The problem is that Bank of America did the federal government a colossal favor when a former Savings and Loan and a brokerage were about to go under because of their horrible mortgage practices and Bank of America agreed to buy them both.
Bank of America was forced to take Countrywide and Merrill Lynch under great pressure from the Federal Reserve and the other banking agencies. So those mortgage portfolios are now under B of A’s wing.
There was a long standing practice in banking, dating back to World War II. Large banks were always expected to buy or absorb smaller failing banks to protect the depositors and the FDIC.
This long history of good behavior in helping federal agencies is now being punished.
Every banker is watching. Don’t expect them to be cooperative and bail out failed banks in the future.