Bank America — the largest US bank, posted a giant $1 billion loss. Note that this was not caused by subprime/toxic assets, but by run-of-the-mill consumer defaults.

The negative consumer losses were offset in part by trading profits from the Merrill Lynch division. (No word if the Countrywide acquisition contributed anything to the quarter).

Near 10% unemployment and record foreclosures have hurt the largest U.S. consumer lender.

Category: Credit, Earnings

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

25 Responses to “B of A loses $1B on Consumers Defaults”

  1. Bruce in Tn says:

    http://www.bloomberg.com/apps/news?pid=20601080&sid=amOuOzJDVtFE

    Japan Air Has Record Weekly Drop; S&P Cuts Rating

    Oct. 16 (Bloomberg) — Japan Airlines Corp., seeking its fourth state bailout since 2001, completed a record weekly drop in Tokyo trading and was downgraded two levels by Standard & Poor’s on concern it may issue new shares to pare debts….

    …B of A has huge loss, and this story about JAL makes me wonder if this is the future for some US companies spared by the government bailout. Went to a party last night, and talked with my CPA friend who oversees a large loan portfolio for middle and eastern Tennessee. One of the things we talked about, that I hadn’t considered, was that he STILL thinks GM is destined for the ash heap. Doesn’t think that the government bailout will save them. Could we step in again and again for these companies? Right now it appears that hasn’t been ruled out by our leaders. Multiple interventions until we are completely burnt toast….?

  2. Bruce in Tn says:

    http://money.ninemsn.com.au/article.aspx?id=876431

    Banks face big rise in capital holdings

    “New rules that require banks to do more to protect themselves against trading losses will force them to increase their total capital holdings by an average of 11.5 per cent, according to an impact study by the Basel committee on banking supervision.”

    …My buddy also thinks this will doom some smaller banks that would have otherwise made it…

  3. wally says:

    “…offset in part by trading profits from the Merrill Lynch division”

    In a natural world, all the banks who are trading against each other cannot all have profits. Think about it.

  4. Winston Munn says:

    Quantitative Greasing didn’t work.

  5. clawback says:

    Sounds like another “green shoot”! This is good for another 100 points on the S&P, no doubt.

  6. Free Market Extreemist says:

    Barry – I understand you are trying to paint a negative picture but you should quantify the numbers you use and put them into context.

    BOA posted a loss of $1 Billion – What is the total amount of loans they have outstanding?

    ~~~

    BR: You understand little, least of all my motivations. I am calling it as i see it, and last I looked a billion loss in a quarter was a boatload of money.

    Let’s put a cancerous tumor into context — its only a few grams relative to a 200 pound man.

    Its a loss of a billion dollars —

    That line of bullshit your are spinning was the same crapfeed that Ben Stein tried. (Recall how he argued in 2005 how small subprime was relative to GDP).

  7. clawback says:

    Extreemist,

    How do you “quantify” numbers?

  8. Mr.Sparkle says:

    BR –

    Wally @ 8:26 makes an interesting point and one that has been bubbling around in my sleep-deprived head for weeks now:

    Who is on the other side of these trades that are making the IBs such great profits? Futures/options/CDS are zero-sum games which implies *someone* has been taking massive losses but you rarely hear about these. So who’s been taking them? (Aside from AIG.)

    Taking it a little further, it is received wisdom that equities are considered to be a non zero-sum proposition but near as I can tell this is because the dividend yields along with the possibility of a future bagholder/greater fool to sell out to. If you make the equities market a closed system (to steal a bit of thermo) and I’m not so sure the non zero game proposition holds.

    I realize this is probably a bit outside the scope of your blog but I would be very interested in seeing a post somewhere on who has been taking the losses on all these contracts and hedges, or if it is simply a case of dampening profits on otherwise profitable positions.

  9. HarryWanger says:

    Mini economic boom: Industrial Production best in 4 years! Now will you guys listen to me? Probably not as I’m sure you’re all looking for something “bad” in that report to support you doom.

  10. phb says:

    Could be that BAC is GOD AWFUL at customer service too? I hate (yes hate is a strong word) doing business with the bureaucratic machine that is Bank of America…

  11. Mannwich says:

    Green shoots, Barry. Nothing to see here.

  12. HCF says:

    @phb:

    I second your comments… I’ve been wishing BAC to go under for many years now. I used to be a customer and they are terrible. Account minimums, low interest rates, fees galore… Needless to say, I took my money elsewhere!

    HCF

  13. Wonder if BofA’s results had anything to do with Ken Lewis at the helm. He made some awful calls on the economy and markets during his tenure…

    “Recession Almost Over? Show Me The Evidence”
    http://www.boom2bust.com/2009/04/02/recession-almost-over-show-me-the-evidence/

  14. Dennis says:

    BR, why do you even respond to a jerk like “Free Market Extreemist ?”
    He is obviously a clueless doofus —

    Don’t waste your time on idiots, and never feed the trolls

  15. rootless_cosmopolitan says:

    Harry Wagner claims:

    “Mini economic boom: Industrial Production best in 4 years!”

    Harry, are you delusional?

    rc

  16. rootless_cosmopolitan says:

    Harry Wanger claims:

    “Mini economic boom: Industrial Production best in 4 years!”

    Harry, are you delusional?

    rc

  17. Thor says:

    Now I’m even more interested to see what WF’s numbers are. They have an even greater loan loss exposure than BofA don’t they?

  18. Mannwich says:

    @Thor: Don’t assume that Wells isn’t still hiding a lot of their losses. I wouldn’t put much credence into any of their numbers.

  19. dussasr says:

    I am a real estate investor and frequently buy houses through short sale. I submitted a short sale offer for a nice house in April. B of A is the lender and they just called me back last week! The homeowners haven’t paid a nickel in over a year. How could a bank be this bad and handling its business?

  20. Mannwich says:

    BofA and the other TBTF should STILL be broken up. That’s the bottom line.

  21. MorticiaA says:

    @Thor and Mannwich, in re WFC:
    There is much yet to be seen once the bizarr-o world of Wachovia + WFC hits the fan. I’m not the tin-foil-hat-type, but that is one weird merger.

    http://www.alternet.org/workplace/143289/getting_to_the_bottom_of_the_bizarre_bank_merger_between_wells_fargo_and_wachovia/?page=1

  22. tCA says:

    Here’s a scenario for the board:

    -BofA announces a week or so ago that Lewis would step down earlier than previously announced
    -this week, BofA decided to waive some attorney-client privileged documents to help provide some clarity/insight into what went down
    -…what’s next???

    One possibility…
    Cuomo, Ohio AG, and others who will gain access documents will have the veil of secrecy lifted regarding Lewis’, Bernanke’s, and Treasury’s (Paulson) roles in the BofA/ML meger. We, then, find that the Fed and/or Treasury did have more of a role than they’ve previously admitted under congressional testimony. In other words, Lewis isn’t making up shit about the wink and nod he claims to have gotten from the government. As a result, pressure is off Lewis and placed back on Bernanke.

    If that scenario plays out, Bernanke’s head gets chopped for the interference and/or lying to Congress sending the the markets into a tailspin.

    As a traveling non-attorney, maybe I’m mis-reading the tea leaves. I find the timing curious of Lewis’ announcement, followed by the legal developments shortly thereafter. The scenario I describe above may be the endgame BofA/Lewis are hoping will result. Your thoughts?

  23. DiggidyDan says:

    This now confirms that HW is indeed just bullshitting everyone. Sorry I wasted my time trying to argue that the U.S. economy is different from the market and severely handicapped still, currently. I will not waste my breath in the near future.

  24. Free Market Extreemist says:

    Barry – Thanks for your Snarky / Belittling response – classy.

    Cancer is a terminal disease – are you insinuating that the forclosure crisis is something terminal for the housing market?

    Do you also belive that BOA will NEVER turn a profitable quarter again?

    Kind Regards,

    FME