Investors sent bank stocks plunging yesterday, as they finally started to worry about the mortgage robo-signing scandal. Up until now, investors have mostly assumed the crisis would blow over. But on Wednesday, 50 states announced investigations into mortgage servicing practices, and yesterday a San Francisco hedge fund circulated a report predicting that the crisis would wind up costing Bank of America a whopping $70 billion, the New York Times reports.
As a result, Bank of America fell 5.2%, its biggest drop since mid-July, Wells Fargo fell 4% and JP Morgan fell 2.8%, despite a relatively flat stock market, according to the Wall Street Journal. “I don’t see how it can be cleared up in a short period of time,” said one analyst. “The moratorium won’t last that long, but the problem will last four or five years, maybe a decade.”