We all thought that the Merrill Lynch deal would be BOFA's Waterloo, it still should, and will eventually bring the nationalization of this institution, but new information has come out on the Countrywide and LaSalle Financial deals that BOFA completed. I don't understand when Ken Lewis (CEO) says that business at Countrywide is on "fire". What does he mean by this statement? Is it on fire enough to wipe out close to $33 Billion in potential losses that various Analysts have currently modeled for Countrywide? This is roughly $10 Billion more then what BOFA has taken provisions for. Where is the money to cover these incremental losses? How about the LaSalle Financial deal? This deal has BOFA exposed to billions in commercial real estate losses.
Also, Lewis currently thinks that unemployment will peak at about 9%, most economists think 9% is the best case estimate, with estimates peaking at 12-14%. So does this mean that BOFA is only internally modeling 9% worse case unemployment with regards to their internal projections for:
1-Credit Card Losses
2-Potential Reserve Build Up
3-Auto Loan Delinquencies
4-Mortgage and Home Equity losses
5-Commercial Real Estate
If this is the case, BOFA is in more serious trouble then previously imagined.
All of this leads me to believe that Ken Lewis is giving us the same chatter that Dick Fuld & Alan Schwartz gave us just days before Lehman and Bear Stearns imploded.
Don't believe a person who would come on TV and make excuses for his lack of due diligence, while only making derogatory remarks about the current BOFA situation.
He offers no real plan to save this institution, only to give BOFA some time and things will work out eventually with regards to the Merrill and Countrywide Deals.
Hmmm...TIME...if that's what it really takes, wouldn't that be what Bear Stearns, Lehman, Wachovia, Fannie, Freddie, AIG, and WAMU really needed in the end?
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