The Bank Of America Death Spiral

There's no question of a double dip for shares of Bank of America.

After financial crisis lows near $3, BAC traded above $15 for over two years. In the past year, however an accumulation of foreclosure-related costs and concerns about capital requirements erased these gains. Today headlines on both front pushed the stock down to $6.42.

Remember, Bank of America traded above $50 just a few years ago.

The stock was pounded again yesterday in an up market, dropping 8% to $6.42.

One analyst, Layla Peruzzi of Jefferies, thinks that Bank of America needs to raise an eye-popping $40-$50 billion.

Assuming most of this capital-raise came in the form of equity, the dilution would be severe: The bank's market capitalization is now only $65 billion. And the more the stock falls, the worse the dilution will get.

Moral Hazard For Banks Has Never Been Greater

Banks today are more centralized and powerful, than they were before the crisis.