DJ BofA Has Made "A Lot of Progress" To Strengthen Itself - CFO
By David Benoit
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Bank of America Corp. (BAC) Chief Financial Officer Bruce Thompson, in an attempt to assuage employee fears, told them the bank has made "a lot of progress in a short period of time" to strengthen itself.
Thompson reassured employees the bank has more than enough capital to operate and a clear path to meet new capital regulations looming in 2013 and 2019, according to a posting on an internal website that was obtained by Dow Jones. Thompson said the bank's Tier 1 common ratio of capital to assets would now be 8.75%, meaning the bank's recent actions have overcome more than $20 billion in mortgage-related costs the bank swallowed in the second quarter.
The comments come as investors have sent Bank of America shares sliding, down 7.6% to $7.31 Friday and now off 45% year-to-date and 35% over the past three months. Investors have questioned whether the bank has the ability to raise capital to new global standards particularly in the face of mounting mortgage issues and lawsuits, a charge the bank has struggled to rebuff completely.
Friday, the Wall Street Journal reported the Federal Reserve had asked the bank what it would do if the environment worsens, showing regulators are watching the nation's biggest bank by assets with increasing concern as well.
Thompson answered questions from the bank's internal communication website--known as Flagscape--about why the bank is selling assets and why it agreed to an investment with Warren Buffett for $5 billion last week if it didn't need capital. "It sounds like this was an expensive deal for us and a good deal for him," one question to Thompson read.
Thompson responded that Buffett is "one of the world's most admired investors" and provided a "strong validation" of management. He also reiterated that Buffett came to the bank and was initially told no.
Thompson was also asked about media reports on the plethora of mortgage lawsuits hitting the bank, and how the bank could be sure it wouldn't need more capital with "new issues coming up every day."
In response to that question, Thompson said the $8.5 billion settlement the bank reached with investors in some mortgage-backed securities was expected to face some questions, and the bank continues to believe it is fair. That settlement has received attention as dozens of investors sought this week to ensure they had a voice in it and some, including the New York attorney general, have questioned it.
Other investors, such as American International Group Inc. (AIG), have sued the bank for losses from the financial crisis. Bank of America is also reportedly among the banks about to be sued by mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) over billions in mortgage-backed securities, a suit that could be filed in the coming days.
Thompson said the bank has been successful in defending securities claims and that "In some cases, some of the most deeply sophisticated investors, such as AIG, are alleging they didn't know what they were purchasing," an argument the bank will fight.
-By David Benoit, Dow Jones Newswires; 212-416-2458; firstname.lastname@example.org
(END) Dow Jones Newswires
September 02, 2011 13:51 ET (17:51 GMT)
Listen, These guys are a bunch of Shirt Lifters and would screw you out of your last dime. They may as well walk around with ski masks and a shotgun. And we fall for it. Yada, Yada, Yada. It's better to ask for forgiveness that permission to Rob us. You really don't trust these Wankers do you?
Amazing how we all fall for it. We see our wife banging some guy but by the time she gives her side of the story. We feel like the bad guy and can't even remember seeing it. I'm waking up now from this nightmare.
You people are not even looking at their offsheet liabilities....between BAC, Morgan Stanley, and GS they total 100 billion in CDS exposure from Europe.
On Sept 7th the German Constitutional Court rules on the legality of EFSF and if its thumbs down then the bailout is over meaning real blood for the Banks and a lot of exposure to BAC.
While the Fed was lending up to 16 trillion to keep these insolvents afloat they went out and extended leverage by selling CDS to Europe...Now its coming back to haunt them which is only one of the reasons why they need to raise a lot of capital very quickly.....
Whenever a CFO has to justify his balance sheet to calm the markets, its pretty much game over for the bank....
Watch the hedge funds attack next week and deposits evaporate......
CEO Kelley from bank of NY mellon quits, supposedly in a rift with the BOD..He just might take Moynihans job as a replacement.. after all, he was offered the job to replace Lewis, which he declined... just thinking out loud..Kelley is a fine CEO and banker to be without a job... Lodas
BAC has 8% capital against 10% mortgage foreclosures and 30% of mortgages underwater and 20% unemployment.
Pick up a college textbook. Any bank with less than 10% - 20% capital must fail. In this environment 20% is the bare minimum.
a lot of things going against BAC. I think the most damaging factor is the reasonable consensus that BofA has vastly overstated its assets plus the sheer lack of credibility of the management.
I won't be surprised to see a run on BofA sometime down the road.
I just don't know how long it will take before the general public realize that they are being screwed over and over by these Wall Street criminals and their Washington cohorts.
Is there anyway that you can contact me via email? Make up one just for this and email me at the email on my account. Its my screen name.
I have a quick question for you and other longs and do not want to post it here.
Understand that this article would be considered subjective because it is written by an insider.
The best documentation that you could have would come from a 3rd party, independent source.