Bank of America is a behemoth beyond control. The destruction of shareholder value in its recent history is shocking. The Wall Street Journal reported on Oct. 19 that the bank has spent $148 billion on acquisitions since 1998 and today its market value is only about $65 billion.
Bank of America is also a badly managed bank. In 2008, Ken Lewis, then the chief executive officer, agreed to pay about $4 billion to buy Countrywide, a disastrous foray into mortgage origination and distribution that will probably end up costing shareholders more than $60 billion. Eric Schneiderman, the New York state attorney general, is calling for a full investigation of mortgage abuses; egregious and allegedly illegal behavior at Countrywide must be very much in his sights.
Lewis bought Countrywide after a year’s worth of due diligence -- what was he thinking? -- and then grabbed Merrill Lynch over a weekend in September 2008, apparently without much thought. Significant additional losses were the result.
Bloomberg News reported on Oct. 18 that regulators have allowed Bank of America to move highly risky derivatives contracts -- and the associated downside risk -- from Merrill Lynch into the insured retail deposit-taking part of the bank.
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