Skip to main content

FRED PROUSER

Here's a fascinating battle to watch: Henry Blodget versus Bank of America Corp.

The sniping began earlier on Tuesday when Mr. Blodget wrote a blog post on Business Insider explaining why Bank of America's share price was "collapsing" far below its book value. He drew on two sources, bloggers Zero Hedge and Yves Smith, who essentially argued that the market no longer believes that the bank's assets are worth what the bank says they are, due to such things as mortgage litigation costs, unrealistic values of second mortgages and exposure to troubled sovereign debt.

Bank of America hit back, releasing a statement that picked away at Mr. Blodget's troubled past as a Wall Street analyst: "Mr. Blodget is making 'exaggerated and unwarranted claims,' which is what the SEC stated publicly when he was permanently banned from the securities industry in 2003."

Back to Mr. Blodget, who is dumbfounded by the attention he's getting: "And now – get this – Bank of America is apparently blaming its stock collapse on ME! Seriously! I was eating a tuna sandwich when I saw the news blip across Bloomberg TV. I almost choked."

Thing is, Mr. Blodget's first blog post contained some inflammatory lines, including this gem: "And given that Bank of America has now persuasively broken the $7 barrier and now has a mere $65-billion of equity value left, this death spiral can't continue much longer. (The good news, we suppose, is that the stock can't fall below zero)."

Still, it is much more comforting to hear bank rebuttals come from independent sources rather than the banks themselves – and Bank of America at least had noted analyst Dick Bove of Rochdale Securities on its side.

In an interview with Bloomberg Television, Mr. Bove said that the bank has enough capital: "Bank of America has so much cash on its balance sheet that it could pay back all of its short-term debt and a big chunk of its long-term debt. There's no reason for the bank to have to go out and raise capital whatsoever."

The bank's shares have been in a seesaw session throughout the day, falling as low $6.01 (U.S.). The shares have fallen 53 per cent this year.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe