Bank Of America Scrambles To Defend Itself From Henry Blodget's Allegations It Is Massively Undercapitalized

Tyler Durden's picture

Early this morning, Henry Blodget penned a post titled "Here's Why Bank Of America's Stock Is Collapsing Again" in which he used Zero Hedge data among other, to determine that the capital shortfall for the bank is between $100 and $200 billion. It took BAC exactly 6 hours to retort. Below is the full statement.

2011-08-23 16:29:04.675 GMT


(The following is a reformatted version of a statement from Larry DiRita, a Bank of America spokesman. The statement was confirmed by the sender.)


Mr. Blodgett is making “exaggerated and unwarranted claims” which is what the SEC stated publicly when he was permanently banned from the securities industry in 2003.  The sovereign exposure is off by a factor of 10.  The commercial real estate figures are off by a factor of four.  The mortgage analysis was provided by a hedge fund that has acknowledged it will benefit if our stock price declines.  The recommendations on goodwill accounting would be prohibited by generally acceptable accounting practices.  Traditional bank valuation relies upon tangible book value per share, which excludes by definition 100 percent of goodwill and other intangibles.  As of June 30, our tangible book value per share was $12.65.

Oh ok, Bank of America, that explains it all. As for the mortgage analysis being provided by a hedge fund "that has acknowledged it will benefit if our stock price declines", co-authored by Zero Hedge, does that make it wrong? Last time we checked Muddy Waters made money on Sino Forest...

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dbach's picture

Funny they don't say which way they are off by factors of 10 and 4.

alexwest's picture

or the mortgage analysis being provided by a hedge fund "that has acknowledged it will benefit if our stock price declines

cant believe idiots could write this way..

so let me get it straigt.. ANY ANALYSIS IS OKKKKKKKKKKK

did they mean that? arent they afraid of sec/lawsuits/etc?

fin world is compelety fucked and lost mind


squidward's picture

I can't believe that they would put this in because they are saying that a hedge fund has analysis so credible they are putting money behind it.   

Blodget doesn't even have that type of skin in the game

toady's picture

Afraid of the SEC? More like complicit with the SEC!

A class action though... That might be a good idea...

buzzsaw99's picture

btw, if BAC is massively undervalued that means insiders won't sell squat. Right? Beuller? Beuller?

RobotTrader's picture



TLT barely moving.  People are still piling into bonds.

5-yr. still at 0.91%, which means if you want to earn $100,000/yr. "risk-free", then all you need to do is to pile $11,000,000 of fiatscos into 5-yr. AA-rated Uncle Gorilla notes.

Cleverbot's picture

No, I don't think it would. Why don't you tell me more about the Anunnuki?

Pladizow's picture

They will return shortly for the gold they left behind for us to mine as slaves!

Bam_Man's picture

There is still a lot of short covering going on. When it is finally over watch out. The spike in yields at the long end will be sudden and spectacular.

A lot of people followed Taleb's and Gross' advice to short UST's and have been buried.

Mongrel's picture

It's all fun and games until somebody gets an eye put out . . .

Crumbles's picture

Perhaps Irene will make a huge withdrawal from the Outer Banks over the weekend.


Shirley Wilfahrt's picture

I'd happily pay a pound of silver to see Irene grind up the DC/NYC corridor into a pile of shit....Katrina stylee....



bill1102inf's picture

Its a MASSIVE RALLY!!!!  KD begs GOD to flood DC

Bohemian Clubber's picture

Now that DSK is out, careful for your gold!

Darth Silver's picture

SGS, your bears called this one.  way to go dude!

lizzy36's picture

Just an FYI on the Rumor Mill. Emphasis on RUMOR.

JPM to take over either BAC or CFC with assistance from the government.

New entity to get $100B pref investment from the Geithner/government.

Now i am going to blow my personal gasket.

Looks like Dodd/Frank isn't worth the paper it is written on. Shocked at that really shocked.

slaughterer's picture

JPM can't get BAC without violatng anti-trust laws.  

TruthInSunshine's picture



Laws are no longer relevant in Amerikranski.

smore's picture

Yeah, not for a very long time.

"Let me issue and control a Nation's money and I care not who makes its laws"

Rothschild, 1838

NotApplicable's picture

Only if you're TBTF.

Otherwise, bend over and spread 'em!

zenbones's picture

Ask Sandy Weill what can be done.

--Freedom--'s picture

The wsj article said they would have to sell assets later to come into compliance.
If this turns out to be true, what do people thing it will do to the financial sector stocks in general?

NotApplicable's picture

There will be fewer of them.

Eventually, there will be but one, to rule them all.

oogs66's picture

and the government will likely cap litigation the government will pay the people for the bankster fraud?  

CompassionateFascist's picture

I heard that TBTF bailouts are MANDATORY under D-F. Whatever.

bill1102inf's picture

Rebels just stole a gold plated ak47 from the Q compound... wonder if he knows how much that thing is worth

Ben Probanke's picture

A Florida man was charged on Tuesday in connection with plans to set off a large stash of

fireworks on the National Mall in Washington, D.C., apparently to protest U.S. banking industry

policies, .


    Bond was set at $2 million, according to WTTG.


  National Park police said they arrested Neff, of Stuart, Fla., after they saw him in a red

Jeep Cherokee in a park in the Washington suburb of Bethesda, Md., after closing time Monday.

The Jeep contained fireworks and was fitted with a turret and multiple tubes from which the

explosives were to be deployed, police said.


  Neff told police he didn't want to hurt anyone, but wanted to draw public attention on the

busy National Mall. He said he wanted to send a message about the banking industry, police said.

Shirley Wilfahrt's picture

Pfffttt....fucking amateur....



Surly Bear's picture

What is the CDS spread? That will tell me everything I need to know....

monopoly's picture

Gold down and Robot is back.

Yeah, missed the old guy and his prophetic posts. Where were you the last 300 dollar ramp in gold? Oh well, nice to have you back Robot.

ForWhomTheTollBuilds's picture

Robot isn't about "responding" to other people's posts.

Seasmoke's picture

just based on how they lied, stalled, bumbled and have no clue what they are doing with a simple modification (BOA can factor that by a few million) and the rest of us should fully understand why this bank is insolvent

hambone's picture


Sequitur's picture

Disgusting, more taxpayer money to backstop these reckless fuckers. When the fuck does this shit end.

j0nx's picture

I could answer your question but you already know the answer to it just as the rest of us already know. It also amazes me how we never have any money for NASA or education or jobs programs or infrastructure upgrades but somehow we always seem to be able to find a few hundred billion laying around in the seat cushions to bail out the TBTFs...

pamriallc's picture

Guys like Henry are fun like the same guys (Cramer) on the other side.  At least Cramer tells you that he really is there to entertain you.  Blodget was incredible at puffery, and now that he has found mainstrem media, and is "expempt" from the SEC after being permanently banned...  he can be as blasphemous as he wants to be.

Truth be told, companies like Coca Cola have virtally ZERO tangible equity and yet still earn tons of cash.  That's the case with Bank of America as well.  Tangible equity is not necessarily all that it's cracked up to be if the firm in quesiton has tons of recurring cash flows.  24 months from now, the company will stil charge off $20+ billion a year in losses but the cash flows will be triple that number.

I suspect you iwll see the FED capitulate in RELAXING the current capital standards and claiming the beginning of a recovery and furthermore, the relaxing of capital ratiostandards in order to accelerate lending.

11% of the deposit base in America will not go to ZERO.  Sorry guys.  The system will not allow it.  Buy the TARP preferred and the Convertibles if you can't stomach the common equity.

Bam_Man's picture

The reason banks need tangible equity is that in "bad times" their cash flow is woefully insufficient to cover write-offs and write-downs.

That is B of A's problem right now - in spades.

slackrabbit's picture

Delivery boy: Hello I have a large delivery of new underwear and toilet paper for someone...ummm L Dirita, El Dorado, El Diarea?

TradingJoe's picture

Well what can I say, if you are not shorting this "rally", suit yourself! All I see is fear and greed, fear and greed, no one, really, no one, is actually THINKING for a change!

Traianus Augustus's picture

Be careful there Joe. Earlier rumor today was the that the US was going to implement their own ban on Financial stocks very soon.  This is sooo stupid it has got to be true!!!

TradingJoe's picture

Traianus, on Friday I'll know weather my grandparents raised an idiot ora lucky fool :)))!