BofA plunges as AIG sues for $10 billion "fraud"
August 9, 2011
Total Loss:
Billions
Bank of America Corp shares plunged more than 20 percent on Monday, capping a three-day rout in which the largest U.S. bank lost nearly one-third of its market value.
Monday's decline was triggered by a $10 billion lawsuit from American International Group Inc alleging a "massive" mortgage fraud.
The action raised new concerns about burgeoning losses related to the bank's $2.5 billion purchase of Countrywide Financial Corp in 2008 and prompted questions about the stability of the bank's management team.
"The bank just can't get its hands around the liabilities it's facing," said Paul Miller, an analyst at FBR Capital Markets.
He said investors fear the bank will have to raise equity to cover potential losses, diluting existing shareholdings.
Bank of America spokesman Jerry Dubrowski countered that the bank has adequate reserves to buy back mortgages if necessary and is comfortable with its strategic plans.
Source:
Reuters
Posted in:
New Account Fraud