Bank of America's Left Out of the Party

As credit markets return to normal levels of sanity, and a barrage of government programs help banks fund operations, Bank of America (NYSE:BAC) is choosing to skip one of the biggest parties.

Bloomberg reports that B of A's credit card receivables are in such bad shape, it's eschewing the securitization market banks use to sell bundled loans to other investors.

B of A is shunning securitizations for two reasons. First, it's too expensive. The securitization market undoubtedly won't offer B of A what it thinks its receivables are worth. "[T]he cost of issuance may be higher than the bank thinks is worthwhile," Bloomberg quotes one investor as saying. (This brings up another point: Maybe the securitization market is trying to tell us something.)

Second, if loans offered through the taxpayer-backed TALF securitization program don't meet certain health requirements, the bank could be tagged as an official subprime lender. When perception trumps reality, that ain't worth the hassle.

This is only important to note because B of A's biggest credit card competitors -- JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and American Express (NYSE:AXP) -- have all tapped the securitization market this year. That gives them a whole 'nother avenue to sell assets, raise cash, and make new loans, while B of A sits on its legacy portfolio.

Which raises the question: Is B of A's credit card book really that much worse than everyone else's?

Yes.

Check out July's default rates among the industry's largest players:

These are all seriously high, but Bank of America has created its own separate category of fail. Having a default rate that's nearly 75% higher than your largest rival isn't a fun thing when you're trying to convince the market you've got everything under control.

For related Foolishness:

• Is Bank of America a Buy?
• Understanding Citigroup
• The Blatant Opacity of Banks' Balance Sheets