So you thought Bank of America was a blue-chip stock? Seems to have downgraded itself to brown chip. This e-mail arrived, from my elite financial managers:
While we had intended to remain invested in Bank of America (BAC) through the turnaround, we sold that position today. Mortgage delinquencies have eased, but banks are now facing repurchase requests on loans they originated from buyers of those loans and loan guarantors. Leading the charge to make originators repurchase their loans are Fannie Mae and Freddie Mac, the two government-owned finance agencies that guaranteed many mortgages. Freddie and Fannie are sorting through delinquent loans for signs of any violations in the representations and warranties, known as “reps and warranties.” In essence, they are looking for documented misrepresentations by borrowers or lenders on the loan applications. Bank of America is reportedly facing approximately $11 billion of unresolved repurchase demands (up 46% in six months). Just too many clouds on the horizon for U.S.-based banks when compared to other opportunities held in your portfolio.
We will use the proceeds to invest in your other holdings that we believe have a better opportunity for appreciation in the future.
Well. That’s bracing. And of course, BofA isn’t alone.
I wish I could share your view that the destruction of the American banking system is in some way a reason for celebration. Many bad decisions were made by the people who were supposed to be running our banks, but they aren’t the ones who will pay the price – we are. The failure of BofA and their peers would have unthinkable ramifications for America’s economy. If the banking system fails, those “other opportunities” your advisor spoke of will be a pipe dream. You, and the rest of us will pretty much be able to kiss our retirement savings goodbye.
@ Pat: Where did I say this was a reason for celebration?
Apparently, I shouldn’t read anything before cleaning my glasses. You wrote “Yipe”, I read “Yippee”.
I guess the vision of my 401k plummeting (again) made me a cranky.
Sorry about that!
@ Pat: Well, it does make me feel good that I’m not alone in having those experiences!!!
God help us, though. If even one of the huge banks goes down, we are doomed. At our business group meeting this morning, one of the members remarked that in ten years we may look back on 2010 as the good old days.
I guess it doesn’t do to dwell on this stuff. We can’t do a damn thing about it. And there are enough scary things going on without borrowing still more trouble. {sigh}
Happy Hallowe’en…
Just watched a really interesting video about the foreclosure crisis and the investigation into those “documented misrepresentations by borrowers or lenders on the loan applications.”
On the Washington Post website you should check it out:
http://www.washingtonpost.com/wp-dyn/content/video/2010/10/18/VI2010101804450.html