Updated from Tuesday, March 3
CEO Ken Lewis says Bank of America (BAC) is strong and doesn't need more government assistance. The market says BofA is worth nearly 90% less today than it was a year ago.
Are these two sentiments reconcilable?
Lewis, the bank's CEO, asserted before Congress last month that BofA's "core business is strong." He told staffers in a memo last month that, "Bank of America does not need any further assistance today, and I am confident we will not need any further assistance in the future. I believe our company has more than enough capital, liquidity and earnings power to make it through this downturn on our own from here on out."He went a step further on Monday, telling the Financial Times that BofA accepted too much money from the government. Lewis called his request for $20 billion to support the bank's acquisition of Merrill Lynch a "tactical mistake" that was done out of "an abundance of caution." Bank of America only needed half that amount, he told the FT. Investors have heard Lewis' line before -- from executives at Lehman Brothers, Citigroup (C), AIG (AIG), Fannie Mae (FNM) and Freddie Mac (FRE), among others -- and are loathe to trust the CEOs of financial institutions on their word alone. Citi needed another massive lifeline from the government last week, and rumors circulated that BofA -- another banking behemoth with a myriad of financial services products -- would be the next to fall. Worries persist, especially in light of Bank of America's substantial risk exposure in several categories: Credit cards, mortgages and investment banking.
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