Wednesday, March 25, 2009

Way to go Kenny!

Thanks to JJ Hornblass at for bringing the Los Angeles Times story about Ken Lewis' intent to pay off Bank of America's TARP debts as soon as possible. While people may quibble over whether or not it's doable, all I can say is bravo sir.

In my comment on JJ's site I wrote, "There's absolutely no reason for a bank to retain TARP subsidies if they can effect a business strategy to configure assets and operations to go forward after paying them off. In fact I believe that's an essential mission challenge all banks that took TARP funds need to make part of their strategic planning. Banking is a highly competitive industry and global competition among the largest banks is hypercompetitive. That universe did not cease to exist when the United States legislated the current suite of laws into existence. Institutions saddled by government strings are disadvantaged in that universe. Mr. Lewis has his head on straight. An independent Bank of America is a better Bank of America. He's looking out for his shareholders and his depositors. If he can find a way to turn TARP into a short-term liability instead of an LBO more power to him."

Can Bank of America accomplish this? Based on the information we have in the IRA databases if any of the large banks can do this it's going to be BAC. It remains one of the strongest super-regional banks in our economy and we in our distillations of their Call Reports see the artifacts of an organized strategic plan to reign in their stray units quarter by quarter. Is it perfect? No. But what is in these times. Bank of America inherited some serious challenges as part of their 2008 acquisitions and Mr. Lewis is right to point out that there's some luck involved as to how the economy will evolve to making his dreams come true.

The bottom line is it's a plan that I personally believe benefits the National Interest. I wish you all the success in the world sir.

We respectfully suggest that other banks, particularly the better off mid-size and community banks, should take note of what Bank of America hopes to do. The next phase of this industry may not be centrally governed but instead highly competitive and possibly fratricidal. There's a lot of private capital out there just waiting to prove that the United States remains a nation with the means to pursue happiness. Speed and flexibility are strategic assets not to be underestimated.


Individual IRA Bank Reports can be purchased by anyone at You can use a credit card or PayPal.

We also invite qualified parties to contact us about our Advisory Services at


  1. Dennis, when US Bancorp recently cut their dividend, they came out with this slide presentation.

    They highlight their metric of "Return on Tangible Equity" as being tops amongst peers at 24%. How relevant and important is this metric because I've never seen it mentioned anywhere before and you and Chris don't use it on your bank report cards.

  2. Hi. I am an avid reading of IRA. Glad to see you have a blog! Could you answer a simple question for me about "Loss given default".

    Let me quote the last IRA interview for example:

    IRA: Well your LGD, what we call "Loss Given Default," was up in the 80's, which is not unusual now as you just were describing the recovery rate. But that's not bad either because the big guys are all 98, 99% LGDs at present, so 80% is stellar.

    What does a 99% LGD mean? Does that mean that the loss is 99% of the loan? How could that be if most loans are collateralized? The house isn't worth zero. I always thought that typically a banks loses about 40% on a foreclosure. Is this different from LGD? I would assume other readers of IRA would have the same confusion. Thanks.