BofA to meet bailout needs, but challenges remain
Lahore, Islamabad, Karachi Wednesday, December 08, 2010, Muharram 01, 1432
NEW YORK: Bank of America, mired in scandal and facing potential losses over its alleged mishandling of mortgages, now says it will be able to fully leave its taxpayer bailout behind.
Whether the nation will soon escape its own bad experiences with Bank of America - - not least, a spate of allegedly unfair and improper foreclosures --remains an open question.
The country's largest bank by deposits, B of A has one final task to complete before it can shake off the influence of the bailout program known as the Troubled Asset Relief Program: It still must raise $3 billion in additional capital as a reserve against future losses, even after repaying its $45 billion TARP bailout. According to a Financial Times report, the bank has told the Federal Reserve that, by selling various assets, it will be able to reach the $3 billion goal by the end of the year.
But even if the bank follows through on that pledge, its future remains uncertain, and that poses myriad risks for a still weak American economy. As a major source of finance in virtually every sector of commercial life --directing loans to small businesses, and mortgages to homeowners --Bank of America's willingness to extend credit influences the vigor of the broader economy.
And whatever the strength of the bank's balance sheet, its starring role in the national foreclosure crisis has reinforced questions about whether its taxpayer-financed rescue has delivered adequate dividends for ordinary people.
After admitting that it employed "robo-signers," who approved thousands of foreclosure documents without even reading them, the bank temporarily halted its foreclosures nationwide, and it now faces a federal rackteering lawsuit. Reports emerge regularly of the bank's botched foreclosures --New York Times' Joe Nocera recently told the story of an elderly woman who almost lost her home through the bank's sheer sloppiness. As evidence mounts that the mortgage company Bank of America owns didn't properly transfer crucial documents when it sold mortgages to be transformed into securities, investors are demanding their money back. To top it off, WikiLeaks could soon unearth further examples of the bank's questionable practices.
As experts estimate that banks may be forced to buy back $179.2 billion worth of securities, troubles for the industry are far from over.
"Bank of America may be able to do some deals just now, to get itself off the TARP hook, but Bank of America going forward, along with the major banking systems as a whole, that's a big question that nobody really knows the answer to," said Mark Blyth, a political science professor at Brown who specializes in finance. -PB News