Countrywide Financial Corporation

Bank Stocks Tumble to Biggest Plunge Since 2009 Led by BofA, Citigroup

Bank of America Corp. (BAC) and Citigroup Inc. led U.S. lenders to their steepest drop in more than two years as the government’s loss of its AAA credit rating rippled through financial markets.

Bank of America, the nation’s largest bank by assets, plunged 20 percent and Citigroup slid 16 percent, leading the KBW Bank Index (BKX) down 11 percent. It was the worst showing for the 24-company benchmark since April 20, 2009, when Bank of America told investors it was putting aside more money to cover a growing pool of uncollectible loans.

Those costs have continued to erode investor confidence ever since for the lender and some of its biggest rivals. More pressure came last week after S&P downgraded the credit of the U.S. government, which guarantees some of their deposits and debt, to AA+. Bank of America’s shares sold for only a third of their book value today, and Citigroup’s price-to-book ratio fell to less than 50 percent.

“Investors are dumping financials because there’s so much confusion about what could be on their books,” Dave Lutz , head of ETF trading and strategy at Stifel Nicolaus & Co. in Baltimore, said in an interview. “You’ve got a perfect storm against Bank of America.”

Bank of America slid $1.66 to $6.51 as of 4:15 p.m. in New York Stock Exchange composite trading. It was the biggest drop since April 2009, and left the stock shorn of half its value since the start of 2011. Citigroup fell $5.49 to $27.95, down 41 percent for this year, and sold for as little as $26.25, its largest decline since February 2009, when investors were speculating that lenders might be nationalized.

Credit-default swaps on Charlotte , North Carolina-based Bank of America soared to the highest since May 2009, as prices on contracts for U.S. banks including Morgan Stanley and Citigroup rose, according to data provider CMA. Bank of America’s contracts gained 88 basis points to 295 basis points as of 4:30 p.m.

The U.S. credit downgrade led to cuts in ratings at companies sponsored or backed by taxpayers, including Fannie Mae and Freddie Mac , the two mortgage finance firms seized by the government in 2008 to prevent their collapse. Both were lowered to AA+ because of their “direct reliance on the U.S. government,” the ratings firm said.

Among other U.S. lenders, New York-based JPMorgan Chase & Co. fell 9.4 percent, San Francisco-based Wells Fargo & Co. and U.S. Bancorp declined about 9 percent. Goldman Sachs Group Inc. declined 6 percent and Morgan Stanley dropped 14 percent. Capital One Financial Corp., Regions Financial Corp. and SunTrust Banks Inc. all lost more than 12 percent.

NY seeks to intervene in BoA $8.5 billion pact — Clearing and ...

NEW YORK/CHARLOTTE, N.C., Aug 4 (Reuters) – New York’s attorney general will oppose Bank of America Corp’s $8.5 billion settlement over repurchasing toxic mortgage loans, joining a growing number of unhappy mortgage bond buyers now fighting the pact reached with some of the largest institutional investors in the country.

In court papers filed late Thursday, New York Attorney General Eric Schneiderman sought to intervene in order to “protect the marketplace and the interests of New York investors, the vast majority of whom otherwise are not present before the Court in this proceeding.”

The filing comes a day before a scheduled court hearing in the case that’s expected to address when parties opposing the deal can seek discovery.

In late June, BofA settled an eight-month dispute with outside investors who bought Countrywide Financial Corp mortgage bonds.

The investors — including Pacific Investment Management Co, or PIMCO, and BlackRock Inc — requested the bank repurchase toxic home loans that comprised a series of mortgage-backed securities.

BofA, the investors and securities trustee Bank of New York Mellon agreed to an $8.5 billion settlement that applies to all investors in nearly all Countrywide Financial-created mortgage bonds, but the deal must be approved by a New York court.

The attorney general said in a filing the accord may interfere with his ability to pursue claims against the banks involved, and claims that BofA and Bank of New York may have violated their fiduciary duties in reaching the agreement.

In court documents, Schneiderman echoed complaints from other investors who have said that the deal was done in secret and was rife with conflicts. He called the proposed settlement “both procedurally and substantively flawed.”

Schneiderman argued that Bank of New York was conflicted during the negotiations with Bank of America because Countrywide agreed to indemnify it for claims arising out of its role as trustee.

“As trustee, BNYM owed and owes a fiduciary duty of undivided loyalty to trust investors, and its direct financial interest in the consummation and approval of the settlement violates that duty of strict loyalty,” said Schneiderman in court filings.

A spokesman for Bank of New York said in a statement that the allegations are “outrageous” and “baseless.

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