Investors Flee Banks Over Mortgage Mess

Analysts estimate huge losses
By Kevin Spak,  Newser Staff
Posted Oct 15, 2010 8:15 AM CDT
Investors Flee Banks Over Mortgage Mess
The Bank of America building is shown at the Bank of America Plaza in downtown Los Angeles on Friday Oct. 8, 2010.   (AP Photo/Richard Vogel)

Investors sent bank stocks plunging yesterday, as they finally started to worry about the mortgage robo-signing scandal. Up until now, investors have mostly assumed the crisis would blow over. But on Wednesday, 50 states announced investigations into mortgage servicing practices, and yesterday a San Francisco hedge fund circulated a report predicting that the crisis would wind up costing Bank of America a whopping $70 billion, the New York Times reports.

As a result, Bank of America fell 5.2%, its biggest drop since mid-July, Wells Fargo fell 4% and JP Morgan fell 2.8%, despite a relatively flat stock market, according to the Wall Street Journal. “I don’t see how it can be cleared up in a short period of time,” said one analyst. “The moratorium won’t last that long, but the problem will last four or five years, maybe a decade.” (Read more Bank of America stories.)

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