Bank of America: Federal Reserve Loser

NEW YORK ( TheStreet) -- Bank of America ( BAC) was the loser among the largest U.S. banks Wednesday, with shares sliding by more than 3% to close at $11.80.

The broad indices were already down but turned sharply lower in afternoon trading after the Federal Reserve released the minutes of the Federal Open Market Committee's meetings Jan. 29 and 30.

The Fed has said over the past two months that most members of the Federal Open Market Committee believe it is appropriate for the central bank to continue with its "highly accommodative" policy of keeping the federal funds rate in a range of zero to 0.25% until the unemployment rate falls below 6.5%, assuming inflation is kept in check. The Fed has also been making monthly purchases of $85 billion in long-term U.S. Treasuries and mortgage-backed securities to keep long-term rates down.

However, the Open Market Committee meeting minutes indicated that some members were having a change of heart. According to the minutes, "a few participants expressed concerns that the current highly accommodative stance of monetary policy posed upside risks to inflation in the medium or longer term."

When discussing the central bank's continued ballooning balance sheet, "several participants noted that a very large portfolio of long-duration assets would, under certain circumstances, expose the Federal Reserve to significant capital losses when these holdings were unwound." Some committee members suggested that the Fed might vary the pace of its securities purchases, while "a number of participants" said the Fed might "taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred."

Also Wednesday, the Census Bureau said U.S. housing starts during January declined to a seasonally adjusted annual rate of 890,000, from a revised 973,000 during December. The pace of housing starts was 24% higher than in January 2012.

The decline in housing starts in January was limited to multifamily homes, with an annual pace of 260,000 multifamily units, declining sharply from 352,000 in December. Single-family housing starts actually rose slightly to an annual pace of 613,000 in January, from 608,000 in December.

The KBW Bank Index ( I:BKX) was down 2% to close at 54.54, with all 24 index components showing declines.

Bank of America

Shares of Bank of America have returned 2% this year after more than doubling in 2012. In 2011, the stock tumbled 58%.

The shares trade for 0.9 times their reported Dec. 31 tangible book value of $13.36, and for 9.2 times the consensus 2014 earnings estimate of $1.29 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $1.

Bank of America remains very much a recovery play, as the company works through its mortgage mess, including $28.3 billion in unresolved mortgage repurchase demands from investors as of Dec. 31. However, the company put a major dent in that number early in January, as a mortgage putback settlement with Fannie Mae ( FNMA) lowered repurchase claims by roughly $12.2 billion.

Following reports that Bank of America CEO Brian Moynihan earned $12.1 million in 2012, and was paid more than JPMorgan Chase ( JPM) CEO James Dimon, who earned $11.5 million, Rafferty Capital Markets analyst Richard Bove released a note taking the media to task for bashing banks over executive pay.

"These two banks employ more than half a million people. Yet their CEOs make about 25% of what they could make if they were shooting guards on the Los Angeles Lakers or good golfers or tennis players, let alone quarterbacks in Denver," Bove wrote.

The analyst went on to say: "The AFL-CIO publishes its list of the top 25 CEOs according to compensation. The average take was $63.5 million and there were no bankers on the list."

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.