By Parke Shall
In our last piece about Bank of America (NYSE:BAC), we made our case as to why it's one of the few stocks we'd go long during this economic climate. For those that don't read us, we're strong believers that the market is going to correct at some point relatively soon, and we've been making our stock picks and valuations based on that.
Our case consisted of simple points about the bank: its fundamentals are favorable, its recent fines weren't a huge burden on its balance sheet, and it's the lowest multiple and arguably best positioned of all the major banks.
Since we released our piece, Bank of America stock has pulled back a little bit, but remains above its $16 support and looks to be ready to take the next leg up.
We thought we had finally finished things up on the legal front for the company. We were so excited to report about the DOJ settlement, even though it was a significantly larger fine than we had anticipated. It was nice for the bank to get the issue behind it and have a chance to exhale.
The latest Bank of America headline to make its rounds is relating to yet another lawsuit nicknamed the "hustle" case. It's a case related to the bank's Countrywide unit and fraud associated with selling toxic mortgages to Fannie Mae and Freddie Mac. The bank is arguing that the evidence doesn't support the claims and is trying to get a verdict already made by a jury thrown out.
A Reuters UK piece reported that the case had already been settled and through the ringer:
Last year, a jury found Bank of America and a former mid-level Countrywide executive, Rebecca Mairone, liable for fraud.
In a decision last month, Rakoff ordered Bank of America to pay $1.27 billion and Mairone to pay $1 million.
The judge at that time called the Hustle programme "from start to finish the vehicle for a brazen fraud" and said the evidence of the fraud was "ample."
Bank of America's efforts in getting rid of their legal troubles do not want to go in vain. The worst is over for Bank of America, so why create a stir here over a case they've already essentially lost? To finally get the DOJ out of their way for $17 billion and then to make a scene trying to overturn a $1.23 billion verdict is a little contradictory.
If they continue carrying on, kicking and screaming over this $1.2 billion, the bank risks coming off as foolish after just shelling out $17 billion for the DOJ settlement.
It's time to turn the legal sieve off. Whether they're paying for settlements or paying for the lawyers that are neck deep in this litigation, it's time for it to end. Pay the fine, and let's get on to being the best bank on the market to invest in.
We reaffirm our BUY on Bank of America.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.