Bank of America’s stock price has dropped by 50 percent since the beginning of year, amid speculation that it was confronting additional write-offs related to subprime mortgages, wanted to unload investment back Merrill Lynch (no takers), might be merging with JP Morgan Chase, and was facing a capital crisis that caused investors to strongly suspect that the bank wasn’t muddling through the economy’s current soft patch but was in fact insolvent. Treasury Secretary Tim Geithner was prepping the bailout! Game over was just days or weeks away!
Three bloggers created a kind of tag-team to parse the meltdown of the country’s second-biggest bank. Yves Smith at Naked Capitalism (who had already started a B of A Death Watch) and Zero Hedge drilled into the numbers, while Henry Blodget at Business Insider summed it all up, was attacked by B of A for talking smack about the true value of the bank’s assets, and then proposed that the government closely monitor B of A’s slide, taking it over once it falls beneath a certain threshold and restructuring it to prevent a Lehman 2 event that would bring down the U.S. and probably world economy: