What's Dragging Bank of America Down

Stock of the nation's largest bank is getting killed today

The stock markets as a whole are getting absolutely bludgeoned. But the market gods have reserved a special kind of wrath for the country's largest bank. As the Dow dips 500 points, Bank of America is down around 18 percent. You know what else happened today? Insurance giant American International Group sued the bank for $10 billion, accusing it of selling overvalued mortgage-backed securities. Now, a handful of market watchers are describing the bank's terrible day in their own special way

Apple could buy Bank of America in cash right now  Apple-centric thinker Philip Elmer-DeWitt took note of the plummeting Bank of America stock today and did a simple calculation. "As of June 25, Apple's holdings in cash and marketable securities stood at $76.2 billion. That's enough to buy Bank of America outright and still have more than $6 billion left over... Why isn't Apple AAAA?"

This is Bank of America's 'No Good, Very Bad Day' writes Michael de la Merced at The New York Times.

It isn’t clear just what is behind the wave of selling that has crashed upon the banking giant. The biggest new headache that the firm must contend with is a $10 billion lawsuit by the American International Group tied to faulty mortgage-backed securities. (Read the lawsuit.)

...Another major contributing factor may be a bearish analyst report by Mike Mayo of CLSA that was published on Monday. Mr. Mayo downgraded Bank of America to “underperform” on concern that the firm may need to embark on another round of capital-raising.

The bank is running out of money, notes Paul Miller, an analyst at FBR Capital Markets, speaking to Reuters. "A lot of people think the bank will have to raise capital, and any major capital raise will be massively dilutive. The bank just can't get its hands around the liabilities it's facing."

Its purchase of Countrywide is dragging it down, write Jonathan Stempel and Joe Rauch at Reuters: "The lawsuit may complicate Bank of America Chief Executive Brian Moynihan's efforts to contain losses from the bank's $2.5 billion purchase in July 2008 of Countrywide Financial Corp, the nation's biggest mortgage lender. That purchase, engineered by Moynihan's predecessor Kenneth Lewis, is now considered a disaster for Charlotte, North Carolina-based Bank of America because of the costs of litigation and writing down bad loans."

'Will the last person to sue BofA please turn out the lights,' quips John McDermott at Financial Times.