Bank of America Corp (BAC) Don’t Overlook This Multi-Billion-Dollar B of A Risk

The second problem is that recent court rulings have gone in the insurers’ favor. Most recently, Judge Jed Rakoff of the U.S. District Court in New York awarded Assured Guaranty nearly all of the damages it sought in an analogous breach of contract case against Flagstar Bancorp Inc (NYSE:FBC). This doesn’t bode well for B of A because it effectively eliminates any incentive for the larger monoline companies to settle these matters out of court.

A final estimate on B of A’s monoline liability
After taking all of this into consideration, these claims could end up costing B of A anywhere between $3 and $6 billion to resolve, equating to between one and two quarters worth of earnings. While this is an extremely rough estimate — emphasis on both the “extremely” and “rough” qualifiers — even the upper bound is digestible for a bank of B of A’s size. What investors will want to watch for, however, is how these claims ultimately influence others, as that’s where the real money is.

The article Don’t Overlook This Multi-Billion-Dollar B of A Risk originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool owns shares of Bank of America.

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