The nation’s second largest bank continued its struggle to find stability in the wake of the Great Recession. Bank of America announced a slight $340 million profit in the third quarter of this fiscal year yesterday. The slight profit, however, amounts to 95 percent decrease from last year, signaling that large financial institutions remain weak four years after they almost collapsed.
The precipitous drop in Bank of America’s earnings comes after a settlement last month with the Justice Department and investors over its takeover of Merrill Lynch during the financial crisis. The bank announced the $2.43 billion settlement after accusations by shareholders that it misled investors about the financial health of Merrill. The settlement is the largest securities class-action lawsuit following the financial crisis.
The acquisition of Merrill was not the only one to saddle the bank with financial problems. In 2008 it also purchased the troubled mortgage lender Countrywide Financial. Both Merrill and Countrywide were implicated in trading toxic assets and relying on complex financial instruments for risky investments that created the financial crisis. The Countrywide acquisition occurred as the subprime mortgage bubble was imploding, and it is estimated that the purchase of the troubled mortgage lender cost Bank of America more than $40 billion in losses over four years.
Starting in 2009, Bank of America began cutting its expenses by closing branches, selling billions in assets, and cutting thousands of jobs. The announcement of a slight profit yesterday was therefore touted by the bank as a kind of victory, but the reality is that America’s largest financial institutions remain unstable and continue to struggle in the post-recession economy.