It might have been a happy occasion in Washington DC yesterday, but Kari Lydersen reports that developments on Wall Street have grim implications for one of the major players in her Melville House Live Book Project ….

Chicago, January 21, 2009 — Bank of America Corp. and other banks nationwide logged more bad news Tuesday. BOA’s shares “slid” to 29% Tuesday, as this New York Times report details; it was a 52-week low, according to a Wall Street Journal report (that’s only available to subscribers). Its financial ratings were downgraded by multiple prominent analysts several times over the past week, as this Reuters wire story reports.

This all spurred an options trading frenzy, with options traders seeking the right to purchase shares at these low prices in hopes the bank’s fortunes improve.

Last week the bank announced fourth quarter $2.39 billion losses on escalating credit costs. That news came the same day (Jan. 16) that the government awarded it $20 billion more in bailout funds, in addition to the $25 billion granted in the fall. The additional bailout was meant to help Bank of America survive its acquisition of troubled Merrill Lynch, a merger which the Dow Jones newswire called a “shotgun marriage” that will mean the loss of 35,000 jobs, according to a December statement from the bank. Meanwhile the Associated Press reported Tuesday that the bank will likely lay off an additional 4,000 people in its capital markets unit

Bank of America and Merrill Lynch bankers and analysts probably have little socio-economically in common with Republic Windows workers. But given these announcements, thousands of financial sector workers will soon find themselves in somewhat similar positions to those of Republic Windows workers a month ago: without a job and, in a tanking market, with few other places to look.

Meanwhile, a little more insight into Bank of America’s financial arrangement with Republic Windows ….

As Bank of America explained in Friday’s Live Book report, they had extended a $5 million secured revolving line of credit to Republic Windows and Doors. The interest rate fluctuates depending on the borrower and their financial history; Bank of America declined to reveal any details of Republic Windows’ credit line but given the company’s financial troubles it’s likely the interest rate was high or became increasingly high. This is a way for the bank to recoup possible losses in advance and/or to make a profit depending how you look at it and how the situation pans out.

This excerpt from a report at Creditor Web explains a bit more about this financial product:

“A revolving line of credit is a commitment from a lender to make available to a borrower a certain amount of credit. As each purchase or advance is made by the borrower, the amount is debited from the amount available. As it’s repaid that amount becomes available again. A credit card is a good example of the way a revolving line of credit works.

A revolving line of credit likely is so named because the available credit is continually fluctuating upwards and down. When funds are used (or borrowed) available credit decreases. When funds are repaid, available credit increases up to the maximum.

Those that issue revolving lines of credit do so with the intention of making a profit. The profit each makes is derived primarily from the interest rate charged for using the credit. Depending on the issuer and also on the borrower’s credit history, the interest rate charged will vary and it can fluctuate according to the terms outlined by the issuer.

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