS) prior to the housing collapse and financial crisis. The Justice Department is still on a high from its successful civil lawsuit against Goldman Sachs Group Inc.'s (NYSE:GS) mid-level toxic securities shill, Fabrice Tourre.

The charges allege out-and-out fraud in Bank of America's soup-to-nuts loan origination and securitization of mortgages. Loans, bad from the start, were knowingly bundled and securitized into trade-able MBS, unbeknownst to buyers.

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Bank of America (NYSE: BAC) Takes Huge Step in Fixing Its Mortgage Mess

By , Contributing Writer, Money Morning -

About five years after the housing market crumbled, Bank of America Corp. (NYSE: BAC) has taken a major step toward resolving federal allegations it had improperly handled mortgages.

The Charlotte, N.C.-based bank announced today (Monday) it had reached a $10.4 billion settlement with federal mortgage issuer Fannie Mae, resolving all of Bank of America's disputes with Fannie.

BofA, which had been one of 14 banks negotiating with federal prosecutors over foreclosure abuses, settled its battle with housing finance giant Freddie Mac in 2011.

Under the latest settlement, Bank of America will pay $3.65 billion to settle claims related to the sale and delivery of certain residential mortgage loans. Plus, the bank will repurchase at a discounted price $6.75 billion worth of residential mortgage loans it sold to Fannie Mae.

BofA also said it has agreed to sell the servicing rights on some 2 million expensive residential loans, worth about $306 billion, that are chipping away at the value of the banking giant's stressed portfolio.

In a statement, Bank of America CEO Brian Moynihan said, "Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time."

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Here's Another Genius Mortgage Idea From Washington That Is Going to Cost You

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

Now here's another good idea from the geniuses that ruin, I mean run, our country.

The Obamarama administration really wants to help homeowners whose homes aren't worth what they borrowed to buy them. In other words, they are "underwater."

A lot of the loans to homeowners that are underwater are owned outright or, at a minimum, insured (more often both) by Fannie Mae and Freddie Mac, the government-sponsored (which means taxpayer saddled) enterprises that the government had to take over when in 2008 they lost on their trillion-dollar bets that home prices would go up forever. Geniuses!

In fact, these geniuses own or insure close to half of all home loans in the United States. Obviously, they like to bet big. But they didn't bet alone. They had betting partners.

The casino was the whole country and the whole system.

The mortgage originators, prime and subprime lenders, banks - everyone was handing out loans because, get this, they wouldn't be responsible for the loans they were making. Fannie and Freddie were buying them all up while the guilty parties would make money as Fannie and Freddie pipelined more products to - guess what - make more loans!

In case you forgot, that's where all the money came from in the whirling dervish derby that fed the mortgage bubble and aided and abetted Alan Greenspan's how-low-can-you-go interest rate policies. I guess we can call him the Big Pit Boss. But I digress...

So, if Fannie and Freddie own your loan and you're underwater, they have been cattle-prodded by the geniuses above them (yep, government geniuses) to let you refinance at a lower rate (lower than the crushing, sucker's rate that ballooned on you).

Because, as an investor (that's what home buying really is - an investment, not a right) you made a go-for-broke bet at the table and forgot your basic math. Math that says, "One, plus the none that I have, equals three, so this is a good bet I can double down on and retire."

What will these geniuses think of next?

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The Real Crooks Are The Ones Who Perpetrated This Scam - Not The Shareholders

By , Money Morning -

Haters of the big banks cheered when Federal prosecutors decided to sue Bank of America (NYSE: BAC), alleging that they defrauded Fannie Mae and Freddie Mac of at least $1 billion.

But they shouldn't have. Because no matter how satisfying it might be to see justice done after the financial crash of 2008, the truth is the real crooks have already gotten away.

Now four years later, the only people that will suffer will be the bank's unfortunate shareholders, not the bad guys who perpetrated the scams that cost a fortune during the mortgage meltdown.

After all, this wasn't the first lawsuit filed against Bank of America in this mess.

Last year the Federal Housing Finance Agency filed suit against the bank for similar offenses. And in February the bank agreed to a $1 billion settlement of a case brought by the Brooklyn attorney's office claiming fraud on guarantee claims against the Federal Housing Agency.

Also in February, the bank and five other mortgage lenders combined to agree to a $25 billion settlement of claims over mortgage fraud.

Now, according to estimates by Credit Suisse, the final cost to Bank of America of all the lawsuits relating to mortgage fraud during the bubble will come to around $40 billion.

And guess where that will come from?...

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Why the U.S. is Suing Bank of America (NYSE: BAC)

By , Contributing Writer, Money Morning -

Long after the disco era, Bank of America Corp. (NYSE: BAC) was still singing "Do the Hustle."

So the federal government alleges.

U.S. regulators maintain BofA, the second biggest U.S. bank by assets, and its partner in crime, its Countrywide Financial Corp. unit, burdened taxpayers with hordes of losses by misrepresenting the quality of home loans they sold to Fannie Mae and Freddie Mac.

In federal court in Manhattan on Wednesday, the Justice Department slapped BofA with the suit, seeking damages of at least $1 billion claiming mortgage fraud.

Filed under the False Claims Act, the lawsuit also threatens to impose steep fines and could provide for three times the damages suffered by Fannie and Freddie, a penalty that could swell to more than $3 billion.

The complaint claims that in 2007, ailing Countrywide, saddled with revenue shortfalls as the subprime mortgage markets came tumbling down, did away with background checks on loan quality in a process streamlining effort dubbed "the Hustle," short for the acronym HSSL-High Speed Swim Lane. According to Countrywide documents, the program's mantra was "move forward, never backward."

Meanwhile, the bank gave surety to Fannie and Freddie that it was strengthening its underwriting guidelines.

The move by the U.S. government is seen as a means to help it foot the hefty costs linked to the 2008 bailout of Fannie and Freddie.

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Mortgage Settlement Just the Start of Trouble for Bank of America (NYSE: BAC) and Friends

By , Associate Editor, Money Morning -

The biggest U.S. mortgage lenders, including Bank of America Corp. (NYSE: BAC), finally reached a $25 billion mortgage settlement to help homeowners - but the banks still face years of legal battles and billions of dollars in costs.

The provisions to the mortgage settlement include:

  • $5 billion total in cash penalties, payable to borrowers, states, and the federal government.
  • $20 billion in additional aid, through reducing homeowners' loan balances, and refinancing for underwater homeowners who are current on their loans.
Bank of America will pay an additional $1 billion to settle claims that it inflated appraisal prices from 2003-2009.

The multi-billion dollar mortgage settlement ends state and federal investigations into improper foreclosure procedures (like robo-signing), but banks can still get hit with criminal enforcement actions due to lending practices and mortgage-related securities.

"It's a big check with narrow immunity," Paul Miller, an analyst with FBR Capital Markets and a former Federal Reserve examiner, told Bloomberg News. "You get the state attorneys general off your back, but you're not getting immunity from securitizations, which could come with their own steep cost down the road."

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Money Morning Mailbag: Tobin Tax the Only Solution to Problems Posed by High Frequency Trading

By , Associate Editor, Money Morning -

An episode of the television news program "60 Minutes" that aired Oct. 10 highlighted investors' fears over the growing trend of high frequency trading (HFT) run by a world of "supercomputers."

The "60 Minutes" piece prompted this letter from a reader wondering if the technological shift means it's time to readjust investment strategy.

Sunday night on "60 Minutes" they had a story about high-speed computers that are out-trading humans. Is it time to refocus on the world stage and find tangible rather than paper investments to put your money in? A partnership in a retail or manufacturing venue surely is more transparent than the stock market.

--Roman

Money Morning has been examining the effects of high frequency trading for years. In August 2009 Contributing Editor Martin Hutchinson said high frequency trading systems were front-running the market.

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De-Coupling Back in Vogue as Emerging Economies Outshine the U.S.

By , Contributing Writer, Money Morning -

While the U.S. economy is struggling to break its slump, growth remains strong in other places around the world - so strong, in fact, that analysts are breaking out a term that's spend much of the past two years on the shelf: De-coupling.

U.S. gross domestic product (GDP) will meandered along with a meager 1.7% expansion in the second quarter and is expected to grow by less than 2% for the full year.

Meanwhile, Brazil's GDP is on pace to expand by 7.5%, India's economy is projected to grow by 8.5% and China's economy is expected to grow by 9.5% this year.

Emerging market economies are moving ahead at such a brisk rate that their combined GDP will be bigger than developed countries by 2015, according to the World Bank.

Now, the biggest Wall Street firms - including Goldman Sachs Group Inc. (NYSE: GS) Credit Suisse Group AG (NYSE ADR: CS) and Bank of America (NYSE: BAC) - are betting that the global economy has de-coupled from the United States, and will shake off any slowdown in the world's largest economy.

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Six Stocks That Should be on Every Investor's 'Don't Buy' List

By , Contributing Writer, Money Morning -

With more than 8,790 publicly traded stocks on U.S. exchanges and another 7,000 or so listed on the OTC Bulletin Board and the pink sheets, it's not particularly difficult to find stocks you wouldn't want to buy. It's not even that hard to find stocks with numbers so bad they're good short-sale candidates.

What's really hard is recognizing companies whose shares seem like they might be bargains, but that actually have subtle or hidden problems. These stocks truly belong your DO NOT BUY list.

A good example is Bank of America Corp. (NYSE: BAC). The financial sector was among the leaders as the market rallied from its July lows, but BAC didn't add much to the advance. In fact, after a brief bounce, it tumbled to a 12-month low of $12.18 on August 30 - a far cry from its October 2007 high of $52.71. Still, it looks like the stock built a solid technical base during the early September market upsurge and could be poised for a breakout if its earnings, due out Oct. 20, beat expectations.

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