Bank of America Slides on Concern for Nationalization (Update1)

By David Mildenberg

Feb. 5 (Bloomberg) -- Bank of America Corp., the nation’s largest bank, declined to its lowest level in New York trading since 1984 on concern regulators may seize the company after a $138 billion U.S. bailout package failed to halt the slide.

The bank fell 55 cents, or 12 percent, to $4.15 at 10:44 a.m. in New York Stock Exchange composite trading, and earlier declined as much as 20 percent to its lowest level since October 1984. The stock of the Charlotte, North Carolina-based company has dropped for six days and lost more than two-thirds of its value this year.

The descent follows the U.S. government’s latest infusion of $20 billion in fresh capital and a plan to share losses on $118 billion in mortgages, corporate loans and derivatives. The U.S. previously committed $25 billion to the bank and Merrill Lynch & Co., acquired earlier this year. Bank of America lost $1.79 billion in the fourth quarter, its first deficit since 1991, as more borrowers fell behind on paying their loans.

“Washington is dithering while the banking stocks are going to zero,” said Nancy Bush, an independent bank analyst in Annandale, New Jersey. Trading is being driven by speculation that the government may take over Bank of America and other lenders as part of a plan to bolster the nation’s financial system, she said.

Scott Silvestri, a spokesman for the bank, said the company declined to comment on its stock price.

Tipping Point

“You have got to nationalize the banks,” said Paul Miller, analyst at Friedman, Billings, Ramsey Group Inc. in an interview yesterday, adding that the public may not be ready for Bank of America and Citigroup Inc. to be seized. “We’re past the tipping point, and the government is taking small steps.”

Citigroup, which dropped as much as 8.3 percent today, fell 11 cents, or 3.2 percent, to $3.38.

Bank of America’s risk increased after it acquired Countrywide Financial Corp., the largest U.S. home lender, and Merrill Lynch, the world’s largest brokerage, said David Dietze, president of Point View Financial Services Inc. in Summit, New Jersey, in an interview late yesterday. Merrill lost $15.3 billion in the fourth quarter.

“There is this lurking shadow of nationalization which haunts the banks, but particularly Bank of America,” he said. “It’s pretty spooky.”

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net
Last Updated: February 5, 2009 11:01 EST