BofA to meet bailout needs, but chal­lenges re­main

La­hore, Is­lam­abad, Karachi Wed­nes­day, De­cem­ber 08, 2010, Muhar­ram 01, 1432

The Pak Banker - - Front Page -

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

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