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Bank of America in battle with bloggers

BoA moves to correct rumours on the web

Bank of America (BoA) has taken on two prominent blog sites after accusing them of spreading incorrect rumours.

The bank last week faced two difficult stories on consecutive days, and moved to publicly correct them after the sites shocked investors and the company's stock price seemed to be affected.

The actions throw under the spotlight the dangers faced by businesses of rumours and comment on high profile websites.

First, blogger and former Wall Street analyst Henry Blodget said the bank may need to raise up to $200 billion in additional capital. Blodget had written on the Business Insider website that "the trouble is that the market doesn't believe Bank of America's assets are worth anything close to what Bank of America says they are worth".

The next day, the website 24/7 Wall Street site reported "circulating" rumours that JPMorgan was set to take over the bank, in an emergency move supported by $100 billion of US government cash.

The bank refutes suggestions that its strong response to both blogs was a personal attack on the writers, according to sources close to the situation.

Nevertheless, it publicly attacked Blodget's credentials in particular, noting he was banned from the securities industry eight years ago after settling fraud charges with the Securities and Exchange Commission, the US regulator.

BoA said in a statement: "Mr Blodget is making 'exaggerated and unwarranted claims', which is what the SEC stated publicly when he was permanently banned from the securities industry in 2003.

"The sovereign exposure is off by a factor of 10. The commercial real estate figures are off by a factor of four. The mortgage analysis was provided by a hedge fund that has acknowledged it will benefit if our stock price declines."

Bank of America told staff in a memo, seen by the Financial Times: "Some blogs are speculating about rumours of merger talks with JPMorgan Chase, which are baseless and don't even make practical sense. Reports that suggest we need to issue up to $200bn in additional common stock to satisfy new regulatory capital requirements are just wrong. They are based on uninformed and artificial assumptions and are not based on facts."

While some observers questioned whether the BoA response was an overreaction, other public relations experts told the newspaper that the bank had to act, given the prominence of the commentators.

"In today's wired world, when someone like [Mr Blodget] makes that kind of charge, it is not going to go away," said Michael Robinson, head of the financial practice at Levick Strategic Communications. "They had to address it."

Days after a turbulent time in the stock markets, Bank of America received a $5 billion investment from Berkshire Hathaway, owned by billionaire Warren Buffett who said he wanted to express his confidence in the company.

Now read: BoA private email archive thrown open in $11bn AIG lawsuit


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