Lawsuit, Losses Hit Bank of America
Bank of America shares have gone plummeting following the announcement that it would charge many debit card users a $5 monthly fee for their purchases.
As if that was not enough, investors have started packing up to take their business elsewhere other than Bank of America. Meanwhile, Fitch Ratings affirms the outstanding notes of Bank of America Auto Trust 2009-3 transaction as Class A-3 at ‘AAAsf’; Outlook Stable; and Class A-4 at ‘AAAsf’; Outlook Stable, which are based on available credit enhancement and loss performance.
Shares of Bank of America fell more than 2 percent, amounting to a decline of 44 percent for the quarter, a worst case scenario that could befell the Dow Jones industrial on an average. This means the stock is down 56 percent for 2011, aggravated by a growing public relations backlash.
Bank of America pointed to a recent legislation by Sen. Richard Durbin (D-Ill) that reduced the amount of money it can get when consumers swipe their debit cards when shopping as the reason for imposing the fee.
“Bank of America is trying to find new ways to pad their profits by sticking it to its customers. It’s overt, unfair, and I hope their customers have the final say,” Durbin said in a statement.
Bank of America will start charging consumers next year for the its basic checking accounts. It will apply only to debit card purchases and not to ATM withdrawals, online bill payments or mobile phone transfers, according to the bank.
On the other hand, Bank of America’s Countrywide unit was sued by Sealink Funding Ltd. in New York over $1.6 billion of residential mortgage-backed securities the fund purchased between 2005 and 2007, BusinessWeek reported.
Sealink filed the suit against Countrywide in New York State Supreme Court, seeking unspecified compensatory, rescissiory and punitive damages, the report stated.
Sealink is a fund created to manage Landesbank Sachsen AG’s riskiest assets after the German lender almost collapsed.
“Countrywide was an entity driven by only one purpose — to originate and securitize as many mortgage loans as possible into” mortgage-backed securities “to generate profits for the Countrywide defendants, without regard to the investors that relied on the critical, false information provided to them with respect to the related certificates,” lawyers for Sealink were quoted as saying.
At the same time and at the same place, Sealink filed a similar suit against JPMorgan Chase & Co. over $2.4 billion worth of residential mortgage-backed securities purchased between 2005 and 2007.