Bank of America Could Lose $44 Billion in a Severe Recession. Should Investors Be Worried?
The Federal Reserve recently released the results of its annual stress testing, in which it puts the largest banks in the country through a set of hypothetical severe economic conditions akin to a severe recession.
The goal is to ensure that the nation's banking system is on sound footing. This year, the Fed was not messing around. Between the fourth quarter of 2021 and through the first quarter of 2024, the Fed's hypothetical scenario included unemployment rising above 10%, commercial real estate prices dropping 40%, and stock prices dropping 55%.
All of the banks put through the test passed but still got dinged up. In particular, the Fed calculated that Bank of America (NYSE: BAC), the second-largest bank in the U.S., would incur a hefty pre-tax loss of close to $44 billion over the nine-quarter period in the hypothetical scenario, more than any of the 33 banks tested. So, should investors be worried?
Source Fool.com
