Jonathan Weil wrote the commentary, Bank of America Edges Closer to Tipping Point, which I found on the Bloomberg web site.

Judging by its shrinking stock price, though, investors are acting as if Bank of America is near a tipping point. Its market capitalization stands at $115.6 billion, or 54 percent of book value.

The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet is that it’s largely impenetrable. Some portions, though, are so delusional that they invite laughter. Consider, for instance, the way the company continues to account for its acquisition of Countrywide Financial, the disastrous subprime lender at the center of the housing bust, which it bought for $4.2 billion in July 2008.

Here’s how Bank of America allocated the purchase price for that deal. First, it determined that the fair value of the liabilities at Countrywide exceeded the mortgage lender’s assets by $200 million. Then it recorded $4.4 billion of goodwill, a ledger entry representing the difference between Countrywide’s net asset value and the purchase price.

That’s right. Countrywide’s goodwill supposedly was worth more than Countrywide itself. In other words, Bank of America paid $4.2 billion for the company, even though it thought the value there was less than zero.

Since completing that acquisition, Bank of America has dropped the Countrywide brand. The company’s home-loan division has reported $13.5 billion of pretax losses. Yet Bank of America still hasn’t written off any of its Countrywide goodwill.

Consider this post along with my previous post, Financial Improprieties Abound as Stocks Rally. I hope there won’t be any buyer’s remorse when the Republicans in the House get to deal with the second leg of the impending banking disaster.  Nah, the voters will just blame Barney Frank.

You might also want to consider The Best Way To Rob A Bank Is To Own A Politician,