Monday, August 8, 2011

Bank of America hit hard

Here is a story from MSN money that talks about today's market collapse and some reasons why Bank of America went down so hard. 

Why Bank of America tankedBank of America was the biggest loser among Dow and S&P 500 stocks, down 20.3% to $6.51. Investors worried the banking giant won't be able to handle all the problems created by its mortgage business. The selling accelerated after a big hedge-fund manager sold out his stake.

It's not clear if the collapse today of Bank of America's stock price means the government may be forced to extend assistance again. Most of its problems are mortgage-related and directly the result of its disastrous 2008 acquisition of Countrywide Financial.

It was hit with two bits of bad news today: American International Group (AIG) sued the company for more than $10 billion over what it called a "massive fraud" on mortgage debt, deepening the litigation morass facing the largest U.S. bank.

AIG said it expects to pursue other litigation to recover losses from counterparties that "sought to profit at our expense." Taxpayers still own 77% of AIG, which received $182.3 billion of government bailouts.

The other was that hedge-fund manager David Tepper, who won big in 2009 betting on battered bank shares, now is bailing out on some battered bank shares.

CNBC said Tepper’s Appaloosa Management sold its position in the banking company.

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