Unless things change drastically in the next hour or so, it’s fair to say that shares in Bank of America Corp (NYSE:BAC) totally tanked this week, down 6.32% with about one hour left to go in the trading week. And B of A wasn’t the only big American bank to lose that lovin’ investor feeling.
- Citigroup Inc. (NYSE:C) is down a hefty 4.83%.
- JPMorgan Chase & Co. (NYSE:JPM) is down a much less hefty but still significant 2.43%.
- Wells Fargo & Company (NYSE:WFC), if not exactly burning up the markets, is at least up 0.91% on the week.
The market overall didn’t fare much better:
- The S&P 500 is down 1.86% on the week.
- The Dow Jones Industrial Average is down 1.10%.
- And the Nasdaq took the biggest hit of all the major indices: down 2.55%.
Except for Wells Fargo, no one did very well this week, but B of A clearly takes the cake in that department. What caused the superbank to super-tank?
A 71% pay hike and a wobbly Fed
The big news for B of A this week was a reported 71% pay hike for CEO Brian Moynihan. For 2011, his total pay package came to $7 million. For 2012, it will top $12 million: a base salary of $950,000 and restricted shares worth $11.1 million. The bank’s share price dropped 3.22% on that day alone — Wednesday, the day the pay package was announced.
So it’s fair to say that investors weren’t happy with the news. True, B of A did reward its shareholders handsomely in 2012. Anyone who owned shares on January 3, 2012 saw them double in value by the end of the year. But does that justify an extra $5 million dollars to one person, when the bank is so obviously still recovering from the misdeeds and missteps of the financial crisis?
Of course, the markets just seemed to be off in general this week, and maybe B of A more or less came along for the ride.
We did hear that the Federal Reserve is going wobbly on its commitment to QE3, the central bank’s latest round of quantitative easing. Markets did not react well to the notion that the Fed might shut the program down early out of fears of stoking inflation and a too-big balance sheet: Investors have gotten quite used to the notion of Ben Bernanke’s bottomless cash-cushion being there for moral support.