Tag Archives: bank of america

I Don’t Remember

Those of us with children have had countless conversations with them that went something like this:

Parent: Why did you <insert some inexplicably stupid act>?

Child: I don't know.

Parent: What were you thinking?

Child: I don't remember.

Apparently the CEO of Bank of America is very much like a child:

In the case of Bank of America, MBIA has long wanted to depose Moynihan because it was precisely Moynihan who went public with comments about how B of A was going to make good on the errors made by its bad-seed acquisition, Countrywide. "At the end of the day, we'll pay for the things Countrywide did," was one such comment Moynihan made, in November of 2010.

As it turns out, Moynihan was deposed last May 2. But the deposition was only made public this week, when it was filed as an exhibit in a motion for summary judgment. In the deposition, attorney Peter Calamari of Quinn Emmanuel, representing MBIA, attempts to ask Moynihan a series of questions about what exactly Bank of America knew about Countrywide's operations at various points in time…

Early on, he asks Moynihan if he remembers the B of A audit committee discussing Countrywide. Moynihan says he "doesn't recall any specific discussion of it."

He's asked again: In the broadest conceivable sense, do you recall ever attending an audit committee meeting where the word Countrywide or any aspect of the Countrywide transaction was ever discussed? Moynihan: I don't recall.

Calamari counters: It's a multi-billion dollar acquisition, was it not? 
Moynihan: Yes, it was. Well, isn't that the kind of thing you would talk about? 
Moynihan: not necessarily . . .

The exasperated MBIA lawyer tries again: If it's true that Moynihan somehow managed to not know anything about the bank's most important and most problematic subsidiary when he became CEO, well, did he ever make an effort to correct that ignorance?  "Do you ever come to learn what CFC was doing?" is how the question is posed.

"I'm not sure that I recall exactly what CFC was doing versus other parts," Moynihan sagely concludes.

The deposition rolls on like this for 223 agonizing pages. The entire time, the Bank of America CEO presents himself as a Being There-esque cipher who was placed in charge of a Too-Big-To-Fail global banking giant by some kind of historical accident beyond his control, and appears to know little to nothing at all about the business he is running.

In the end, Moynihan even doubles back on his "we'll pay for the things Countrywide did" quote. Asked if he said that to a Bloomberg reporter, Moynihan says he doesn't remember that either, though he guesses the reporter got it right.

Well, he's asked, assuming he did say it, does the quote accurately reflect Moynihan's opinion?

"It is what it is," Moynihan says philosophically.

(H/T to Lex for linking to this).

 

 

WTF TBTF BAC?

This post by Fec about Bank of America put me off my breakfast:

So that’s $53T in unregulated derivatives being backstopped by $1T in customer deposits. And remember, those derivatives are largely contracts made with the other TBTF banks, so that if one goes down, they all go down. And there’s no way in hell the FDIC (the taxpayers) can cover those kind of losses.

At this point, I can’t imagine why anyone would leave their money, much less own stock, in a TBTF bank.

I remember the deregulation of the '90s. At the time it made sense to me that a bank could start offering their customers investment services since, you know, it let them do stuff with their money without having to inconvenience themselves with dealing with two (or more) different people.  Then again I didn't know jack about banks or the markets so it isn't a real surprise that I couldn't see the possible negatives in a deregulated environment.  In retrospect the deregulation doesn't seem like it was such a good idea, even to a financial fool like me.

**Update**- In a later post Fec provided a link to a good article explaining the Bank of America situation.

Bizarro Banking

If we've learned nothing else the last year or so it's that we can't count on the folks running our financial system to be, you know, wise.  Check out this paragraph from an article in the Washington Post about the trouble Bank of America is having meeting the Obama administration's November deadline for modifying 125,000 home loans:

The company's effort has been hamstrung by a staff shortage and by adapting its computer systems and even fax machines to the scale of the program, which began in March. The company was also slow out of the box because it initially took a more conservative approach than some other banks, requiring that borrowers document their income and complete other paperwork before granting preliminary approval for a modification. In August, Bank of America softened the requirement and began authorizing some modifications without getting all the documents first. (Emphasis mine)

So a bank is struggling, in part, because it is doing what we'd normally expect a bank to do when it's loaning money to a consumer?  Obviously they're doing this because they don't want to risk any more of their capital than they have to, right?  Maybe not so much:

Under the Making Home Affordable program, lenders are paid with taxpayer funds to reduce borrowers' mortgage payments by lowering their interest rates, for example, or by extending the terms of their loans…

Bank of America and other lenders have a lot riding on the foreclosure prevention program. The company stands to collect about $6 billion — some of which will be passed on to investors — of the $75 billion the administration has set aside for the Making Home Affordable program. 

Hey, it's easy to criticize the banks since they really and truly have earned condemnation on many fronts.  It's also easy to laud a program that's set up to help people manage their mortgage expenses.  It's damn near impossible to understand how this is going to end well.