Bank Of America 's Financial Crisis

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Bank of America in the 2008 Financial Crisis – An Even Bigger Financial Giant Suffered Losses and Lawsuits from Risky Behavior Summary of Bank of America in the Financial Crisis As one of the largest banking holding companies, Bank of America has taken a significant role during the whole process of the financial crisis. Compared with financial institutions whose business focused on specific fields, like investment banks or mortgage companies, Bank of Along got involved in activities in various fields that directly related with crisis – deregulation from big banks lobbying, mortgage originating, mortgage securitizing, and CDS dealing. Besides, as a systematically important financial institution, Bank of America was highly…show more content…
Compared with its investment bank and hedge fund counterparties, Bank of America seemed stood away from the mortgage-CDO-CDS crisis pipeline. In the contrary, not only had it worked on deregulation for decades; it was also an active player in the financial system, which contributed to the burst of crisis. The largest banks, including Bank of America, removed most barriers limiting their high-speed expansion, and the loose regulation and supervision had exposed the whole financial system to higher risks. The largest banks became more powerful in a booming parallel banking system, and the fast growing banks stressed the regulators to remove barriers against their growth and competition. (P52) As a result, Bank of America along with other four largest banks owned 55%, jumping from 25%, assets of the industry, and the combined assets became more than tripled. (2) Additionally, the bank added more leverage, which rose form 18:1 in 2000 to 27:1 in 2007 (60). With the barriers removed and less capital to absorb losses, Bank of America was obviously vulnerable to huge and continual losses, which is a hint foreshadowing future struggle in the crisis. In the financial crisis, Bank of America not only acted as a mortgage originator, a mortgage securitizer, but also interconnected with other major important financial institutions to promote trading activities. Nevertheless, as the bank was too eager and greedy to make more profits,
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