Feb. 5 (Bloomberg) -- Bank of America Corp., the nation’s largest bank, declined to its lowest level in New York trading since 1984 on concern regulators may seize the company after a $138 billion U.S. bailout package failed to halt the slide.

The bank fell 15 cents, or 3.2 percent, to $4.55 at 12:20 p.m. in New York Stock Exchange composite trading, and earlier declined as much as 20 percent to its lowest level since October 1984. The stock of the Charlotte, North Carolina-based company has dropped for six days and lost more than two-thirds of its value this year.

The descent follows the U.S. government’s latest infusion of $20 billion in fresh capital and a plan to share losses on $118 billion in mortgages, corporate loans and derivatives. The U.S. previously committed $25 billion to the bank and Merrill Lynch & Co., acquired earlier this year. Bank of America lost $1.79 billion in the fourth quarter, its first deficit since 1991, as more borrowers fell behind on paying their loans.

“Washington is dithering while the banking stocks are going to zero,” said Nancy Bush, an independent bank analyst in Annandale, New Jersey. Trading is being driven by speculation that the government may take over Bank of America and other lenders as part of a plan to bolster the nation’s financial system, she said.

Scott Silvestri, a spokesman for the bank, said the company declined to comment on its stock price.

Tipping Point

“You have got to nationalize the banks,” said Paul Miller, analyst at Friedman, Billings, Ramsey Group Inc. in an interview yesterday, adding that the public may not be ready for Bank of America and Citigroup Inc. to be seized. “We’re past the tipping point, and the government is taking small steps.”

Citigroup, which dropped as much as 8.3 percent today, fell 1.7 percent to $3.55.

The Fed needs to take decisive action in developing a new plan to support the banks, analyst Andrew Marquardt of Fox-Pitt Kelton Cochran Caronia Waller said in a report today. He also urged Bank of America to offer “new leadership with a clear and consistent strategic plan to manage through the existing tough period and what the franchise should look like coming out of this downturn.”

Bank of America’s share price reflects a worst-case scenario because if the lender recognized estimated losses, the book value, or net worth, would be $5.74 per share, said Marquardt, who rates the bank at “outperform.” The bank reported tangible book value of $10.20 per share as of Dec. 31.

“Inconsistency and poor vision at the helm has added to lack of conviction and confidence by investors and analysts,” he said.

Acquisitions

Credit-default swaps protecting against default by Bank of America climbed 3 basis points to 208, and earlier reached a three-week high of 215 basis points, according to broker Phoenix Partners Group. The contracts, used to hedge against losses or speculate on the company’s creditworthiness, typically rise as investor confidence deteriorates.

Bank of America’s risk increased after it acquired Countrywide Financial Corp., the largest U.S. home lender, and Merrill Lynch, the world’s largest brokerage, said David Dietze, president of Point View Financial Services Inc. in Summit, New Jersey, in an interview late yesterday. Merrill lost $15.3 billion in the fourth quarter.

“There is this lurking shadow of nationalization which haunts the banks, but particularly Bank of America,” he said. “It’s pretty spooky.”

The reluctance of Kenneth Lewis, Bank of America’s chief executive officer, to speak out is hurting the company, said Tony Plath, a finance professor at the University of North Carolina at Charlotte.

“He’s not communicating with the public because it’s not his style and it’s in the Bank of America culture to put the sandbags up,” Plath said. “You don’t have to communicate when you are privately held, but with the government now involved you have to get out of your tower and talk to the people on the ground floor.”

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: February 5, 2009 12:26 EST