Bank of America Posts a $1 Billion Quarterly Loss
Bank of America last year acquired investment banking giant Merrill Lynch & Co., rescuing them from the ash heap of bankruptcy. Surprisingly on Wednesday they were rewarded with an outstanding earnings report from their investment banking dealings – but that’s where the good news ends.
Bank of America and its investors must feel good about their newly acquired investment banking business after the surprisingly pleasing earnings report. That however was followed two days later by Bank of America posting a $1 billion quarterly loss. Those losses can be directly attributed to continuing consumer credit trouble.
The fact of the matter remains that the credit markets are still very much under pressure due to decades high unemployment numbers. Any rebound of substantive quality must be precipitated by a recovery of jobs. It’s just that simple. Unfortunately the Outlook for job growth is rather dismal at this time.
B of A was extremely active over the past few years issuing credit cards to people with questionable credit ratings. They even caught a lot of heat for giving credit cards to illegal aliens. Their lax credit standards has now come back to haunt them in a big way and will continue to do so in the years to come.
Bank of America is the recipient of two taxpayer funded bailouts totaling a staggering $45 billion. The government funded largess falls in the same category as AIG… too big to fail. The huge banking conglomerate has pledged to repay those loans but have yet to pay back any of them.
They not only acquired Merrill Lynch last year but also the mortgage lending giant Countrywide, a firm that was knee-deep in subprime mortgages and on the brink of bankruptcy. As far as white knights go they leave something to be desired because Bank of America themselves haven’t seen a healthy balance sheet in quite some time.
Perhaps the next time they see a floundering business as a potentially good investment to acquire perhaps they ought to take a look in the mirror and start in-house first.
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