“Economists are pessimists: they've predicted 8 of the last 3 depressions”

Bank of America continued its tailspin on Tuesday as shares in the largest US bank tumbled by another 6.4% to their lowest level since March 2009, fuelling fears of a second banking crisis. As concerns mounted that BoA will need to take huge additional write-offs on bad mortgages, the cost of insuring the group's debt jumped to record levels and investors became increasingly concerned that the financial system could be facing a fresh credit crunch. BoA's share-price fall followed a 7.9% drop on Monday, which took the stock to less than half its value at the start of the year – a decline that wiped about $65bn from its market capitalisation. "It does sap investor confidence to see a bank of this stature struggling so mightily," said David Dietze, chief investment strategist at Point View Financial Services in New Jersey. "It casts a shadow over the entire financial sector and puts a negative spin on the growth picture," added Nick Kalivas, of MF Global Research in Chicago. Dennis Dick, of Bright Trading in Detroit, said: "Every day it's the same story. BoA keeps leading the charge down on financials and every trader is probably using that as an indicator to trade the rest of the financials too." Investors continued to offload BoA's shares on fears that its huge exposure to the rapidly declining US housing market and European sovereign debt mean it will need to make much bigger provisions for bad debts. This would force the bank to raise billions of dollars in additional cash to restore its capital ratios, a move that could push the bank's shares considerably lower.