BofA CEO Says ‘Half the Banks Will be Gone’ in 5-Years

Posted on September 24th, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research

During Ken Lewis’ interview with Maria Bartaromo after acquiring Merrill, she threw him a curve ball and he actually answered it. I honestly don’t think he was expecting the question and for once, perhaps a bank CEO actually answered a question in public honestly. Below is the transcript of the portion of the interview in question.  I cut this from the CNBC site.

The following is a link to the actual interview and CNBC did some crafty editing. They cut out the end of the interview where Lewis actually said that half the banks would not be here any longer. That is a perfect example of the media’s ‘glass half full’ attitude and not looking at the story within the story. This is the very same attitude that led most of the mainstream media to miss the early reporting of the entire credit implosion that we are feeling today.

Ken Lewis CNBC Interview: CNBC Ken Lewis interview. (comments below missing from this interview)

Ken Lewis Interview Transcript:

LEWIS: I’VE SAID FOR A LONG TIME THERE WERE TOO MANY BANKS CHASING TOO FEW DEALS. I’VE ALSO SAID I DON’T THINK THEI NVESTMENT BANKING MODEL WOULD WORK LONG TERM, WHOLESALE FUNDING IS A TOUGH WAY TO ALWAYS HAVE TO GO. I WAS A LITTLE PREMATURE.IT TOOK SEVEN YEARS TO BEGIN TO HAPPEN. BUT I STILL BELIEVE THAT, THAT A WHOLESALE FUNDED INVESTMENT BANK IS A TOUGH WAY TO GO.PARTICULARLY IN THIS ENVIRONMENT, PARTICULARLY GOING FORWARD.SO I THINK YOU’LL SEE SOME MORE CONSOLIDATION. NOW, YOU MAY HAVE AN INVESTMENT BANK BUY A COMMERCIAL BANK YOU COULD DO THAT.BUT I WOULD BE SURPRISED IF — IF BOTH OF THE BIG ONES REMAINING DON’T LOOK DIFFERENTLY OVER THE NEXT YEAR OR TWO YEARS. AND THEN WITH THE COMMERCIAL BANKING BUSINESS, WE’VE ALWAYS SAID THAT IT’S GOING TO BE MORE OF A BAR BELL, THAT YOU’RE GOING TO HAVE BIGGER AND BIGGER BANKS, BUT FEWER.AND THEN MUCH FEWER SMALLER — I MEAN, NORMAL SIZE BANKS. YOU’LL ALWAYS HAVE THE COMMUNITY, THE VERY SMALL BANKS.IT’S GOING TO BE MORE DIFFICULT EACH AND EVERY DAY FOR MID-SIZED BANKS TO COMPETE WITH LARGE BANKS BECAUSE THEY’VE GOT THE BETTER FUNDING, THEY’VE GOT A BETTER CALL STRUCTURE, AND BETTER BRANDS FOR THAT MATTER.

BARTIROMO: SO RIGHT NOW WE HAVE, WHAT, 9,000 BANKS? 9,000 BANKS IN THIS COUNTRY. WHAT WILL YOUR PREDICTION BE AS FAR AS HOW MANY THERE ARE IN THE NEXT FIVE YEARS?

LEWIS: GOSH, I HAVEN’T THOUGHT ABOUTTHAT. MAYBE HALF.

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  • 13 Responses to “BofA CEO Says ‘Half the Banks Will be Gone’ in 5-Years”

    1. […] BofA CEO Says ‘Half Banks Will Go Away’ in Next 5-Years […]

    2. No surprise. I think most already knew this.
      I mean, they didn’t name themselves “Bank of America” for nothing.

    3. Mmm, mmm, mmm. Mmm. Mmm mmm mmm, mmm.

      Oops sorry.

      I’m sure glad the media is there for us, to protect from any unpleasant truths.

      Now it’s time to put my head back in the sand.

      BTW, GREAT INVESTIGATIVE REPRORTING MR. M!

    4. Did Kenny L. say if his bank would be around, Mr. M? You have pointed to a bit of toxic waste on his own plate, and didn’t he get some dead carp from that Mozilla guy? What about…I better quit. I have some cds at his place.

      JAllen

    5. One of (2) scenarios are likely to wash out of this whole mess – and the catalyst for both will be tractionable mistrust of the entire banking industry and/or government combined. Mark it down.

      1. The return to local, independent banking institutions (real small community outfits that keep monies ‘local’) and more traditional methods of saving money for wage earners (as opposed to the last 20+ years of the average ‘Joe’ becoming a day trader…) Remember ‘Pass book’ accounts at the ridiculously low 5.25%…?

      2. Authoritarian takeover of the banking system (like what’s happening right now) and/or, hyper-regulation that makes option #1 impossible…

      With option #1, at least the American experiment still has life and a chance. Realistically however, the sentiment of the overwhelming populace, who’s concerns lie more with the outcome of American Idol and CSI, followed by dinner at Chili’s, lends towards an entitlement-based thought process which is more in line with being Ruled (i.e., authoritarianism), than Ruling one’s own destiny and outcome.

      Most people have no clue that we have very few real freedoms left and are a very thin line away from authoritarian rule. In short order, economic considerations will rapidly give way to social disorder & disruption by way of the aforementioned ‘attributes’ of the American populace at large.

      And clever government rulers will be right there at the ready, to deliver the necessary medications for the ailing public. It won’t be them who’s days are numbered, it will be those who’s tendencies lie towards self-reliance and self-governance. Those principles are at odds with what we’re about to be served up.

      Peace –

      C.C.

    6. Sounds like Pelosi and Frank yesterday, trying to jawbone the thing into existence. BB&T is the type of bank he’s talking about, and they look a lot better off than BofA. Up more than 20% this year, in fact. The market is going to force BofA to value its portfolios (cc debt, home debt, bond debt), and the bank will implode. Welcome back, Glass-Stegel, we hardly knew ya.

    7. To my fellow Americans……

      I’m against the $85,000,000,000.00 bailout of AIG.

      Instead, I’m in favor of giving $85,000,000,000 to America in
      a We Deserve It Dividend.

      To make the math simple, let’s assume there are 200,000,000
      bonafide U.S. Citizens 18+.

      Our population is about 301,000,000 +/- counting every man, woman
      and child. So 200,000,000 might be a fair stab at adults 18 and up..

      So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

      My plan is to give $425,000 to every person 18+ as a
      We Deserve It Dividend.

      Of course, it would NOT be tax free.
      So let’s assume a tax rate of 30%.

      Every individual 18+ has to pay $127,500.00 in taxes.
      That sends $25,500,000,000 right back to Uncle Sam.

      But it means that every adult 18+ has $297,500.00 in their pocket.
      A husband and wife has $595,000.00.

      What would you do with $297,500.00 to $595,000.00 in your family?
      Pay off your mortgage – housing crisis solved.
      Repay college loans – what a great boost to new grads
      Put away money for college – it’ll be there
      Save in a bank – create money to loan to entrepreneurs.
      Buy a new car – create jobs
      Invest in the market – capital drives growth
      Pay for your parent’s medical insurance – health care improves
      Enable Deadbeat Dads to come clean – or else

      Remember this is for every adult U S Citizen 18+ including the folks
      who lost their jobs at Lehman Brothers and every other company
      that is cutting back. And of course, for those serving in our Armed Forces.

      If we’re going to re-distribute wealth let’s really do it…instead of trickling out
      a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President.

      If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!

      As for AIG – liquidate it.
      Sell off its parts.
      Let American General go back to being American General.
      Sell off the real estate.
      Let the private sector bargain hunters cut it up and clean it up.

      Here’s my rationale. We deserve it and AIG doesn’t.

      Sure it’s a crazy idea that can “never work.”

      But can you imagine the Coast-To-Coast Block Party!

      How do you spell Economic Boom?

      I trust my fellow adult Americans to know how to use the $85 Billion
      We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC .

      And remember, this plan only really costs $59.5 Billion because $25.5 Billion is returned
      instantly in taxes to Uncle Sam.

      Ahhh…I feel so much better getting that off my chest.

      Kindest personal regards,

      BOB

      PS: Feel free to pass this along to your pals as it’s either good for a laugh
      or a tear or a very sobering thought on how to best use $85 Billion!!

    8. I have seen the math done on so many sites…amazing.

      If you were to take 1 TRILLION dollars and give it to the 200million adults that you mention, it would be 5000 a piece.

      YOUR MATH IS NUTS!! This is the root problem with the US…too much noise and no sense. It is why people like Bush and Paulson have ZERO respect for the average citizen.

    9. Is the above BOB an idiot or just math deranged. 85 billion divided 200 million (more like 225 million but anyway) is $425

      Thanks for adding zeros.

    10. BOB, learn to do simple division dude. You’re talking about $425 each, pre-tax. Jeez…..

    11. Bob,

      That’s called socialism. Income redistribution. Some people would call it stealing.

    12. Take it easy on Bob. Working for the U. S. Treasury has been difficult these last 2 weeks and his Math skills aren’t what they used to be.

    13. OK, on this post, I have to agree with CC on some points.

      The question is what will the future of banking look like.
      If we allow unfettered free-market, debt-money capitalism to prevail, unfortunately Mr. Lewis is not only correct, but likely a little modest.

      Those “owning” the debt-money pipeline just add a little more squeeze every day until there are few survivors.

      If we take away the debt-money pipeline, and replace with a system of government-issue, debt-free credits, we will end up with not only a tremendous growth in community banks, as CC observes, but with the tremendous growth in depositor/member-owned credit unions and other forms of cooperative banks.

      It will all be part of the monetary revolution that will replace this bankrupt and immoral private debt-money system in this country.

      Returning the money power to we, the people.

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