How Bank of America's Big Quarter Explains the Economy

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Bank of America reported $3.2 billion in first-quarter earnings, almost entirely on the strength of bond and stock trading on Wall Street. If you're looking for evidence of a top-heavy economic recovery, consider these two statistics. BofA made $7 billion from trading revenues on Wall Street alone. It also lost $36 million on all non-investment banking profits, including $2.1 billion lost in the housing market. Total loans continue to decline, and nearly 13% of credit card balances were deemed uncollectible. Investing in Wall Street, where stocks are up 70 percent in a year, is a winner. Collecting from Main Street, where broad unemployment has stopped growing at 17 percent, is a loser. Ladies and gentlemen, your recovery.

The Wall Street Journal write-up has a good summary of the bank's big quarter. One thing that might go under-reported is that the once vilified merger with Merrill Lynch is (to use a Tiger-ism) paying off huge, quickly. The $50 billion merger cost Bank of America $15 billion in write-downs in the last quarter of 2008. It cost both CEOs their jobs. The deal was a scandal wrapped in fraud wrapped in ignominy. But in hindsight, it might have helped to save the financial sector and it's keeping Bank of America in the black.

Merrill's investment banking ops are central to BofA's profitable global banking sector. Profit from the global banking and markets units, which includes the Merrill Lynch investment banking operations, rose $709 million, to $3.2 billion. Merrill is now expected to consistently generate up to 30 percent of Bank of America's profits, and if the investment scene continues to outpace the housing market and consumer demand and small business optimism, that percentage could be even higher in the short term.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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