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Financial Crisis of 2008: The Cost to Bank of America
[Photo: BofA Plaza, Dallas - Justin Cozart / Wikimedia Commons]
Among the banks that survived the financial crisis of 2008, few banks suffered more than Bank of America. But exactly how much did the crisis cost the NC-based bank?
According to BofA Chair and CEO Brian Moynihan the answer is $191 billion - a figure that is larger than the market cap of every company on the S&P 500, outside of the 18 biggest members. The losses can be broken down into 4 different categories.
- $83 Billion from the charge-off of bad loans - most of which were in BofA's credit card division.
- $44 Billion from costs associated with BofA's now-shuttered legacy assets and servicing division - which administered the bank's toxic and non-core assets dating back to the crisis.
- $36 Billion was spent on litigation expenses - legal settlements, attorneys' fees, court costs, etc.
- $28 Billion from representation and warranties claims when institutional investors forced BofA to repurchase soured mortgages originated by Countrywide Financial.
To stay afloat, Bank of America received a $45 billion capital injection from the federal government, and it dramatically diluted its shareholders' equity to raise additional capital - selling new shares at an already-plummeted stock price. The net result is that, even after the recent post-election rally in Bank of America's stock, its shares are still trading for roughly half their pre-crisis levels.