This means less funds to lend to consumers and invest in the economy. It only makes things worse, lengthens the recession:
Bank of America said Monday that it saw a 77 percent drop in its profits for its first quarter this year from last year, as the banking giant announced nearly $2 billion in write-downs tied to its debt underwriting and trading activities.
Monday’s announcement represented the third consecutive drop in earnings for the firm, as its outsized ambitions to rival Wall Street’s traditional financial giants instead hurt the bank again. Bank of America said it lost $1.3 billion in its trading activities, a reversal from the $1.6 billion it earned at the same time last year.
The bank earned $1.21 billion, or 23 cents a share, atop revenues of $17 billion. Analysts surveyed by Bloomberg News had expected on average 41 cents a share.
[...]Though Bank of America’s most immediate pain stemmed from the collapsed mortgage market, its earnings report showed that the credit crisis had seeped into other areas as well. It reported $2.72 billion in net charge-offs, or loans that it thinks are uncollectable, a 90 percent jump from last year. It also raised its credit loss provisions to $6.01 billion from $1.24 billion.
The firm said that its nonperforming assets rose to $7.83 billion, or .9 percent of its total loans, leases and foreclosed properties. That is up from $2.06 billion, or .29 percent, at the same time last year.
In his statement, Mr. Lewis said that the firm still believes that its broad base of operations will allow it to “withstand the jolts” to the economy.
But the sustained shock provided by weak housing markets may not augur well for Bank of America’s acquisition of Countrywide Financial, the troubled mortgage lender that the firm is paying $4 billion for.
The global economies are desperately working to try and avert further drying up of credit worldwide:
The Bank of England announced a near-100-billion-dollar plan Monday to free up Britain's home loan market in one of the biggest moves by a major central bank to combat the global credit crunch.
The BoE said it would allow high street banks to swap mortgage-backed securities for government bonds in a bid to boost their liquidity at a time when banks are reluctant to lend to each other.
Britain's main home loan providers are rapidly tightening their lending criteria as fears persist over the sector's exposure to the collapsed subprime or high-risk housing market in the United States.
"The Bank of England is today launching a scheme to allow banks to swap temporarily their high quality mortgage-backed and other securities for UK Treasury Bills," the central bank said in a statement.
It added: "Discussions with banks suggest that use of the scheme is initially likely to be around 50 billion pounds (63 billion euros, 99 billion dollars)."
[...] A growing number of commercial lenders have recently increased the interest rates they charge to their customers for home loans, contributing to a sharp slowdown in house prices.
The Bank's move to inject such a considerable sum of money into the markets could be seen as a major u-turn as it is traditionally more conservative in its support for banks than the European Central Bank and the US Federal Reserve.
[...] "The credit crunch is of course a global problem and central banks are trying to address it locally, but this particular gesture is mainly aimed at giving the UK lending market, which has clearly started to seize up, a break."
Other analysts were more sceptical.
Martin Slaney, head of spread betting at GFT Global Markets, said: "This rescue plan has been touted as a jump-start to the lending markets but it is more likely to serve as a one-off bail-out which plugs a hole for now.
"We are a long way off from returning to a more liquid lending market where mortgages are freely available."
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