M-P

Ken Lewis on Bank Accounting: Sensible Talk from a Surprising Source

Per other comments that Lewis has made, he often seems to be blaming things external to his firm and himself for BAC's issues. I'm not sure I find this comforting (cf. the language of Buffett in his annual reports). Bottom line, the mark to market is an issue because he bought highly risky assets that the firm didn't understand, with high levels of correlated risk. The reserve piece is not so atypical for a firm that is significantly impacted by the business cycle. The issue is to assume we will have "fat tails" and a black swan will happen. All reserves should have a contingency for those improbable events. Also, statements at one point in time are meaningless - let's look at the behavior and trail of statements to understand the real theme and message. A more holistic perspective and evidentiary base is needed.