The biggest risks to the global economy are emanating from the United States now and Malaysian should be focused on positioning the economy for the eventual effects caused by the sluggish economy.The 77 % drop in Bank of America's first-quarter earnings, higher energy costs and subprime crisis, is any indication, the US economy may have a long way to go before it works out the problems.
The nation's largest retail bank on Monday quintupled the money it set aside for loans that go sour, and hinted that consumer weakness and the housing slump means that things will not get better for it, or for the economy, for some time.
Bank of America says its profit fell 77 percent in the first quarter, hurt by write-downs and rising credit losses. If the economy doesn't turn around, more troubles could loom for Bank of America.
Like many other banks, Charlotte-based Bank of America is besieged on two sides. Its bread-and-butter banking business is ailing because with home prices flagging, more people and real estate developers are failing to repay their loans.
The credit crisis is also hobbling the value of many bank investments. Last week, crosstown rival Wachovia Corp. said it lost $393 million in the first quarter because of bad credit and tumultuous financial markets. Washington Mutual Inc. lost $1.1 billion.
Wells Fargo & Co.'s profit fell 11 percent, JPMorgan Chase & Co.'s profit slid 50 percent, and Citigroup Inc. posted a loss of $5.1 billion.Bank of America's shares dropped 95 cents, or about 2.5 percent, to $37.61.
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