The World Might Never Know How Toxic Bank of America Really Is

BAC is in a constant state of patching its holes

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What’s Next for BAC Stock

Bank of America is trying a lot of things right now to right the ship — but they all involve trying to raise cash and trying to fend off lawsuits. Clearly Bank of America is not focused on growing its business or delivering shareholder value. No, BAC is scrambling to raise money just to keep the lights on and protect itself from bad debt and legal liabilities.

As I mentioned in a previous article about how broke Bank of America really is, the company is scrambling to raise enough Tier 1 capital to meet new regulatory requirements and still have enough cash to lend and grow its business in this difficult environment.

I freely admit I was bullish on Bank of America at the beginning of 2011. That was because, perhaps naively, I expected the economic recovery to continue gaining momentum and Bank of America to continue improvements in its core consumer lending operations. And while it’s true that some metrics in this core business continue to improve, the overall economic outlook is grim, and that means BofA is going to have a tough way out of the very deep hole it has dug itself thanks to the mortgage meltdown and Countrywide buyout.

Instability in Europe hasn’t helped, since any fears over debt and credit instantly hit the financial sector first and hit it hard.

Throw in a brutalized housing market with no bottom in sight and lingering 9% unemployment and you have the recipe for quite a disaster.

At this rate, the world might never know just how ugly Bank of America stock truly is right now — or at least, how ugly it was earlier this year. As the company tries to sell itself off for parts to unwind toxic mortgages on its balance sheet, you need a graphic calculator to compute the losses BAC has suffered and exactly what future profits it is shortchanging for a quick influx of capital.

Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.


Article printed from InvestorPlace Media, http://investorplace.com/2011/09/bank-of-america-toxic-assets-countrywide/.

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