Is a Bank of America Bankruptcy in the Future?

In an interesting twist, Chris Whalen of Institutional Risk Analytics is making the case that Bank of America is better off at this point to pursue bankruptcy to restructure their mortgage liability problem.

It is yet another case of bankruptcy being used appropriately to restructure debt so the person or business can move forward.

Bank of America could enter a Chapter 11 bankruptcy, deal with their massive mortgage liabilities they inherited when they bought Countrywide, and emerge out the other side.

Whalen says, “The only sane way of fixing this and I mean fix it so that Bank of America comes out of the process restructured, ready to support growth, support leverage, is a classic chapter 11…”


That’s one bankruptcy filing you would not normally expect to see but it certainly seems to be a logical consideration.


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6 thoughts on “Is a Bank of America Bankruptcy in the Future?”

  1. Yes- That seems fair- So BoA received a TON of benefit, including a 50 BILLION of our money when they thought Countrywide was a good deal. Now that the economy continues to fail, Chapter 11…? Perfect.  Hahaha. Why dont they just sell more securities? My guess is they do both PLUS sell control to Buffett.

    Mike R- Read an article last week indicating Buffett is preparing to bail them out… with cash!

    • Sean,
      that’s what I was referring to, Berkshire committed to 5 billion. I have been
      watching the 2013 Jan $15 leaps for some time now, great leverage if you
      believe the stock will be north of 15 bucks anytime in 2012. There’s a big shakeup from the management level on down, (cutting the fat) and they sold their european credit card portfolio.

      I think
      those options are still below 40 cents

      • > $00.40… shocker! BoA will survive & come out on top, I’m sure. Buffett is rarely wrong! Unless he’s looking for financing leverage to buy a small country.

      • I believe the point the original analyst was making was not if BoA was a sound company but that a Chapter 11 would allow them to shed what may potentially be billions and billions of dollars in liabilities from the Countrywide mortgage mess they acquired and what may come about as part of the multi-state or government settlement and suits in the works.

  2. Doubt it.

    This from Warren Buffett….

    “Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it,” Mr. Buffett said in a statement. “I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy.”

    5 billion later…


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