Morning Coffee: An unfortunate mistake occurred at Bank of America. Goldman Sachs' M&A descent

efinancialcareers.com:

Someone at Bank of America possibly deserves to lose their bonus or their job, and that person is very senior.

The Financial Times reported yesterday that Bank of America is nursing a loss on paper of $100bn versus comparable losses of $40bn at JPMorgan and Wells Fargo and just $25bn at Citi. 

It's the result of an error of judgement three years ago. 

During the pandemic, when consumers everywhere were unable to spend money as freely as usual, banks received a rush of new deposits. At JPMorgan, Wells Fargo and Citi, a larger proportion of that money was parked safely in cash. At Bank of America, things were done differently.

At BofA, the rush of new consumer savings was instead invested in bonds, which were then trading at historically high prices and low yields. But as bond yields have since risen and bond prices have since fallen, BofA's investment has also fallen in price. At the end of the first quarter, the Federal Deposit Insurance Corporation said US banks as a whole had unrealised losses of $515bn on their investments. Bank of America accounted for 20% of this. 

Who's to blame for the mistake? Veteran bank analyst Dick Bove thinks the board needs to look into it and that whoever was responsible needs their career prospects crimped. The ill-planned investment was made before Alastair Borthwick, BofA’s current chief financial officer, took the position in 2021; his predecessor, Paul Donofrio, is currently vice chairman. Bove thinks the responsibility lies at a senior level. BofA is doing well operationally, he says. “But if you look at the bank’s balance sheet, it’s a mess.

The bank's best bet is simply to hold onto the bonds to avoid crystallizing the loss. As the bonds — most of which are highly rated government