Is Bank of America in Major Trouble?

Bank of America BAC is a large institution that has been in trouble for a long time. Primarily due to Countrywide's distressed home loans, the bank has been unable to remain comfortably liquid. However, it has been hanging on to its investment banking and securities division, Merrill Lynch, to remain profitable.

In the wake of a poor second half in 2011, investment banks across Wall Street had to downsize and cut various costs in order to preserve their profits and prestige. Recently, Bank of America Merrill Lynch had to resort to drastic measures to prop itself up.

The bank is currently considering cutting investment bankers' pay by about 25%. Traders will also be affected in this move. According to Bank of America's CEO, Brian Moynihan, "results were weak in the second half," buttressed by a reduction in "client risk appetite."

While the pay cuts will not necessarily detract talent significantly for the bank, it may be a signal of Wall Street's troubles in recent months. Another major institution, Morgan Stanley MS, claimed that it may cap cash bonuses to $125,000. The Wall Street pay scale is still relatively massive compared to other industries across the US, but current employees are likely disappointed about compensation.

The future of Wall Street is uncertain and further downsizing may be imminent, but financial innovation and securitization will likely continue regardless of government regulation. Bank of America may be at the forefront of the impending relief in Wall Street, but it is simply too early to tell.