Bank of America Chief: It's About Managing Risk, Not How Big

Brian MoynihanThe CEO of Bank of America, the nation’s top lender, said his institution is not too big and that the central issue for those seeking financial sector reform shouldn’t be size but how “you manage risk.”
Brian Moynihan, who took over BofA’s top job on Jan. 1, told CNBC in an interview from the World Economic Forum in Davos that the U.S. government should continue to play the role of stabilizing the industry to avoid another financial crisis.
But Moynihan said the answer is not in breaking up banks by completely separating traditional lending from riskier capital markets trading activities – as one proposal might do under financial reform backed by President Obama.
“You have to have good risk management. That failed a lot of institutions…Through enhancement of regulations, we can make sure that depositors’ money and funding of securities are separate. Not intermingling is fine. But the idea of not having our $250 billion in capital for our clients across the board there – is an idea that would have not solved the last problem and won’t solve the next (crisis),” Moynihan told CNBC.
The Senate is now seeking a compromise on financial reform after the House last month approved its own version that essentially would close the chapter on the “too big to fail” doctrine that spearheaded the bailouts of big banks.
A “Systemic Dissolution Fund” is part of the House bill. It would be use to help wind down failing financial institutions, “but not to preserve them.” The Fund will be backed by assessments on financial companies with more than $50 billion in assets and by hedge funds with more than $10 billion in assets. The House bill allows the Federal Deposit Insurance Corp. to unwind a failing firm so that existing contracts can be dealt with and secured creditors’ claims can be addressed.
Moynihan was asked by a CNBC interviewer if he thought Bank of America was too big.
“BofA is not too big,” Moynihan responded.”The role that government is trying to play is to make sure that institutions remain stable through all kinds of crises and I think that’s an absolute appropriate role. Big, by definition, is not the question. It’s a question of how you conduct your activities and how you manage risk.”

2 thoughts on “Bank of America Chief: It's About Managing Risk, Not How Big

  • January 29, 2010 at 4:27 pm
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    Companies like this should be taxed bases on the cost if they fail to account. Small banks have a limited impact and are easy to bailout. Larger banks are involved in so many aspects of the economy resulting in a much higher cost to the government should they fail to account for their risk.

  • January 30, 2010 at 2:09 pm
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    OBAMA is in a MOVIE about hedgies. He is featured in a movie– about greedy hedge funds called “Stock Shock.” Even though the movie mostly focuses on Sirius XM stock being naked short sold to hell (5 cents/share), I liked it because it exposes the dark side of Wall Street. DVD is everywhere but cheaper at http://www.stockshockmovie.com

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