February 8, 2010
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News: BofA Faces Another Lawsuit
The heat is turned up and some high priced banking executives are feeling the pressure of good things coming to an end. New York's Attorney General, Andrew M. Cuomo filed a lawsuit against the credit card giant Bank of America (BofA) over possible deceptive practices toward stockholders. Joseph Price, President of the bank's consumer, small business, and credit card divisions is at the center of the controversy. There is speculation that Price who previously held the position of BofA's Chief Financial Officer (CFO) might need to take a sabbatical to prepare for the forth coming battle. Price's challenges are great in view of the fact that he heads the unit that includes the bank's most troubling losses. The company has reported excessive credit card write-offs for the past two consecutive quarters. Analysts say that these businesses will need a great deal of focus if the bank is to pull them out of the hole; something which Price might not be able to give while dealing with the lawsuit.
Newly positioned Chief Executive Officer, Brian Moynihan, who replaced retiring Kenneth Lewis, will also have his plate full as he trudges his way through muddy waters to raise the bank above poor performing portfolios and excessive credit card and loan losses. Last year, stock prices took a sharp dive to the lowest it's been in 25 years. Despite the sharp decline in early 2009 and continued record breaking credit card losses, Bank of America's shares had rebound to nearly 7 percent by the end of 2009 while the KBW Banks Index (BKX) ended the year down 4 percent.
Cuomo's suit comes just days after Bank of America announced that it entered into a proposed settlement with the Securities and Exchange Commission (SEC) to resolve issues related to the Merrill Lynch merger which took place a year ago. Questions were raised over bonuses paid to Merrill Lynch's executives in the sea of rising losses. The credit card giant also entered into an agreement with the North Carolina's Attorney General to resolve all matters that are the subject of an investigation also related to the Merrill Lynch merger. Bank of America is based in Charlotte, North Carolina. Read the series entitled "BofA Under Fire" to learn more about its situation.