Wikinvest Wire

BofA's "solid risk management"

Monday, December 28, 2009

Sometimes, when you read something that was uttered by some official at a big bank, it makes you want to lash out and strike somebody, preferably the person that made the comment. But, unfortunately, that's almost always impossible.

Such was the case when Bank of America spokesman Rick Simon appeared in this AP story over the weekend about the dwindling use of home equity lines of credit now that millions of homeowners owe more than their houses are worth.

Bank of America, for example made about $10.4 billion in home equity loans in the first nine months of the year — down 70 percent from the same period last year, spokesman Rick Simon says. They also started sending letters freezing or cutting lines of credit last year, and will disqualify borrowers in areas where home prices are declining.

"This was just solid risk management," he says.
Just the idea that anyone at Bank of America can smugly claim to be performing any kind of risk management in the aftermath of the burst housing bubble in which they played a major role is worthy of some kind of a flogging.

Maybe this was taken out of context and Simon's full statement was much more humble, perhaps even acknowledging that BofA wouldn't still be in business if not for U.S. government bailouts and that they are now taking difficult, but necessary steps.

As it is, it just sounds arrogant and makes you think that nothing has really changed at the big banks, that is, with the notable exception that those banks previously deemed "too big to fail" are now even bigger.

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Anonymous said...

Banks are still issuing low down payment loans that no other advanced country will issue. There is no risk management. There is only bailouts of Freddie/Fannie that perpetuate bad risk practices. This time, the risk is all being put on the taxpayers instead of the banks. The risk is still there though.

Homes cost too much, because zoning forces them to be too big. Creative financing will not change that. Creative financing will only force the taxpayers to endlessly bailout Freddie/Fannie.

Nothing was learned from the financial crises, and its fantastic cost to taxpayers.

Dan said...

My niece, who earns a whopping $12/hour (past six months - prior to that, was unemployed for 2 years) just closed on a zero down home loan from BofA in Las Vegas. So much for "managing risk".

The deal is better for her as her "monthly payment" is 30% lower than her rent. Of course this doesn't include the Homeowners assoc., ins, repair, upkeep, etc. She failed (refused) to calculate these. She is an extremely high risk borrower.

The game is afoot!

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