Bank of America dropped 4.1 percent to $4.99 at 4:15 p.m. in New York, the worst showing in the Dow Jones Industrial Average, after falling as much as 5.4 percent, the most in more than a month. The lender has plunged 63 percent this year.
European regulators are struggling to quell concern that their lenders may be hurt by the sovereign-debt crisis. For Bank of America, a sustained decline below $5 could reduce its appeal to investors, said Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4 billion in Raleigh, North Carolina, including Bank of America shares.
“As active managers, we have screens that usually prohibit us from buying stocks under $5,” Teal said in an interview, citing the greater volatility and risk of such equities. “If we own it, we would not kick it out automatically, but generally we tend to avoid stocks like that.”
Bank of America shares have been pummeled as bond buyers and insurers demanded the company repurchase soured mortgages made by Countrywide Financial Corp., the home lender acquired in 2008 whose lax underwriting contributed to record U.S. defaults. Concern has also focused on the impact that a sovereign European default could have on the world’s largest financial firms.
No secret here that B of A has too much exposure to a European implosion, as do the rest of the big banks in the US. But there's still Foreclosuregate to deal with, and the two combined mean this bank is in real trouble.
Enough to be in $5 freefall and falling. Could this be the trigger event that causes the Fed to step in? Can the Fed even try to step in without the Republicans literally trying to string up Helicopter Ben? And how bad will it get before the Fed is allowed to do anything about this mess?
2012 will show us these answers and more, I suspect.
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