Financial exchange traded funds were suffering losses of 8% on Monday while top component Bank of America (NYSE: BAC) was taken to the woodshed in a nearly 20% sell-off.
The plunge in the U.S. banking giant’s stock further unnerved an already shaky market. Bank of America increased in size during the credit crisis by snapping up Merrill Lynch and troubled mortgage firm Countrywide Financial. It was deemed too big to fail in the bailout along with several other financial institutions.
American International Group (NYSE: AIG) has sued Bank of America, seeking to recover over $10 billion in mortgage-related losses, according to reports. Bank of America shares fell below $7.
Stock ETFs were sharply lower Monday after Standard & Poor’s downgraded the U.S. credit rating.
Despite generally solid bank earnings in the second quarter on improving credit trends and capital levels, “concerns surrounding the stubbornly weak economy, loan growth, and unrealistic earnings expectations continue to undermine confidence in the sector,” Sterne Agee analysts said in a recent note.