10 Signs You're Headed for a Financial Meltdown
Why Taco Bell and Popeyes Want to Serve You Breakfast
Just when we thought the banking crisis was finished, we get another jolt. The U.S. Federal Reserve denied Bank of American (BAC) permission to raise its dividend.
If you recall, Bank of America is still struggling to absorb toxic assets it acquired with its purchase of Countrywide Mortgage. It has been on a slow climb back to fiscal health. At the end of 2010 the company was still bleeding, with a net loss of $1.2 billion.
Apparently the company had projected a return to profitability in 2011, so it declared a modest dividend. But in an unusual move, the Fed denied the bank's request for an increase, according to Barrons. Now the management must go back to the drawing board and resubmit a new capital plan.
Citigroup (C) just received permission for a one penny dividend. If we look at the big banks in terms of their ability to pay dividends, we would rank Bank of America last, followed by Citigroup.
Can we infer from this that the banking crisis is not over yet?
Bank of America stock opened lower Wednesday, falling 49 cents to $13.38 at one point.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 1 of 1)
3-23-2011 @ 6:02PM
william lindblad said...
The Fed is not working with the consumer as the consequence to this will be for the bank to find other venues. By that, I mean find other ways to raise consumer costs. This is more a case of Wall St. at work for Wall St. and profit and stock price are the criteria, at Fed request. What other view could one possibly take?
On face value the move would imply that the bank is not strong enough, but on the other hand the acquisition of "country" and "Merrill" were engineered by the Treasury and the Fed. If the "toxic assests" that came with this deal are the root of the action, than the Fed has egg on their face.
There is possibly another scenario - During the "crisis" period it did appear that a bit of favoritism was afoot and perhaps BoFa has not bowed geneflected in the proscribed manner (whatever that is) and this error remains shrouded in the Fed's secrecy doctrine.
The real question here is - is the banking system now sound, or do serious problems remain. The Fed "speaks with forked toungue", they prop up the bond market with QE2, tell the public that things are getting better and counters with a move that infers insecurity. I guess we have moved on "Greenspeak" to Ambiguity? Must be the new meaning for "transparency". Webster - please note.