Bank of America Corp (NYSE:BAC) Chairman Brian Moynihan spoke with Bloomberg Television anchor Erik Schatzker today, where he said that legal costs stemming from defective mortgages are largely behind it. Moynihan said, “If you look at the different components of liability and the amount of settlements, whether it’s the RMBS cases, yes, it’s behind us…Embedded in that is often the question, OK, that’s over, now you can go concentrate on running the company. The answer is, we were running the company” all along.
Moynihan also said, “I always tell people I could do this for a long time. What else would I want to do? This is a great job.”
BofA’s Moynihan: Most Litigation Overhang Is ‘Behind Us’
ERIK SCHATZKER, BLOOMBERG NEWS: I am delighted to be here with Brian Moynihan. Brian, congratulations. You just became president, and excuse me, chairman of this bank. You were already the CEO of course. We have a lot to cover in this conversation. I hope you don’t mind if I begin with the present. It has been an awfully challenging month, I don’t need to tell you, in financial markets. What do you expect in the months to come?
BRIAN MOYNIHAN, CHAIRMAN, BANK OF AMERICA: Well I think if you think about financial markets they’re going to reflect the economy. And what we see in the economy this month when you see the statistics on a customer basis it’s as strong as it was last month, or even a little bit stronger, and stronger than it was a couple months ago. So you’re hoping that that comes through and America continues to make progress because if you look around the world there’s other places that aren’t growing as fast as we’d want them to and their issues, but you’ve seen our America.
You’ve seen our customer base. You see it strong, which then I think would ought to play forward because you have consumer confidence, people spending, gas prices coming down. Those things are all good for the American economy. And I think as you go forward you’ll see that reflect in the markets and stuff.
SCHATZKER: What about the volatility, because that’s what really scared people?
MOYNIHAN: Well you had – you just had a lot of – a convergence of events, a concern about a lot of things. And when people get concerned they start moving and stuff starts moving, prices start moving around.
SCHATZKER: If you actually see more of it?
MOYNIHAN: Well you always will see more of it based on the news and the information, but we also have to remember we were so unprecedentedly low in volatility, and the thing was so stable that activity is causing it to move off a very low basis. And so but there are adjustments in equity prices, there are adjustments in bond prices, but a lot of that is retraced. You actually sort of look at the ten-year. It went way down and came way back up. And I think as people step back and look at the fundamentals it sort of stabilized.
SCHATZKER: Tell me what effect did Dodd-Frank have on BofA’s ability to trade during that market volatility?
MOYNIHAN: Well I think and if anything else the question is how much liquidity support you can give in the market making?
MOYNIHAN: And I’d say is anything else and the very liquid stuff, less and the less liquid stuff a little bit more. And so our research team has put out notes on this about issues about the high-yield bonds and how to fix it.
MOYNIHAN: And so I wouldn’t attribute it to Dodd-Frank. I’d just say the market structure has changed, the amount of leverage has changed. And I think that’s something we got to keep working on and to improve the markets going forward is to continue to create good liquidity. Our job is to provide liquidity in markets as an agent between all the principals. And everybody knows that’s the job of our industry. And so getting that pendulum swinging back and forth and getting it more right is something we’ll all be working on for a long time I think.
SCHATZKER: Can you say yet whether the capital restrictions are exacerbating volatility because you can’t provide liquidity in certain markets the way you once were able to?
MOYNIHAN: I wouldn’t say it’s that – you can’t linearly trace those much from when you actually look at our activity the more we play, but –
SCHATZKER: So these fears about Dodd-Frank, and liquidity and what’s happening in corporate credit sound to me perhaps a bit overblown.
MOYNIHAN: Well I think we’ve got to, like anything, as a person who studied history a long time you got to wait until you get through a period. You can’t take the present, the last two days which have been different from two days before that, been different and say this is an extrapolation. So I think that overall the amount leveraged in the system is down, which is good. But that’s going to have another effect, which is going to be it’s going to create less activity and less liquidity.
And so figuring all this out will take time, but it’s the responsibility for people like ourselves and my colleagues, and more importantly the experts we have in this to figure out to get this right with our regulatory brethren to avoid the excess of before, but provide the liquidity that we had. And that’s still a work in progress.
SCHATZKER: Brian, the sell-off was triggered in part by concerns over European growth. The data are terrible. How much do you worry about Europe?
MOYNIHAN: Well I think the data is there and you can see it. And it’s real and people are feeling it. And you listen to customers and clients and they see it. So it wasn’t growing very fast, but slowing down just seems like we’re working our way backwards. So the good news is as the adjustments were made by the IMF and others of the growth rates outside the United States the United States came up. The issue with that is the linkage between the United States, and a couple other key economies and what’s going to happen in the world now is pretty linked. In other words, as Europe becoming less of a contributor if the U.S. becomes more of a contributor and if we don’t grow then you could have more risk to the worldwide growth. Everything we see in the U.S. is pretty solid right now.
SCHATZER: So that being the case, what’s your strategy in Europe?
MOYNIHAN: Our strategy in Europe outside the United States has always been the same, global corporate investment banking in companies and global investors. And so we’ve actually had a pretty good year in Europe, frankly, compared to the prior years because the activity had picked up around helping some of our clients restructure their portfolios. And so –
SCHATZKER: So now is the time to be committing more capital to Europe?
MOYNIHAN: Yes. It’s in activity and people. And we have several thousand people in London who work those markets, and