The biggest question here is: Did BofA guess right, or wrong? The acquisition was at a considerable discount from the previous market cap, but the company is in disarray, with many thinking the worst is yet to come. It will be interesting to see how this plays out.
My guess is that they won't be doing the cleanup without assistance from the Gov. I'm sure they'll get some deal from the Fed. Fed will just use BofA as a proxy to do the toxic cleanup. I wasn't kidding in the previous post about all BofA doing "one time restructing charges" for the next couple of quarters or years….They'll just keep playing the game "we beat estimates before the one time charges", but here are the one time charges related to the CFC acquisition. You spread the loss over a couple of quarters over a few years, with the assistance of cash infusion from Fed or foreign companies ,possibly sell off some of this toxic waste at a huge discount to offshore investors, and in a few years, problem magically goes away. Lol….
They're already starting to play this game:
Bank of America expects a $1.2 billion restructuring charge from the transaction, and said it will need a couple of billion dollars of new capital to help preserve its capital ratios.
The next time, it will be another 1.2 billion. Do this across 8 quarters, you got a nice 10.6 billion in charges you just passed through over the course of 2 years, while still being able to look great to wall street ("it was only the one time restructuring charges".) This would be great for BofA to clean their own house too, everything bad is related to the restructuring.
