Along with an unflattering photograph in which he looks as if he’s poking himself in the eye, Bank of America’s CEO generates the following headline in the latest issue of Bloomberg Businessweek: “Brian Moynihan’s Credibility Crunch.”
Since January, he has forged a series of multibillion-dollar settlements with buyers and insurers of shoddy loans created by Countrywide, the subprime lender the bank took over in 2008.
So far, the conciliatory approach has backfired. The Charlotte-based firm disclosed this month that Fannie Mae and Freddie Mac, the government-sponsored enterprises that settled with the bank for $3 billion, are stepping up demands that it repurchase soured loans. Attorneys general from New York and Delaware have challenged the bank’s June $8.5 billion deal with institutional investors. And on Aug. 8 bailed-out insurer American International Group said it will seek more than $10 billion from the bank over mortgage securities gone bad. …
… The expanding legal risk has shareholders concerned that Bank of America, the biggest U.S. lender by assets, may need to sell new shares to comply with more strict international rules on capital—something the bank’s chief has repeatedly said would not be necessary. Adding to Moynihan’s woes are signs the U.S. economy is stalling, a prospect that would punish Bank of America most out of the big U.S. lenders: 80 percent of the bank’s 2009 revenue came from the U.S.
