by Jeff Taylor
OK, anyone with a lick of sense had to scratch their heads over Brian Moynihan’s first con-call emphasizing cost control for Bank of America going forward. BAC has never done cost control, at least not in any conventional sense. What it has done is squeeze consumers while hollowing out the institutions it acquires. But two additional datums put Moynihan’s comments in a new light.
One, is the new populist-progressive drive by the Obama administration to “break up” the big banks. This is the follow-on to the “bank tax” and would sharply curtail — at least in the short term — any growth opportunities for BAC.
Related to this move to re-make the wall between commercial and investment banking is a Business Insider report that Wall Street deal makers are trying to find a way to spin Merrill Lynch back out from under BAC. Right now, ML is a source of badly needed profits for BAC, but if that line of business is about to be essentially outlawed for big money center banks, not for long. Also, ML’s compensation structure — not to mention its more financially savvy clients — are an impediment to Moynihan’s drive to cut costs while nickel-and-diming every transaction with customers. Put it all together and you could see how Moynihan might be receptive to taking X billions for Merrill and re-focusing BAC as a bank bank ahead of federal mandates.
Problem: Who has X billions sitting around?