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Has Bank of America become TBTF — Too Big To Function?

What isn't ailing Bank of America?

It's supposed to be the bank with a name other banks covet. It's the bank that bought up so many other institutions (including Barnett Banks, Florida's last "giant") to become No. 1 in the nation. It's the bank that's hit the legal ceiling on U.S. deposits.

Yet now it's the Rodney Dangerfield of banks, seemingly on the bad side of too many tales of bungled deals with customers and rows with regulators.

It's in legal trouble on multiple fronts from foreclosure messups to lawsuits by angry corporate customers. It's stuck with perhaps the most toxic asset in banking: Countrywide Mortgage, bought in 2008. And it's the embarrassed owner of a stock, priced above $50 a share in 2007, that now sags under $7.

Other banks gripe that Bank of America's bad publicity rubs off unfairly on them. The latest insult? Rumors that "B of A" may be bought by JPMorgan Chase, a deal so unlikely that an internal B of A memo counsels employees with "talking points" to counter such talk.

Can B of A, based in Charlotte, N.C., make a comeback?

Or has Bank of America, among those giants deemed too big to fail, instead become too big to function?

Bank of America spent $50 billion for Merrill Lynch, $47 billion for Fleet Boston, $35 billion for MBNA, $21 billion for LaSalle and $4 billion for Countrywide. What does the bank have to show for $157 billion in acquisitions? A market value of $71 billion.

Most U.S. bank stocks have fallen since the middle of July on fears they could be hurt if countries like Greece or Spain default. Bank of America shares are down even more, falling as much as 35 percent this month.

One of B of A's biggest worries is finding an affordable settlement with federal and state officials who want the big banks — B of A, Citibank and JPMorgan Chase — to pay between $20 billion and $25 billion apiece for their roles in shoddy foreclosure practices.

In return, Bank of America and others want sweeping immunity from further litigation. But it's not clear if state attorneys general will give these banks a free legal pass if they pay up.

In Florida, Bank of America's had a litany of high-profile mortgage screwups.

In 2005, it seized a couple's Spring Hill home and changed the locks to prepare for foreclosure. The couple had bought the house for cash and had no mortgage. The bank had the wrong address.

More recently, months after Bank of America wrongly foreclosed on a house the owners had paid for, the couple won court approval to be reimbursed for the court battle. When B of A ignored the request, the couple's attorney showed up at a branch office in Naples with a moving truck and sheriff's deputies who had a judge's permission to seize the bank's furniture. The bank suddenly wrote a check for $5,772.88.

And this month, a retired New Port Richey couple faced foreclosure after paying a January mortgage payment one week early in December. The bank apologized Monday.

Hey, apologies are welcome. But there are too many other stories of B of A flubbing mortgage deals that make you stop and wonder.

Who's in charge? Why do these tales start to sound like they belong in a Third World country? Is this any way to run one of this nation's biggest and once-proudest banks?

Has Bank of America become TBTF — Too Big To Function? 08/24/11 [Last modified: Thursday, August 25, 2011 6:24am]
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