Mr. B

Exclusive: Big Banks' Recent Profitability Due to AIG Scam?

There is always more to these situations than meets the eye. Given the lack of character of the participants, it is not hard to imagine that Paulson and Geithner have been less than honest with the taxpaying public.

The real problem at AIG-FP was the ability to write these "policies" without having to post collateral. A collateral requirement would have prevented this from ever happening. Instead, leverage was infinite. Now everyone gets to pay and the bailout is really for speculators, which could have been banks, hedge funds or other market participants. Add that to the outrage.

Is Bank of America Still a Safe, Long-Term Stock?

The questions raised are valid. Change has been rapid and driven by extraordinary market conditions.

BAC had a choice - stay the same or capitalize on market driven opportunities. Lewis and the Board chose to be dynamic and change. BAC is now a global universal bank with the addition of Merrill.

The key risk is now execution risk. Management bandwidth is one of primary challenges.

I am not fond of the Countrywide acquisition because BAC clearly overpaid. But BAC will advance its position in the mortgage market on a long term basis. Ultimately, this will be good for the consumer banking franchise especially if BAC can figure out how to turn mortgage only customers into broader consumer banking relationships.

The Merrill acquisition was a once in a lifetime opportunity. BAC now has true investment banking capability. This should drive BAC in the large cap market and enhance capabilities in the mid-cap space. Real value will be added if investment banking services can be expanded for mid and small caps.

There are challenges everywhere, but long-term this should be good for BAC and its shareholders.

The dividend cut and raising equity capital may have happened without the Merrill deal.