Facts & Resources

Remarks to the Northeastern University CEO Breakfast (Moynihan)

Brian T. Moynihan, Chief Executive Officer, Bank of America
Tuesday, April 12, 2011 3:00 am GMT

April 12, 2011

Boston, MA

"Safe at Home" prepared for delivery...

...introduction given by Bill Perlstein, co-managing partner, WilmerHale...

Thank you, Bill. I appreciate your kind words, and I'll return the favor.

Wilmer Hale has been practicing law in Boston for 93 years now... supporting the growth of almost all our most important industries.

All of us at Bank of America appreciate our own relationship with the firm, and all you do to help build this community.

I want to thank President Aoun and Dean Lane of Northeastern for inviting me to be here today... and all the members of the Northeastern community for the warm welcome.

Northeastern is a cornerstone of the higher education community that is building the talent base for our future, here in Massachusetts and around the country.

You all have been at this since 1898 when Frank Speare founded the school as a branch of the local YMCA... your impact has grown since then, but your mission is the same... so thanks for all you do.

It really is great to be here. I've been traveling a lot, spending time with customers, investors and employees of the bank. It's a lot of fun and I get a lot of energy from it... but it's nice to be here in Boston on a Tuesday morning.

It's important to me to be here this morning with all of you because this city... this community... is important to Bank of America.

We serve hundreds of thousands of households and tens of thousands of businesses here. Just looking out across this group, I see friends and clients of the bank.

Over the years, we've worked with many, maybe even most of you, to help you pursue and achieve your goals for your families and your companies. It's our goal to do an even better job of that in the future.

We employ more than 7,000 teammates in the state... Anne Finucane, our chief of Global Strategy and Marketing is here of course, and our local market president for Massachusetts, Bob Gallery, whom most of you know. Bob is here today in case anyone is looking for a new financial partner. Bob, stand up for a second so everyone can see you.

The point is, we are invested here... our success and prosperity is dependent on your success and prosperity. So it is no exaggeration to say that we are all in this together.

The idea that we depend on one another... that we succeed and prosper together... has deep roots in our history in this community.

There's a good story that makes this point.... I know it's been told before... but when our bank here in Boston was being founded in 1784, the people who started it were merchants, businesspeople, like all of you -- not bankers.

So they wrote to a banker in Philadelphia named Thomas Willing for advice on how to run the bank.

In his response, Willing remarked that "The world is apt to suppose a greater mystery in this sort of business than there really is."

I agree, and I've spent the past year telling our employees, our customers and clients and our investors that ours is a straightforward business and company.

We know who our customers are and we know what they need from us.

Our job is to execute, to do what our customers need, to win their confidence and to help them achieve their dreams for their families and their companies.

How we can best do that is what I want to talk about today.

I'll start with a quick review of progress on economic recovery... will share some thoughts on state of the banking industry... but would like to spend most of my time here on a subject of great importance across America... and here in Boston... the housing markets, the ongoing mortgage crisis... and what banks like ours are doing on our own and in partnership with government to help homeowners, to heal the mortgage markets and to move forward.

The economy

The good and most important news is that an economic recovery is continuing. Growth was slower than we would have liked in 2010... and recent events have trimmed estimates of the recovery's momentum by some measure -- from oil prices going up, to the tragedy in Japan, to government spending cuts at the state and federal levels.

Even so, the fundamentals of the real economy are continuing to improve.

Weekly initial jobless claims are now coming in consistently under 400,000. The four-week moving average is now below that. At its lowest level it will get to about 250,000. The national unemployment rate has dropped a full percentage point over the past three months.

Here in Massachusetts, unemployment is a little lower than the national average. It was 8.2 percent in February. It is moving in the right direction.

There is more encouraging news. The ISM Manufacturing Index continues to improve. The household debt service-to-income ratio, which peaked above 14 percent in 2007, is now back under 12 percent -- still too high. Optimism remains solidly in place.

Consumer spending continues to rise, reflecting that optimism. Our March 2011 data show spending increases of

6 percent over 2010, with about 1 -- 1.5 percent due to gas prices. The rest is core activity.

The business sector nationally remains relatively strong. Our client companies are profitable and very efficient. They weathered the storm well and built cash in the crisis. M&A activity is picking up, as is equity capital markets activity, due to a large backlog... and debt capital markets are very strong.

They are beginning -- and the operative word is beginning -- to deploy cash on the organic side of growth. But most of the activity at the moment remains refinancing.

Business leaders still face two issues in contributing meaningfully to U.S. growth -- uncertainty and international opportunity.

In the U.S., uncertainty on the policy front -- taxes, regulations, etc. -- continue to hold businesses back.

On the other hand, the strong opportunities outside the U.S. continue to get businesses attention. And why shouldn't they, with both faster growth and strong support structures to take advantage of that growth?

As I talk to CEO, these are the issues that are on their minds.

So where are we now, and what does this year look like?

Our estimate for annualized U.S. growth in the first quarter is 1.5 percent. For all of 2011 we estimate 2.6 percent for the U.S.... and around 4 percent globally.

The economic downturn has been difficult here in Massachusetts. Housing, construction and manufacturing industries have been hard hit, and are only slowly recovering.

But the key is that we can continue to move forward. The broad-based economy is moving ahead, with sectors like real estate and autos taking more time. The excesses heading into the last cycle were large, and it will take time for them to work through.

State of the banking industry

One thing that is critically important to help drive the economic recovery -- here in Massachusetts and across the country -- is a strong financial services industry. On this point, I believe we're seeing unambiguous progress.

Year-over-year earnings for U.S. banks have increased for six consecutive quarters. Asset quality continues to improve. Charge-offs are falling in almost every lending category. Lending trends were mixed last quarter. Economic growth was offset by consumers and businesses continuing to pay down debt.

Deposit growth remained strong -- at Bank of America, we topped $1 trillion in deposits for the first time, demonstrating that customers continue to look to us as a strong and stable financial partner.

Most U.S. banks also are in a stronger capital position than before the crisis. Banks have raised more than $350 billion over the past several years. Capital ratios -- the core measure of our financial strength -- are at levels not seen since World War II. Banks have paid back most of the capital provided through TARP. (Bank of America paid back all its TARP funds in December of 2009, with interest. We have doubled our capital relative to pre-crisis lows.)

The government is actually now projecting a profit on TARP -- not a loss -- in stark contrast to other economies.

The number of banks on the FDIC's "Problem List" remains high. But the total assets of the 157 institutions that failed in 2010 were about $96 billion. That is less than one percent of U.S. banking assets.

This year, through the first quarter, 26 banks have failed with aggregate assets of less than $10 billion... and two more failed over the weekend, with total assets of about $330 million in assets. This is extremely modest.

The stabilization of the nation's financial system should boost confidence, investment and hiring, as it continues in 2011.

Healthier banks helping drive recovery

The upside of a healthier banking system is that we can do more to help drive economic recovery in the communities we serve. And that's our goal.

I want to mention just a few ways Bank of America has been working to help here in Boston.

Community development -- Investing in the revitalization of low-to-moderate income neighborhoods has been a part of our mission for decades.

Many of you know we're working on a 10-year, nationwide goal of $1.5 trillion for community development lending and investing. Our activity in this space came close to $5 billion

-- yes, $5 billion -- in Massachusetts last year.

Philanthropy -- We held our national and local philanthropic budgets steady through the downturn, and supported scores of non-profit groups in Boston last year through more than $12 million -- that's $12 million -- in grants.

Volunteerism -- Our teammates nationwide volunteered more than a million hours in their communities last year.

April is Global Service Month for Bank of America... here in Boston, we're organizing special volunteer activities this month for financial literacy programs in the schools... for work teams to benefit City Year and Cradles to Crayons... and Earth Day Clean Up activities in partnership with the National Parks Foundation.

There are a lot of important ways we can work together to drive the community and the economic recovery ahead... and we're committed to maintaining our industry leadership to help make it happen.

Housing markets and the foreclosure crisis

One of the most important things we're doing to help drive economic recovery is to help financially distressed homeowners keep their homes when possible... and to help build a better, more stable mortgage industry for the future.

The problem of delinquent mortgages and falling home values is the most stubborn, entrenched and damaging economic problem our country faces today.

Helping to solve it is a top priority.

We are making progress. U.S. banks have completed about 4 million mortgage modifications since 2008 to help customers remain in their homes. More than 800,000 of those are Bank of America's. We are now making about one in three modifications in the country.

Over the past two years, we have more than doubled the size of our staff that works with distressed homeowners, to about 30,000.

Homeowners across America are having a hard time. But they still want to honor their commitments to the best of their ability. We're working hard to help them restructure their loans in a way that enables them to do that.

We also are looking for every good new idea for ways to take action to help America put this issue behind it as quickly as possible.

For example, earlier this month, we announced our plans to expand our community outreach for distressed homeowners across the country.

This year, we will open many more regional customer assistance centers around the country that will be similar to the one we opened in Dedham last July. Expanding on the 650 outreach events we've hosted with nonprofit and local government partners since 2008, we're going to host another 400 this year.

We continue to provide financial support to community non-profits that are working to help customers find a way to save their homes.

We have donated low-value homes to cities and non-profits to help get the homes into the hands of people who will refurbish them. And we have taken down vacant homes at the request of cities to reduce urban blight.

We also announced a new mortgage modification program specifically for current and former members of the U.S. military.

We have served members of the U.S. military with special programs since 1920, and we believe this is the right thing to do for these families.

Those who are sacrificing to protect our freedoms should be free to focus on the task at hand -- and not be distracted by worries about losing their homes because of economic problems back in the U.S.

For some military families, one option we consider is principal reduction.

We also consider the possibility of limited principal reduction in special circumstances, such as customers who are in option-adjustable-rate-mortgages that are in negative amortization.

But generally speaking, we do not see principal forgiveness as a broad cure-all for this issue.

Fairness is a major concern -- it's hard to see how we could justify reducing principal for many delinquent customers, but not for any of our customers who have managed to stay current on their loans.

Every day we talk to tens of thousands of customers who are facing financial hardship and looking for help. Helping customers remain in their homes where possible is our top priority.

We are at a crossroads, though.

In fact, many customers who received modifications in the past are now re-defaulting. The re-default rate is now in excess of 50 percent. We're reaching a point where some customers will be dealing with the reality that despite the myriad programs and our best efforts, foreclosure is unavoidable.

Foreclosure is the worst outcome for a customer and for the bank. It is always the option of last resort.

When a sustainable modification is not possible, we work to help the customer make a dignified transition to new housing, after involving a short sale or deed in lieu.

It is important to our economy that the housing market stabilize. That will require moving through the modification and foreclosure process as quickly as possible, clearing vacant properties, helping those who need assistance in transition, and moving forward.

We are now four years into the housing downturn... prices peaked in the second half of 2006... the worst is behind us.

In many markets, prices have bottomed out.

As we think ahead about new housing related policies, we have to be mindful of the core population dynamics of the U.S. and its regions... the role that housing and housing finance should play in the overall economy... and how America finances its mortgage debt. These issues loom large, but in the meantime, we need to power through it.

My commitment to you is that we will work hard, devote resources, and lead with energy and creativity to be a part of the solution for this community... and others all over America.


To sum up... the economy, nationally and here in Massachusetts, is recovering. There are external events that will continue to cause twists and turns. But the data show that growth in the real economy is gaining momentum, and I think that will continue.

Financial services providers have recovered. We are helping drive economic growth in this community and others across the state -- through lending, investing, community development, philanthropy and the volunteer work of our employees.

Most important, we will continue to pursue solutions to the city's -- and the nation's -- housing crisis. And we will continue to demonstrate leadership in building a stronger, safer, more stable mortgage industry for American families.

In that letter that Thomas Willing wrote back to the founders of the Bank of Boston in 1784, he closed with the following thought:

"You should proceed without fear. To men of your knowledge in business, every difficulty will vanish. The only true and useful secret is to conduct the business so as to acquire the full confidence of your fellow citizens and neighbors."

It may seem an obvious thought for the business leaders in this room today.

But it sums up everything that Bank of America strives to be nearly 230 years later...We are here to provide customers and clients with the best and most comprehensive banking services available... to help them achieve their dreams... and, in doing so, to acquire the full confidence of our friends and neighbors.

That's my commitment to all of you... and I thank you for giving me the opportunity to speak here today.