Bank of America has been underestimating its legal risks for years, and brazenly so, according to the The New York Times Dealbook yesterday. The Fed is set to release figures today on how much capital the nation’s biggest banks must have to cover a “stress” situation. Investors will find out next week whether those banks will be able to return more of their capital to shareholders by paying dividends or buying back stock. Last year, the Fed passed most of the big banks and let them pay out billions. Bank of America, sensing that a request would be unwelcome, didn’t even ask. This year, however, Wall Street expects that Bank of America will get the green light, even though the bank continues to face gargantuan payouts to clean up legal disputes from the bubble years. A lawsuit now suggests that the bank’s mortgage portfolio could cost it tens of billions more than it had planned. In one big case, if things go wrong, Bank of America may be required to make good on many more billions’ worth of bad mortgages from Countrywide Financial, which the bank acquired in 2008.
