BofA Just Showed How Easy It Is to Lose $4B
Is bank too big to keep track of its assets?
By Kevin Spak, Newser User
Posted Apr 28, 2014 12:15 PM CDT
Traders work at the post that handles Bank of America on the floor of the New York Stock Exchange, Monday, April 28, 2014.   (AP Photo/Richard Drew)

(Newser) – Bank of America canceled a planned share buyback program today, after realizing that it had made a tiny little accounting error—and by "tiny little," we mean "$4 billion." "The market's reaction, with about $10 billion of BofA's market value wiped out, was swift, brutal, and justified," writes David Reilly at the Wall Street Journal, whose write-up begins with the question, "Too big to fail, or just too complex to manage?" The error appears to have spilled out of the bank's acquisition of Merrill Lynch, as the bank improperly excluded certain realized gains and losses.

"You have to sympathize a little with Bank of America here," writes Matt Levine at Bloomberg, "They totally messed this up and should be made fun of," but the rules are nuts, and their wrong approach might almost make more sense. The Fed missed this mistake, too, which probably means that it "did not review Bank of America's capital calculations in any detail. Which is—really weird?" It definitely inspires loads of confidence in the Fed's stress tests, that's for sure! "The lesson here is the usual one. Nobody knows what a bank is, or how big it is, or how much capital it has." Click for Levine's full piece; Reilly's is here.

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Showing 3 of 18 comments
PoppyRockz
May 1, 2014 12:45 AM CDT
I hope they lose my 1st & 2nd mortgages too.
Jon Q. Publix
Apr 29, 2014 7:35 AM CDT
BofA is just too big --- and clueless. My mother-in-law died at the height of the housing crisis. She had a mortgage with BofA but the house at the time was underwater to the tune of maybe $20K. We tried to do a "deed in lieu of foreclosure". Basically, we wanted to just sign the house over to them. They refused. They insisted that we had to do a "short sale" --- where we would pay the utilities and advertise and show the house and then be responsible for any shortfall *if* the house sold --- and sign paperwork to that effect. Our response, FU. We stopped responding to them and stopped paying the mortgage and disconnected all the utilities. A year and a half later, their attorneys called and wanted to know if we would be willing to do a "deed in lieu of foreclosure".
FarmerMichael
Apr 28, 2014 7:46 PM CDT
Ah, headlines and drama...the stock was down a little more than 6% today. From a high of $18 just days ago to just below $15 today....I've had more dips on kiddy rides. Yep, the massive numbers look big, but the stock is still UP 25% for the last 12 months. Journalist must not get many math courses....still, anyone investing in BofA does have a "bigger sucker" view (that some sucker will buy this stock from me at a larger price soon.) Small banks has been where the action has been in banking stocks of late.