RALEIGH -- On his first real day as Bank of America's new CEO, Brian Moynihan flew from his home in Boston to speak to business leaders in Raleigh, where he acknowledged that his industry had helped cause the economic crisis and would help end it, too.
His 15-minute speech in Raleigh, at the Progress Energy Center for the Performing Arts, was part of the annual economic forecast forum held by the N.C. Bankers Association and the N.C. Chamber. Speaking to about 1,000 people, Moynihan acknowledged that the financial services industry was fast and loose with its lending, which helped lead to the economic crisis. He did not single out his own employer for particular blame.
"During the last few years, many consumers borrowed more than they should have, and we helped them do it," Moynihan said. He also said the banks increased penalty fees to make up for all the free products it offered, and "these fees hit a small group of customers particularly hard as the economy hit the skids."
Foreclosure filings by lenders such as the Bank of America may have reached a record in 2009, with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said Dec. 10, according to Bloomberg.
More than 5 million mortgages have been caught in foreclosure proceedings since the economy began slipping in 2007, and an estimated 8 million to 13 million more could follow in the next five years, McClatchy Newspapers reported.
Bank of America, which is the country's largest lender, has about 200 branches and 18,000 employees in North Carolina. The company is expected to report another quarterly loss later this month, hurt partly by losses on credit cards and bad loans.
Moynihan, 50, is a Bank of America veteran who was named last month to lead the bank after the retirement of Ken Lewis, who stepped down under criticism of his purchase of Merrill Lynch. Now Moynihan takes the helm as the nation's largest lender faces many challenges, including the likely prospect of increased regulation and tougher scrutiny of its business practices.
Moynihan, who officially became CEO on New Year's Day, has said that the bank's headquarters will remain in Charlotte, though he has not said whether he will move there.
Thad Woodard, who heads the N.C. Bankers Association, said Moynihan's mea culpas amounted to "a cleansing message."
"I thought it was very forthcoming and very honest," Woodard said. "It took a very strong leader to deliver that speech."
Bob Gnaizda, a lawyer for the Black Economic Council, praised Moynihan for his message. But, he added, "the real test" will be of Moynihan's actions, not his speech. Gnaizda said he hoped that Moynihan would increase lending to small businesses - a main objective of Gnaizda's organization, which is based in Oakland, Calif.
Bank of America's fortunes soured quickly when the financial crisis hit, hurt partly by its acquisition of mortgage lender Countrywide Financial and investment bank Merrill Lynch, both with troubled loans on the books. Mounting losses forced Bank of America to accept $45 billion in government bailout money.
Changes on way
Even as Bank of America breaks the tethers that came with its $45 billion loan, legislators and regulators are finding other ways to tighten their grip on the industry, which they blame at least in part for the crisis that rocked the housing market and roiled Wall Street.
For example, sweeping new credit card rules passed by Congress will take effect next month. Lawmakers are also considering a massive bill called the Wall Street Reform and Consumer Protection Act. Among other proposals, it would create a new regulatory agency focused just on consumer rights. The agency would govern how banks market loans and charge fees, and other ways they interact with customers.
Changes already made
Moynihan pointed out consumer-friendly changes the bank has made, such as new "Clarity Commitments," which are designed to help customers understand product terms if they have a mortgage, credit card or deposit at the bank.
He said the bank wants to work with regulators and the government as the industry is reshaped.
"We have been and continue to want to be positive partners in this process, to work toward industry rules that will accomplish important public goals, while at the same time preserving the ability of the industry to meet the needs of all our customers," Moynihan said. "We as an industry cannot avoid the simple fact that we caused a lot of damage, and we have to help make sure it doesn't happen again."
Moynihan also mentioned the bank's $45 billion in government loans, which it repaid last month. He said he thought the government loans to the banks had worked, and he thanked taxpayers for the loan. He also thanked the Obama and Bush administrations "for pursuing an unpopular, but necessary, solution."
"But the key lesson here is 'Never again,' " Moynihan added, saying that means stricter requirements on capital and liquidity.
After the speech, N.C. Chamber chairman Robert Stolz stood to thank Moynihan for his time. Moynihan, who was almost off the stage by then, paused and turned when Stolz started talking about him.
"Get back to it," Stolz said to Moynihan, who waved and walked off stage.
