Posted on | August 24, 2011 | 9 Comments
Four years ago, Bank of America stock was trading above $50 a share. It’s now selling for less than $7 a share. And it may be worth a lot less like that:
The stock of a humongous American bank, Bank of America (BAC), is collapsing.
This is stoking fears that Bank of America will go bust, taking the whole economy down with it.
Why is Bank of America’s stock tanking?
Because the market thinks Bank of America is worth much less than Bank of America’s management says it is.
In fact, in what is fast becoming a formal law of bank-stock thermo-dynamics, the more the bank insists that everything’s fine, the more investors take this as a signal to run for the hills.
But Wall Street need have no fear — Tim Geithner is here!
There is a rumor circulated on Wall St. that JP Morgan will take over Bank of America within the week. The government will support the deal with a $100 billion investment in preferred shares issued by the combined entity. Alternatively, the government may guarantee the value of a large pool of Bank of America assets. The word is that Treasury Secretary Geithner has discussed the transaction with JP Morgan CEO Jamie Dimon.The “merger” would completely destroy the value of BAC’s common shares.
(Via Memeorandum.) So while Obama’s Treasury secretary bails out his big banker buddies on Wall Street, Obama and the Democrats are running around telling poor people to blame everything on Republicans and the Tea Party.