In an interview with Fox Business Network, Lewis plants his feet squarely in his mouth while wearing the pinkest of pink too-big-to-fail glasses, claiming again that he will not need any additional capital, putting his job on the line, and squarely contradicting Chris Kotowski and anyone else who can read financial statements and realize that another round of massive equity dilution at BofA is merely a matter of time, probably very short time at that. Additionally, Lewis is seeing BofA as earning $30 billion which is how it should be "in good times." Maybe once the bank marks all its toxic assets down by 15-20 points, and somehow deals with the $150 billion capital deficiency without Lewis losing his job, this idyllic vision could be realized. Speaking of his job, and referring to Whitney's demand that Lewis not join the unemployment benefits line just yet, his response is that he plans to "be in the job [sic] because I want to get us through this." Curious just where Ken will get us to...
Lastly, Ken should not use the word "hero" to describe the Fed: infinite piggy bank that will fund all of his undiligenced M&A and 90 cent mismarked toxic assets is much more appropriate.
The full fox business news interview is presented below: we recommend readers
On what he wants for the future:
“I plan to be in the job because I want to get us through this. I want to be on the other side of it to take advantage of the upside and no bank in the world will be better positioned than we will across all the products and geographies. And I also want to see the TARP money paid back. And then finally, I want to see this bank earn $30 Billion after tax and that’s about what it should be making in good times.”
On Brian Moynihan as a CEO successor:
“He absolutely could be as well as several others on the management team. I think the world of Brian. He’s outstanding. He’s got so much talent. He’s so bright. But, we have a lot of people on my management team that would fit that description as well.”
On differences between Bank of America and Citi:
“I don’t want to bash Citigroup, but there are some striking comparisons. First, I mentioned our core deposit levels. We grew our deposits $42 billion last year. We didn’t have a loss of deposits. We made $4 billion last year after tax. We didn’t lose money. So there are some striking differences. And then finally, when we were asked to go to Washington and asked to take $15 billion of the first TARP money, we had just raised $10 billion in common. We didn’t need more money. We did it for the better good. I feel like I’m living the saying, ‘no good deed goes unpunished’ because it is not a fair comparison.”
On December bonuses paid at Merrill Lynch:
“I can’t talk a lot about it because there’s litigation and I’ve been subpoenaed by the Attorney General of New York and so you can’t speak about your testimonies in those activities but I’ll say what I’ve said before….Merrill Lynch was a separate, publically owned company. We had an agreement where we could advise on incentives but the final agreement was decided on by the board of directors and the chair of the compensation committee and we did not own them until January 1st 2009. And so, that is the explanation I have given in the past and will continue to.
On whether he overpaid for Merrill Lynch:
“We’ll never know. The critics would say we should have waited until Monday and have things fall apart and then get it at a bargain rate but they did have other deal offers out there. And so, we weren’t the only one trying to do a deal. And so, what would have happened, I have no idea. All I know is, I’m very pleased they’re part of the company at the moment.”
On how he feels about the Merrill Lynch acquisition:
“From an overall standpoint, we are very, very pleased that Merrill Lynch has been a part of our company during the first quarter. The timing could not have been better. A number of deals – you mentioned Pfizer and Wyeth, Dow Chemical, that deal we were involved in, the homebuilder deal you mentioned we were involved in. And so, you take the investment banking activity in addition to a lot of debt capital being raised that we participated in and then plus the capital markets activities – it has really been a boost to revenue for Bank of America.”
On whether he will be judged for the Merrill Lynch acquisition:
“That doesn’t bother me as much as making the judgment on a three month basis. This is a very important acquisition for Bank of America and you should judge that over three to five years. But, the point is we haven’t even reported earnings for the three months yet. And so, it seems to me that it’s just a little premature to make a judgment on such a short time frame. That’s the only thing that bothers me.”
On whether he should have disclosed more about Merrill’s losses:
“No, I think we’ve done everything we were supposed to do, and that will come out as we have these cases tried, and I have no doubt that we did the right thing.”
On Merrill Lynch’s toxic assets:
“Well, there’ve been some pretty severe markdowns already, and so we know they’re marked to market in the case that there are markets. And so, we feel we’re going in with a pretty good position and things could improve. So, I feel just as good about the deal as the day we signed it. As you mentioned, once you get past the current event, virtually nobody says that it’s not a good strategic fit and that’s what I’m looking at.”
On the best parts of Merrill Lynch [ed. "best parts"?]:
“On the investment banking side, for instance, obviously we’ve said capital markets activities were a good fit. On the investment banking side, the deals that I mentioned the Pfizer deal and the Dow deal – were deals that neither company would have had the position that we ended up having by themselves. And so, we’re seeing the benefits of being this corporate bank and having the investment banking business on Merrill on top of the investment banking business we already have. And so, we’re seeing real, live evidence in these deals that we’re getting positioned as a result of coming together.”
On what he thinks of the Fed and the TALF program:
“I haven’t really kind of thought through the three years to five years but they have been working, they have been providing liquidity and I think the Fed has been kind of a hero here in terms of providing the liquidity they have and getting interest rates down on mortgages. If they had not done some of the things they have done we’d be in a lot worse shape than we are.
On whether they will separate the role of Chairman and CEO:
“I don’t think the breakup of the Chairman and CEO is necessarily a bad thing, but I don’t think it’s a good thing necessarily either. Think about the 4 or 5 banks that had the massive losses and insurance companies as well – AIG, RBS, Citigroup, UBS – they have 2 common characteristics in 2008: first, the lost tens of billions of dollars – perhaps the most massive losses in the history of the financial services industry – and they had separate chairmen and CEOs. I rest my case. It’s not the be all and end all.”
On his relationship with Obama:
“I had never met him until we got invited to Washington, and so there is no relationship other than having had that conversation with him and listened to him. I thought he was very well prepared. He understood the subjects that we talked about and he’s obviously very bright. But beyond that there is no relationship.”
On what shareholders can expect with Bank of America:
LEWIS: We’re going to have a thing of beauty called Bank of America when this economy turns.
GLICK: So, you’ll bring them back the equity that they’ve lost over the past year?
LEWIS: That would be the intention.
On parts of the business he is most concerned about:
“I’m most concerned about credit quality related to the consumer – card, home equity, even a little bit of deterioration with mortgages, even the prime mortgages. Fortunately, we didn’t do the subprime - that stopped in 2001. But, credit in general is deteriorating on the consumer side. But, the good news so far is that the capital markets business has done a lot better and so you’re not having the write downs and the credit deterioration. So, it’s becoming more like an old fashioned recession when you’re dealing with credit as the singular issue, as opposed to two issues at once. And so, the good news is that you’ve got some capital markets offset. But, there’s no question as unemployment rises, we’re going to have credit deterioration.”
On Bank of America’s refinancing business:
“Well we’re having five and six billion dollar days of applications and so it is on fire. Our countrywide business in addition to the old Bank of America business is absolutely on fire in a positive sense and I thin people underestimate the effect on the economy that it’s going to have because now you’ve got the stimulus program but now on top of that you’ve got people getting their monthly payments down pretty substantially. And so, I think that double edged effect is going to have a major impact on the economy.”
On positive indicators in the economy:
“Actually, it’s the purchases that give us a lot of hope that things are starting to bottom at least, and the sales activity that’s picking up is in places that went down the furthest. I mean, Inland Empire in California which is sort of the poster child for the downturn has seen signs of improvement, so we’re encouraged but you know, it’s limited. But, anytime that you’re looking at a bottom or getting near a bottom in a recession, thing get mixed, you know, not everything is bad.”
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