In a 90 minute investor conference call, BofA’s Chief Defends the Core, but Sounds Sour on Countrywide

Bank of America Corp. Chief Executive Brian Moynihan, in a 90-minute phone call with thousands of investors, defended his performance as the top, said the company won’t divest itself of Merrill Lynch and said demand for new loans is slow.

Mr. Moynihan spoke Wednesday during an unusual conference call, in which Bruce Berkowitz of Fairholme Capital Management, a mutual-fund manager that is a large owner of Bank of America stock, had invited “skeptics” to pass along their toughest questions to Moynihan.

In Mr. Moynihan’s most candid remarks yet about the troubled mortgage business, he told the 6,000 listeners who Mr. Berkowitz said were on the call: “Obviously, there aren’t many days when I get up and think positively about the Countrywide transaction in 2008.” Bank of America acquired mortgage lender Countrywide Financial in 2008, before Mr. Moynihan was CEO, and has struggled since with losses and with financial demands from investors in securities backed with Countrywide mortgages.

Asked whether he would consider letting Countrywide, which remains a separate legal entity, go into bankruptcy to limit Bank of America’s legal obligations to the troubled unit, he said: “We thought of every possible thing we could and but I don’t think I’d comment on any outcome and the path we’ve taken is the best for the shareholders and this company.”

Mr. Moynihan said customers want the bank to provide core services, including investment banking and brokerage. “That’s what the customer needs.” And capital markets, where its Merrill Lynch business is key, “is where we earn the bulk of our money right now.”

“Why would you sell the core assets,” he asked, when the bank can continue to sell noncore assets like mortgage-servicing rights.

Signs of Delusion

That Moynihan would choose to defend his performance now, smack in the face of massive problems and share prices down 55% since mid-January is a sign of delusion or a sign of a blatant lie. I suspect both.

Either way Moynihan should leave, preferably by force of receivership with bondholders wiped out, just as they should have happened in 2008.

Mike “Mish” Shedlock


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