Today is the day that Bank of America Corp (NYSE:BAC) begins the journey toward having its $8.5 billion settlement with 22 institutional investors blessed or dismissed by New York State Supreme Court Justice Barbara Kapnick. This is a big deal for B of A, since what evolves in that courtroom could ostensibly cause more pandemonium to break out over its responsibilities concerning Countrywide and its big pot of crummy mortgage loans.
A stunning run last week saw Bank of America Corp (NYSE:BAC) and its peers either bumping up against 52-week highs or — in the case of B of A — surpassing them. An hour into this trading week, things don’t look quite as good, but it’s early yet. While Wells Fargo & Co (NYSE:WFC), which took a bit of a dip on Friday, seems to be recovering, JPMorgan Chase & Co. (NYSE:JPM) and B of A are dropping. For Bank of America Corp (NYSE:BAC), at least, the decrease in share price is likely a reflection of investor nervousness over the outcome of this case.
Serious implications for B of A
As B of A watchers know, the issue of successor liability on the part of the bank for the past sins of its 2008 acquisition Countrywide Financial could either set the big bank on the path to putting this chapter behind it, or paying out billions more than it planned to for this — and possibly other — disputes regarding soured mortgage-backed securities packed with Countrywide loans.
Heavily involved in this issue is American International Group Inc (NYSE:AIG), the mega insurer which blames Bank of America for at least $28 billion worth of mortgage bonds gone bad. Even though many other large investors have dropped their objections to the $8.5 billion settlement, AIG refuses to do so, and it will have its say in court as well.
And so, Bank of America Corp (NYSE:BAC) stock will likely suffer today, as these dramas play out in a Manhattan courtroom. An important day for B of A promises to be a real nail-biter for its investors, too.
The article Why Today Is a Very Big Day for Bank of America originally appeared on Fool.com and is written by Amanda Alix.
Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends American International Group Inc (NYSE:AIG) and Wells Fargo & Co (NYSE:WFC). The Motley Fool owns shares of American International Group, Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo and (NYSE:WFC) has the following options: Long Jan 2014 $25 Calls on American International Group.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.