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Monday, September 12, 2011

Bank Of America's Lay-Offs Threatens Charlotte's Economy; The Countrywide Curse!

















Bank of America Confirms 30,000 Jobs to Go

Bank of America’s chief executive, Brian T. Moynihan, vowed on Monday to eliminate $5 billion in costs annually by 2014, a move that will eliminate at least 30,000 jobs at the company, which employs 288,000 people and is the largest bank in the United States.

In a widely anticipated speech at an investor conference organized by Barclays in New York, Mr. Moynihan outlined his plan to make Bank of America, the largest bank in the United States, more efficient and profitable even if that means sacrificing scale. “We don’t have to be the biggest company out there,” he said. “We have to be the best.”

While he did not specify the number of jobs that might be involved, the company announced shortly after his speech that 30,000 jobs are to be eliminated under the company’s Project New BAC cost-cutting initiative. The initial recommendations by the architects of New BAC, which takes its name from the company’s ticker symbol, were reviewed last Thursday and Friday by the company’s top management in Charlotte, N.C.

“As the decisions are implemented, employment levels in the areas under review during Phase I are expected to be reduced by approximately 30,000 jobs over the next few years,” the bank said in a statement. “The company expects that attrition and the elimination of appropriate unfilled roles will be a significant part of the anticipated decrease in jobs.”

The first part of New BAC involves the consumer banking operations of the company, as well as its home loan, technology and support operations. Other parts of the business, including Bank of America Merrill Lynch, will be reviewed in the second phase, which begins in October and continues through March 2012.

Out of $73 billion in annual expenses, Mr. Moynihan aims to cut at least $5 billion by shutting some of its 63 data centers, eliminating overlapping deposit systems and trimming layers of back-office staff accumulated during the acquisition binge undertaken by his predecessor, Ken Lewis.

“It’s taking out work we don’t need to do any more, and getting it out of the company,” he said. “We’re a much simpler company than we were 24 months ago.”

While the speech fell short of the bold blueprint many analysts and investors had been hoping for, Bank of America shares rose in early trading by 1.1 percent to $7.06.

It has been a very busy summer for Mr. Moynihan. In the last few weeks, the company has announced a management shake-up, a $5 billion investment by Warren E. Buffett and the sale of more than $15 billion in assets.

None of those major news events have propped up the bank’s battered stock, which is down nearly 30 percent since the beginning of August.

During the question-and-answer part of the session, Mr. Moynihan was asked whether Bank of America had been asked by the federal regulators to raise capital at the time of Mr. Buffett’s investment. Mr. Moynihan said they had not.

A shareholder asked him: “Can you or would you bankrupt Countrywide?” Mounting losses at Countrywide Financial are still plaguing the bank, three years after Bank of America bought it for $2.8 billion when Countrywide nearly collapsed into bankruptcy as its financing dried up.

Mr. Moynihan answered that in dealing with the troubled mortgage giant, the bank “looks at all our options on everything.”

When the questioner followed up by asking Mr. Moynihan if he was saying that bankrupting Countrywide was a viable option, Mr. Moynihan again demurred. “There are options around all this stuff that we continue to work on,” he said.

Angry investors are trying to force Bank of America, and other large banks, to buy back billions of dollars worth of mortgages that have defaulted, arguing that the home loans did not conform to the original underwriting standards or were originated with little evidence of adequate assets on the part of borrowers.

In other cases, investors including the federal government and the insurance giant A.I.G. want to recover tens of billions of dollars from the big banks for losses on securities they assembled from now-troubled subprime mortgages.

Then there is the investigation by state attorneys general into mortgage servicing abuses, which could cost the big banks more than $20 billion in a proposed settlement that so far they’ve been unable to finalize. “The attorneys generals settlement is part of what can move us forward, but the settlement has to be reasonable for the company and reasonable for shareholders,” Mr. Moynihan said.



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Sources: Associated Press, Charlotte Magazine, Forbes, NY Times, Youtube, Google Maps

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