Aug. 14, 2011 (AlterNet) -- Bank of America is no stranger to controversy. The largest bank in the United States has seen, in just the last six months, nationwide protests of its branches by groups like US Uncut, National People's Action and other progressive activists angered by the company's tax dodging,foreclosures, massive bonuses (paid after taxpayer bailouts) and other practices.
But could the too-big-to-fail behemoth actually be headed for failure?
On August 5, Yves Smith of the blog Naked Capitalism started a Bank of America Death Watch, writing:
“It is clear that the Charlotte bank has too much in the way of legal liability that it will not be able to shed and yet-to-be-taken writedowns on balance sheet items (for instance, roughly $125 billion of home equity loans and junior liens on residential real estate as of end of last year) for it not to be at risk of a death spiral.”
Back in 2008, Bank of America snapped up Countrywide, one of the subprime lenders that preyed on low-income home buyers, often with adjustable-rate mortgages that ballooned after a couple of years, leaving homeowners unable to make payments. Though it doesn't seem hard to figure out that many people would be driven into foreclosure by such loans, Countrywide was able to repackage these loans into mortgage-backed securities that were then resold as prime products to investors—investors that often were state pension funds, like CalPERS, the funds responsible for paying the benefits owed to public employees. These are the same public employees who are now being targeted around the country as greedy and unwilling to take cuts to their pensions. The unethical actions of big banks and mortgage lenders are at fault, yet working people are expected to take the hit.
"Countrywide exploited the American dream of homeownership," then-state attorney general, now California governor Jerry Brown said when he announced his state's lawsuit against the lender. "Countrywide was, in essence, a mass-production loan factory, producing ever increasing streams of debt without regard for borrowers," he said. "Californians...were ripped off by Countrywide's deceptive scheme."
