Perhaps in order to give him a day off from memo-writing, former Bank of America chairmen and CEOs Hugh L. McColl Jr., and Thomas I. Storrs have picked up where Ken Lewis left off yesterday, to reiterate, ad nauseum, that NOTHING IS FUCKED at BA to the C. In an editorial printed in today's Charlotte Observer, McC and Storrs insist that "Bank of America's final chapter won't be written for a while," in response a hideous suggestion that the firm would be better off if KL hadn't acquired an asbestos company last spring, and another one this past December, and that it may or may not bite the big one. This is what it's about people. Sticking your neck out on the line. Chuck Prince's rousing endorsement for Vikram Pandit is said to be forthcoming, and though the timing's a bit off, Stan O'Neal's said to be crafting a few words in defense of John Thain, as well. And when he emerges from the back of a van he's been hotboxing for the last several hours, Jimmy Cayne will probably have some rambling bit of incoherence about Jamie Dimon, and the nearing one-year anniversary of a certain buy.
We found it disheartening and disappointing in the extreme to read the Observer's screed against Ken Lewis and Bank of America. At this moment of great economic uncertainty and tremendous pressure on the bank, the Charlotte Observer decided to pile on. The decision was both mystifying and unhelpful.
The Observer criticized Lewis for taking a risk in acquiring Merrill Lynch. CEOs get paid to make big decisions, and public criticism comes with the territory. But Lewis also tried to kill the deal in December as Merrill's losses ballooned. Our sense is that the government pressured management to close the deal and take billions in additional public assistance, leaving Lewis no acceptable alternative.
We've heard the criticisms of acquisitions before, from "paid too much," to "not enough due diligence." But it's worth remembering that the critics said the same things about the bank's deal for FleetBoston in 2004, which paid off in spades. Lewis and his team have proven again and again to be masters of merger integration, achieving savings and efficiencies through acquisitions of MBNA, U.S. Trust and LaSalle Bank.
Lewis' decision to acquire Countrywide has put Bank of America in a unique position to take advantage of one of the few bright spots in the entire industry right now: the surging market for mortgage financing that is being fed by extremely low interest rates.
Let's have some facts. Bank of America earned more than $4 billion last year. By our back-of-the-envelope calculations, it should generate more than $100 billion in revenue this year, and between $40-$50 billion in pre-tax, pre-provision earnings. This is the point that many people miss: The most important protection against losses - more than capital and more than provision - is earnings. Bank of America's huge earnings power provides significant protection against future credit losses.
The bank continues to provide huge amounts of credit to the U.S. economy - Lewis testified to Congress recently that in the fourth quarter alone the bank loaned about $185 billion to consumers and businesses of all sizes. That fact stands in stark contrast to the complaints of newspaper editors who insist daily that the banks "aren't lending."
It's a truism that bankers aren't as smart as they look when they're making money, nor as foolish as they look when they're losing it. Banks are a mirror of the economies they serve. Bank of America is no different in that regard. It is different in that, because of its size, scale and quality of management, it has the capacity to be a big part of the solution to our current economic challenges. We believe that Lewis and his team are doing all they can to help push our local and national economies forward.
The final chapter in Bank of America's story won't be written anytime soon. With its reach into cities and towns all across America, Bank of America is America's bank. We're betting that Lewis achieves his vision for Bank of America, and that all of the bank's stakeholders - including the city of Charlotte - will be rewarded by the bank's resurgence in time.