Can Buffett Save Bank of America?

[Parsad]

Article discussing the possibility of Buffett making a preferred investment as he did with Goldman and GE.  Cheers!

 

http://www.thestreet.com/_yahoo/story/11213991/1/can-buffett-save-bank-of-america.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

[BargainValueHunter]

Thanks.

 

It is days like this when I can't figure out why everyone isn't a value investor.

[Guest Hester]

One major reason Buffett is unlikely to buy Bank of America shares is that he sold his remaining stake in the company in the fourth quarter.

 

Buffett made it clear during an interview with Becky Quick that he never bought a share of BAC. All shares were bought by Simpson and were subsequently liquidated upon his departure.

 

So reading anything into Berkshire's trading history of BAC is wrong.

[ubuy2wron]

Who says they need saving. AIG files a lawsuit puhleez give me a break if they had not written the CDS's the mkt never would have grown in the 1st place AIG should have been buried except for the fact that they would have taken everyone else down with them. Country wide and Merrill sold a bunch of crappy paper who here bought any ,no one is my guess . A bunch of highly sophisticated investors with perverse compensation schemes bought the crappy paper.

[Ballinvarosig Investors]

I don't know why everyone on this site is focusing on BAC so much. There are banks out there in much, much better shape than BAC, but in many cases are only a little more expensive. NYB is one such bank that springs to mind, great and proven management, no excessive leverage, solid and improving numbers, etc. Looking a NYB, I know I can sleep at night with the knowledge that it's cheap at these prices and it would take a financial holocaust to take them down. BAC on the otherhand scares me, my only surprise is that the Countrywide acquisition didn't take them down already.

[ericd1]

Bal - I think the interest in BAC is because it has potential to be a double, triple or more. The potential is there, but they need to work thru a number of issues, which they are trying to do. I have a small position betting they will work things out.

[JSArbitrage]

If BAC goes down and the deposits have to be moved, they will probably be going to WFC (with JPM a strong second.)  Or maybe Wells takes Merrill to let JPM have the banking assets.  So maybe Warren doesn't want to help BAC...

 

 

[Parsad]

Wells would be smart to take Merrill.  Depending on what happens over the next period, if BAC does have to raise capital and can't sell a depressed stake in China Construction, their ownership of Merrill could go.  Cheers!

[ubuy2wron]

I just read  a story on the AIG lawsuit against BA. It appears that AIG was happy to buy the crappy MBS because of the fees that they could get from lending them out. It was their securities lending unit which was doing the buying. The INSANITY of the activity which was happening is beyond belief. I will  lease the rope to my executioner because he is offering me an attractive rate but I am going to sue the guy who sold me the rope.

[berkshiremystery]

Moynihan just addressed his staff via a posting on their internal website. He said BAC still remains financially strong.

 

A few facts:

 

BAC continue to build our fortress balance sheet. Tier I Common capital ratio (8.23%) and excess liquidity ($402 billion) are much higher than they were a year ago, and all BAC's capital ratios are well in excess of regulatory requirements.

 

BAC has resolved a large portion of the legacy mortgage issues, and have more than quadrupled reserves for mortgage-related issues remaining to be settled to $18 billion over the past year.

 

 

http://www.bizjournals.com/baltimore/news/2011/08/09/bank-of-america-ceo-company-remains.html

 

[ubuy2wron]

Moynihan just addressed his staff via a posting on their internal website. He said BAC still remains financially strong.

 

A few facts:

 

BAC continue to build our fortress balance sheet. Tier I Common capital ratio (8.23%) and excess liquidity ($402 billion) are much higher than they were a year ago, and all BAC's capital ratios are well in excess of regulatory requirements.

 

BAC has resolved a large portion of the legacy mortgage issues, and have more than quadrupled reserves for mortgage-related issues remaining to be settled to $18 billion over the past year.

 

 

http://www.bizjournals.com/baltimore/news/2011/08/09/bank-of-america-ceo-company-remains.html

 

From everything I have seen BAC ran a pretty darn good bank the stuff that they had on their balance sheet going into this mess was as good as any. The stuff that they originated was rock solid. They bought a ton of really crappy stuff when they bought Country wide and Merrill but with country wide they got a mortgage servicing business which was and still is a gold mine and they got a great franchise @ Merrill. Did they know how crappy the stuff was at Country wide prolly not but I am guessing that they figured if the bad stuff did not cost them more than 10 billion they would do ok. These lawsuits could drag on for a decade before they are all heard in the mean time their business is just getting stronger. I was worried about European exposure but they seem pretty well firewalled in that regards. I think the guys who are suing BAC would have been in worse shape if BAC had not stepped in and bought Country wide Country wide would have been TU they would have had no one to sue. Now if some one wants to start a lynch mob and string up Mozilla and Stan Oneal i will pay for the rope. Parsad Please feel free to edit or delete this I do not know why I feel so cranky cuz I made a bunch of dough today. ;D

[PlanMaestro]

From everything I have seen BAC ran a pretty darn good bank the stuff that they had on their balance sheet going into this mess was as good as any. The stuff that they originated was rock solid. They bought a ton of really crappy stuff when they bought Country wide and Merrill but with country wide they got a mortgage servicing business which was and still is a gold mine and they got a great franchise @ Merrill.

 

Bank of America is a great bank as it is. The problem is the Charlotte crowd and their empire building ambitions. BofA was in great shape (Wells Fargo shape) getting into the recession and they are getting out of this mess without significant earnings dilution (compare with Citi for example) despite those risky acquisitions.

 

All we need from Moynihan for a home run is to stop any acquisition temptation, control the Charlotte crowd, bring people from the outside, and use capital for dividends and buybacks.