Weil: Curse the Geniuses Who Gave Us Bank of America

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At $9.85 a share, down 26 percent this year, Bank of America finished yesterday with a market capitalization of $99.8 billion. That’s an astonishingly low 49 percent of the company’s $205.6 billion book value, or common shareholder equity, as of June 30. As far as the market is concerned, more than half of the company’s book value is bogus, due to overstated assets, understated liabilities, or some combination of the two.

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As recently as late 2010, Bank of America still clung to the position that none of the $4.4 billion of goodwill from its 2008 purchase of Countrywide Financial Corp. had lost a dollar of value. Chief Executive Officer Brian Moynihan also was telling investors the bank would boost its penny-a-share quarterly dividend “as fast as we can” and that he didn’t “see anything that would stop us.” Both notions proved to be nonsense.

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The goodwill from Countrywide, one of the most disastrous corporate acquisitions in U.S. history, now has been written off entirely, via impairment charges that were long overdue. And, thankfully, Bank of America’s regulators in March rejected the company’s dividend plans, in an outburst of common sense.

Last fall, Bank of America also was telling investors it probably would incur no more than $4.4 billion of costs from repurchasing defective mortgages that were sold to investors. Since then the company has recognized an additional $19.2 billion of such expenses, with no end in sight.

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