BofA CEO Lewis Speech In Boston; Should See "Close To $50B In Pre-Tax, Pre-Provision Earnings" In '09
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Bank of America (NYSE: BAC) CEO, Ken Lewis, delivered a speech today to the Boston Chief Executive Officers' Club "Banking on Recovery". Below is a copy of the speech:
Thank you, Chad. It's great to be back in Boston. I'd also like to thank Peter Rollins and all the members of the Boston CEO Club for having me back.
Today, as I stand here before you, Americans are in the economic fight of our lives. It has taken time and pain to get us this far. More time - and more pain - will be required.
The past year has been very difficult - for Bank of America shareholders and associates... and also for our customers...businesses large and small… individuals… our communities… and our country. The recession we're in today is already the most severe and most costly in generations. We still don’t know how deep it will be or how long it will last.
One thing we do know is that there is no easy solution. Severe imbalances have been building up in the U.S. economy for a long time, from excessive consumer and public debt... to massive trade and current account deficits. The credit bubble was both huge and global. What’s happening now is a massive deleveraging of household and business balance sheets worldwide. Our great challenge is finding a way to allow this necessary rebalancing to happen, while at the same time avoiding an even more dramatic slowdown in economic activity.
Bank of America is working hard to be part of the solution. We are providing the capital that families and businesses need to take new risks on the future. We announced a new Lending & Investing Initiative through which we are reporting to the public our progress in lending, community development, foreclosure mitigation, philanthropy, environmental investments and many other activities. We also are working with our partners in government to implement immediate ideas to jump-start the economy... and long-term solutions to build a more sustainable financial services industry for the future.
As bad as our economy is right now, I am still optimistic about our long-term prospects. Our financial system is stronger and more resilient than most people seem to think.
And I believe the financial services industry and the federal government are doing many of the right things to turn this cycle around and restore economic growth.
My goal today is to provide some much-needed clarity on some of the issues that are shaping the debate about the state of our industry... and to offer a few of my thoughts on how we can best move forward together.
There are some things that set this economic episode apart from previous crises… for example, a more globalized economy than we've had in the past... the rapid growth of complex, sophisticated securities markets... and the 24/7 news cycle, in which information and opinions about the economy spread faster than people can digest them.
But in the most fundamental ways, the story of this crisis is the story of every great market bubble in history. Excess liquidity led to a credit bubble that grew out of control for years. Almost every group of participants in the economy - lenders, borrowers, regulators, policymakers, news media, appraisers, rating agencies, investors, investment bankers - had a motive to push economic excesses forward, and most did.
The institutions that gave in completely to the frenzy around them are no longer with us. Those that balanced the need to compete with the need to maintain prudent lending standards survive today.
With turbulent markets and spiking credit costs, there is no question that many banks are under a lot of pressure. Our challenge is to find the quickest, most effective, least expensive and most fair way to relieve some of that pressure so that the industry can better support economic recovery.
But I don’t think the industry as a whole is in nearly as dire shape as some would have us believe.
U.S. banks as a group lost a lot of money in the fourth quarter. But, of the more than 8,300 banks and savings institutions tracked by the FDIC, 68 percent were profitable and 36 percent actually grew earnings year-over-year.
Bank of America should generate more than $100 billion in revenue this year, and close to $50 billion in pre-tax, pre- provision earnings. That kind of cash flow can solve a lot of problems, given time and an improving U.S. economy.
I’m not one to question the judgments of the stock market. But I do think that there are times when the market’s judgments are based on economic and business fundamentals... and there are times when those judgments are based on greed or fear. Stock prices for Internet start-ups in the late ’90s were driven by greed. By the same token, I think stock prices for banks today are largely driven by fear… fear about how deep and long this recession will be... and fear about what the government may do that could dilute or wipe out shareholders.
Those fears are not irrational. But they also are not reflective of the real strength of the industry. Over the past 18 months, we’ve seen fewer than 50 banks fail. That compares to about 2,000 between 1986-1991. More likely will fail. But years of consolidation in the industry have left the survivors in a stronger position… and revenue diversification has helped insulate many banks from losses.
The last thing we need to do is start nationalizing banks. By nationalization, I mean a full-scale takeover of an institution by the government in which common shareholders, and possibly debt-holders as well, would be wiped out. This, in my view, would be a nightmare.
This is one of those theories that looks like it might work on paper… and actually does work in limited circumstances with small banks. The FDIC does it all the time, and other countries, like Sweden, have done it on a relatively small scale.
But leaping from that precedent to an assumption that the government could do the same thing with several very large, complex, global institutions... is misguided. The announcement of nationalization would immediately undermine confidence in the financial system even further and send shudders through the investment community. It would give the false impression that all banks are insolvent... and investors would immediately start betting on which banks would be next… possibly creating a self-fulfilling prophecy. And, government control of large banks would politicize lending decisions and the capital allocation process, damaging the economy.
While some banks may need more public support in the future, I don’t believe we will. It’s possible that the government could compel us to take more capital pending the results of their stress test. But I’m confident we’ll pass the stress test. And I strongly agree with Chairman Bernanke that nationalization is not necessary to stabilize the banking system.
We all agree that we’ve been in a credit crunch for a while now, and that restoring a healthy flow of credit is vital to restoring economic growth. The credit crunch is very real. But, for the most part, banks are not the problem. 40 years ago, bank credit accounted for about 60 percent of the total credit in our economy. When this crisis started, banks accounted for less than 30 percent. What's gone is the easy credit that got us into this mess, as unregulated non-bank lenders have failed...and the market for many asset-back securities has all but disappeared.
It is true that banks have tightened lending standards after a period in which standards were too lax. It’s also true that in a recession, demand for new loans goes down, as does the number of qualified borrowers. So there are lots of reasons you would expect banks to be lending less.
But, according to Federal Reserve data, bank credit has actually increased over the course of this recession… and business lending is trending up modestly so far in 2009. Mortgage finance volume is booming as a result of low interest rates. Most banks are making as many loans as we responsibly can, given the recessionary environment.
One charge that the banks have had to answer in this environment is very troubling: the suggestion that we aren’t lending more because we are wasting money on unjustifiable expenses.
That’s a tough charge to answer. Taxpayers feel, and rightly so, that if a bank has accepted public support, all its financial decisions should signal a conservative, sober and frugal approach, reflecting the difficult times. And it's all too easy to tie any dollar of public support to any expense that is deemed extravagant or unnecessary.
In some cases, I think public judgments on this issue have been right on. But I also think banks have been criticized for activities that, in fact, have very serious business purposes. Compensation is an example.
I completely understand the outrage that people feel when they hear of banks that lost money paying out large bonuses to top executives. I believe in pay-for-performance. That’s why, given the decline in our 2008 earnings - even though we earned more than $4 billion - we paid no year-end incentive compensation to members of our Executive Management Team, including me.
I think that was the right thing to do. I also think that top bank executives can handle artificial caps on compensation related to public financial support. We’re not going to leave the company over this. We have invested our careers here, and our loyalty runs very deep.
But when artificial caps are extended down into the organization, they hit associates who are not part of executive management, but whose compensation reflects very high revenue production. We could lose these associates to a foreign bank or an investment boutique that is not operating under the same restrictions. Such a loss hurts our company and our shareholders.
Marketing activities, especially sports marketing, have also come under fire. I’ll admit that it’s easy to be skeptical about the business value of multi-million dollar marketing contracts with sports teams. And, obviously, there are lots of business executives who just really enjoy having access to the teams and the athletes. For the record, I don’t. I really enjoy going to the mountains for the weekend with my wife.
So I was never inclined to pump big sums of money into sports marketing. Until I saw the facts - and the numbers. In general terms, for every dollar we spend on sports marketing, we get $10 in revenue and $3 in earnings. This is not wasted money. It's money that drives business results.
Bank of America has for years been the most financially efficient bank with our business mix in the country. We have a hard-earned reputation for frugality, not extravagance. When we compensate associates, engage in marketing and advertising campaigns, or invest in green building technologies, we do so to grow our business, enhance profitability and generate returns for investors - a group that now includes taxpayers.
As we work to rebuild our industry and economy, one of the greatest challenges we face is balancing the need to pump credit into the system… with the need of households to pay down excessive debt. For an industry that became too dependent on debt-driven consumption to create growth, the prospect of household deleveraging is sobering. One answer, in my view, is that banks must embrace business models that are built on revenue diversity, which helps produce balanced earnings. Revenue diversity also helps with customers. When you say you want to help customers achieve financial balance, there’s great credibility in having the product set back it up.
We have to re-assess our approaches to managing risk. In this past cycle, banks relied too much on computer modeling, and not enough on our instincts and knowledge about economic cycles. We have to resist the temptation to let innovation and growth overrun our ability to control the new risks we’re creating. We have to nurture a culture in which contrarian thinking is welcomed. And we have to return to business fundamentals, and recalibrate assessments of creditworthiness, portfolio concentrations and market trends to account for new economic realities.
We must re-think and re-form the financial services industry. The industry that emerges from this crisis will have accelerated toward the "barbell" we've been predicting for years: a handful of very large, diversified, global firms on one end, and thousands of community banks on the other. Credit markets will feature simpler, more transparent products.
Regulation will be tighter and more conservative, especially in sectors that were lightly regulated before (such as mortgage lending, hedge funds, credit markets and investment banking). Investment banks will have to decide whether they want to be large and systemically important… or whether they want to be largely unregulated risk-takers... they will not be allowed to be both. The entire financial services industry will be smaller... and, one hopes, more humble.
The industry also must work in partnership with the government to solve the toughest problems in our economy... including finding new ways to attract private capital back into the system.
Congress and the Administration have taken several very positive steps.
The Troubled Asset Relief Program, contrary to popular opinion, has worked very well. Last October, when TARP was enacted, systemic risk threatened our entire financial system and economy. The government's goal was to act quickly to stabilize surviving banks, prevent a total meltdown, and enable banks to lend more.
Measured by those standards, the TARP has been a great success. We have not suffered a collapse of the banking system. The vast majority of banks continue to be viable. And every banker I’ve talked to who has received TARP funding says it’s enabled them to lend more.
A nice side benefit to TARP is that taxpayers will most likely make a lot of money from it. Banks that received TARP funds are scheduled to make about $13 billion in dividend payments to the U.S. Treasury this year. Bank of America already made our first payment of $400 million on February 17. TARP funds are loans yielding anywhere from 5 percent to 8 percent. This is a win-win: Banks are getting the capital they need, and taxpayers are getting a strong return on their investment. Our goal is to pay back the TARP funds as soon as we possibly can.
There also is the issue of all the marked-down assets on many large banks' balance sheets. If we've learned anything from this episode, it should be that mark-to-market accounting can be both useful during "normal: economic times... and extremely destructive during times of great market stress. When a market for a given security ceases to function, "market value" loses its meaning.
I think the ideas the Administration is exploring to sell and manage these assets make a lot of sense. Right now, there is such a huge gap between the current market value of many of these assets... and the value that is implied by continuing cash flows... that somewhere in that gap there is a price that would help the banks, but also provide taxpayers with a likely profit. Creating an investment entity that combines public guarantees with private capital would create a new market for these securities, and lure private investors off the sidelines, which is exactly what we need.
Other government actions are helping. The Fed is providing sufficient liquidity, and has helped lower mortgage rates, which is fueling a boom in mortgage refinance. The stimulus bill will help boost economic activity. The government’s Term Asset-Backed Securities Loan Facility, or TALF, will do a lot to help liquefy the credit markets. And the Administration’s housing and foreclosure relief plan is very well thought out.
It will be very helpful to both homeowners and banks as we work to stabilize housing markets across the country.
Right now, it is hard to find tangible glimmers of hope in the economic data we see every day. But I believe we are going to break the back of this thing, and I still believe we’ll do it this year. There is too much ammunition being fired from too many directions to not bring this beast down. Working in partnership, the government and the financial services industry will stop the slide. We will turn the economy around, and build a new, sustainable economic expansion.
Our generation’s greatest economic crisis began in June of 2007, when two hedge funds collapsed under the pressure of deteriorating subprime mortgage loans. That was almost two years ago. It’s been a long journey on a very dark road. And it’s far from over.
Over the past two years, we've spent a lot of time and energy leveling accusations and placing blame. Some of that is necessary. We want to know how this happened, so we can figure out how to fix it... and, hopefully, prevent it from happening again. At least on this scale.
My view is that we've spent enough energy on blame. Maybe that’s because my industry... and my company... is getting at least its fair share. But maybe it’s also because I think it’s no longer productive. The worst offenders are out of business.
The rest of us are working hard to rebuild a financial services industry that will better serve the American people.
This is the economic challenge of our lifetimes... but it is far from the greatest challenge in our nation’s history. America has overcome wars... natural disasters... and an economic calamity much greater than this one, without sacrificing our dignity, our hope or our spirit of unity.
Our history of hard work and success provides our roadmap today. After all, economic cycles do not come and go mysteriously and without reason, like waves on the open sea.
They are the result of people engaging in economic activity.
They are not to be passively endured - they are to be worked through and overcome.
Those who are discouraged because they've lost something in this downturn need only look around to see people who have lost even more... people who are responding by working even harder... becoming even more determined... more creative in their efforts to wring a little progress from the grip of hardship.
For all that we’ve lost in this recession, there is so much more that we still have, and that will help us rebuild: our abundant natural resources... the best higher education system in the world... a flexible and dynamic economic system... the work ethic and values of our people... and a culture of innovation, risk-taking and entrepreneurism that has made us the world's economic leader for more than 100 years. Today, the world needs our leadership more than ever.
At Bank of America, this is our singular focus: Doing all within our power to turn around our company... to help rebuild our industry... and to help individuals and businesses across America... and around the world... find the confidence to take risk again... to place their bets on the future... and to build a new prosperity.
It's a task we undertake with determination... and humility.
Thank you.
Thank you, Chad. It's great to be back in Boston. I'd also like to thank Peter Rollins and all the members of the Boston CEO Club for having me back.
Today, as I stand here before you, Americans are in the economic fight of our lives. It has taken time and pain to get us this far. More time - and more pain - will be required.
The past year has been very difficult - for Bank of America shareholders and associates... and also for our customers...businesses large and small… individuals… our communities… and our country. The recession we're in today is already the most severe and most costly in generations. We still don’t know how deep it will be or how long it will last.
One thing we do know is that there is no easy solution. Severe imbalances have been building up in the U.S. economy for a long time, from excessive consumer and public debt... to massive trade and current account deficits. The credit bubble was both huge and global. What’s happening now is a massive deleveraging of household and business balance sheets worldwide. Our great challenge is finding a way to allow this necessary rebalancing to happen, while at the same time avoiding an even more dramatic slowdown in economic activity.
Bank of America is working hard to be part of the solution. We are providing the capital that families and businesses need to take new risks on the future. We announced a new Lending & Investing Initiative through which we are reporting to the public our progress in lending, community development, foreclosure mitigation, philanthropy, environmental investments and many other activities. We also are working with our partners in government to implement immediate ideas to jump-start the economy... and long-term solutions to build a more sustainable financial services industry for the future.
As bad as our economy is right now, I am still optimistic about our long-term prospects. Our financial system is stronger and more resilient than most people seem to think.
And I believe the financial services industry and the federal government are doing many of the right things to turn this cycle around and restore economic growth.
My goal today is to provide some much-needed clarity on some of the issues that are shaping the debate about the state of our industry... and to offer a few of my thoughts on how we can best move forward together.
There are some things that set this economic episode apart from previous crises… for example, a more globalized economy than we've had in the past... the rapid growth of complex, sophisticated securities markets... and the 24/7 news cycle, in which information and opinions about the economy spread faster than people can digest them.
But in the most fundamental ways, the story of this crisis is the story of every great market bubble in history. Excess liquidity led to a credit bubble that grew out of control for years. Almost every group of participants in the economy - lenders, borrowers, regulators, policymakers, news media, appraisers, rating agencies, investors, investment bankers - had a motive to push economic excesses forward, and most did.
The institutions that gave in completely to the frenzy around them are no longer with us. Those that balanced the need to compete with the need to maintain prudent lending standards survive today.
With turbulent markets and spiking credit costs, there is no question that many banks are under a lot of pressure. Our challenge is to find the quickest, most effective, least expensive and most fair way to relieve some of that pressure so that the industry can better support economic recovery.
But I don’t think the industry as a whole is in nearly as dire shape as some would have us believe.
U.S. banks as a group lost a lot of money in the fourth quarter. But, of the more than 8,300 banks and savings institutions tracked by the FDIC, 68 percent were profitable and 36 percent actually grew earnings year-over-year.
Bank of America should generate more than $100 billion in revenue this year, and close to $50 billion in pre-tax, pre- provision earnings. That kind of cash flow can solve a lot of problems, given time and an improving U.S. economy.
I’m not one to question the judgments of the stock market. But I do think that there are times when the market’s judgments are based on economic and business fundamentals... and there are times when those judgments are based on greed or fear. Stock prices for Internet start-ups in the late ’90s were driven by greed. By the same token, I think stock prices for banks today are largely driven by fear… fear about how deep and long this recession will be... and fear about what the government may do that could dilute or wipe out shareholders.
Those fears are not irrational. But they also are not reflective of the real strength of the industry. Over the past 18 months, we’ve seen fewer than 50 banks fail. That compares to about 2,000 between 1986-1991. More likely will fail. But years of consolidation in the industry have left the survivors in a stronger position… and revenue diversification has helped insulate many banks from losses.
The last thing we need to do is start nationalizing banks. By nationalization, I mean a full-scale takeover of an institution by the government in which common shareholders, and possibly debt-holders as well, would be wiped out. This, in my view, would be a nightmare.
This is one of those theories that looks like it might work on paper… and actually does work in limited circumstances with small banks. The FDIC does it all the time, and other countries, like Sweden, have done it on a relatively small scale.
But leaping from that precedent to an assumption that the government could do the same thing with several very large, complex, global institutions... is misguided. The announcement of nationalization would immediately undermine confidence in the financial system even further and send shudders through the investment community. It would give the false impression that all banks are insolvent... and investors would immediately start betting on which banks would be next… possibly creating a self-fulfilling prophecy. And, government control of large banks would politicize lending decisions and the capital allocation process, damaging the economy.
While some banks may need more public support in the future, I don’t believe we will. It’s possible that the government could compel us to take more capital pending the results of their stress test. But I’m confident we’ll pass the stress test. And I strongly agree with Chairman Bernanke that nationalization is not necessary to stabilize the banking system.
We all agree that we’ve been in a credit crunch for a while now, and that restoring a healthy flow of credit is vital to restoring economic growth. The credit crunch is very real. But, for the most part, banks are not the problem. 40 years ago, bank credit accounted for about 60 percent of the total credit in our economy. When this crisis started, banks accounted for less than 30 percent. What's gone is the easy credit that got us into this mess, as unregulated non-bank lenders have failed...and the market for many asset-back securities has all but disappeared.
It is true that banks have tightened lending standards after a period in which standards were too lax. It’s also true that in a recession, demand for new loans goes down, as does the number of qualified borrowers. So there are lots of reasons you would expect banks to be lending less.
But, according to Federal Reserve data, bank credit has actually increased over the course of this recession… and business lending is trending up modestly so far in 2009. Mortgage finance volume is booming as a result of low interest rates. Most banks are making as many loans as we responsibly can, given the recessionary environment.
One charge that the banks have had to answer in this environment is very troubling: the suggestion that we aren’t lending more because we are wasting money on unjustifiable expenses.
That’s a tough charge to answer. Taxpayers feel, and rightly so, that if a bank has accepted public support, all its financial decisions should signal a conservative, sober and frugal approach, reflecting the difficult times. And it's all too easy to tie any dollar of public support to any expense that is deemed extravagant or unnecessary.
In some cases, I think public judgments on this issue have been right on. But I also think banks have been criticized for activities that, in fact, have very serious business purposes. Compensation is an example.
I completely understand the outrage that people feel when they hear of banks that lost money paying out large bonuses to top executives. I believe in pay-for-performance. That’s why, given the decline in our 2008 earnings - even though we earned more than $4 billion - we paid no year-end incentive compensation to members of our Executive Management Team, including me.
I think that was the right thing to do. I also think that top bank executives can handle artificial caps on compensation related to public financial support. We’re not going to leave the company over this. We have invested our careers here, and our loyalty runs very deep.
But when artificial caps are extended down into the organization, they hit associates who are not part of executive management, but whose compensation reflects very high revenue production. We could lose these associates to a foreign bank or an investment boutique that is not operating under the same restrictions. Such a loss hurts our company and our shareholders.
Marketing activities, especially sports marketing, have also come under fire. I’ll admit that it’s easy to be skeptical about the business value of multi-million dollar marketing contracts with sports teams. And, obviously, there are lots of business executives who just really enjoy having access to the teams and the athletes. For the record, I don’t. I really enjoy going to the mountains for the weekend with my wife.
So I was never inclined to pump big sums of money into sports marketing. Until I saw the facts - and the numbers. In general terms, for every dollar we spend on sports marketing, we get $10 in revenue and $3 in earnings. This is not wasted money. It's money that drives business results.
Bank of America has for years been the most financially efficient bank with our business mix in the country. We have a hard-earned reputation for frugality, not extravagance. When we compensate associates, engage in marketing and advertising campaigns, or invest in green building technologies, we do so to grow our business, enhance profitability and generate returns for investors - a group that now includes taxpayers.
As we work to rebuild our industry and economy, one of the greatest challenges we face is balancing the need to pump credit into the system… with the need of households to pay down excessive debt. For an industry that became too dependent on debt-driven consumption to create growth, the prospect of household deleveraging is sobering. One answer, in my view, is that banks must embrace business models that are built on revenue diversity, which helps produce balanced earnings. Revenue diversity also helps with customers. When you say you want to help customers achieve financial balance, there’s great credibility in having the product set back it up.
We have to re-assess our approaches to managing risk. In this past cycle, banks relied too much on computer modeling, and not enough on our instincts and knowledge about economic cycles. We have to resist the temptation to let innovation and growth overrun our ability to control the new risks we’re creating. We have to nurture a culture in which contrarian thinking is welcomed. And we have to return to business fundamentals, and recalibrate assessments of creditworthiness, portfolio concentrations and market trends to account for new economic realities.
We must re-think and re-form the financial services industry. The industry that emerges from this crisis will have accelerated toward the "barbell" we've been predicting for years: a handful of very large, diversified, global firms on one end, and thousands of community banks on the other. Credit markets will feature simpler, more transparent products.
Regulation will be tighter and more conservative, especially in sectors that were lightly regulated before (such as mortgage lending, hedge funds, credit markets and investment banking). Investment banks will have to decide whether they want to be large and systemically important… or whether they want to be largely unregulated risk-takers... they will not be allowed to be both. The entire financial services industry will be smaller... and, one hopes, more humble.
The industry also must work in partnership with the government to solve the toughest problems in our economy... including finding new ways to attract private capital back into the system.
Congress and the Administration have taken several very positive steps.
The Troubled Asset Relief Program, contrary to popular opinion, has worked very well. Last October, when TARP was enacted, systemic risk threatened our entire financial system and economy. The government's goal was to act quickly to stabilize surviving banks, prevent a total meltdown, and enable banks to lend more.
Measured by those standards, the TARP has been a great success. We have not suffered a collapse of the banking system. The vast majority of banks continue to be viable. And every banker I’ve talked to who has received TARP funding says it’s enabled them to lend more.
A nice side benefit to TARP is that taxpayers will most likely make a lot of money from it. Banks that received TARP funds are scheduled to make about $13 billion in dividend payments to the U.S. Treasury this year. Bank of America already made our first payment of $400 million on February 17. TARP funds are loans yielding anywhere from 5 percent to 8 percent. This is a win-win: Banks are getting the capital they need, and taxpayers are getting a strong return on their investment. Our goal is to pay back the TARP funds as soon as we possibly can.
There also is the issue of all the marked-down assets on many large banks' balance sheets. If we've learned anything from this episode, it should be that mark-to-market accounting can be both useful during "normal: economic times... and extremely destructive during times of great market stress. When a market for a given security ceases to function, "market value" loses its meaning.
I think the ideas the Administration is exploring to sell and manage these assets make a lot of sense. Right now, there is such a huge gap between the current market value of many of these assets... and the value that is implied by continuing cash flows... that somewhere in that gap there is a price that would help the banks, but also provide taxpayers with a likely profit. Creating an investment entity that combines public guarantees with private capital would create a new market for these securities, and lure private investors off the sidelines, which is exactly what we need.
Other government actions are helping. The Fed is providing sufficient liquidity, and has helped lower mortgage rates, which is fueling a boom in mortgage refinance. The stimulus bill will help boost economic activity. The government’s Term Asset-Backed Securities Loan Facility, or TALF, will do a lot to help liquefy the credit markets. And the Administration’s housing and foreclosure relief plan is very well thought out.
It will be very helpful to both homeowners and banks as we work to stabilize housing markets across the country.
Right now, it is hard to find tangible glimmers of hope in the economic data we see every day. But I believe we are going to break the back of this thing, and I still believe we’ll do it this year. There is too much ammunition being fired from too many directions to not bring this beast down. Working in partnership, the government and the financial services industry will stop the slide. We will turn the economy around, and build a new, sustainable economic expansion.
Our generation’s greatest economic crisis began in June of 2007, when two hedge funds collapsed under the pressure of deteriorating subprime mortgage loans. That was almost two years ago. It’s been a long journey on a very dark road. And it’s far from over.
Over the past two years, we've spent a lot of time and energy leveling accusations and placing blame. Some of that is necessary. We want to know how this happened, so we can figure out how to fix it... and, hopefully, prevent it from happening again. At least on this scale.
My view is that we've spent enough energy on blame. Maybe that’s because my industry... and my company... is getting at least its fair share. But maybe it’s also because I think it’s no longer productive. The worst offenders are out of business.
The rest of us are working hard to rebuild a financial services industry that will better serve the American people.
This is the economic challenge of our lifetimes... but it is far from the greatest challenge in our nation’s history. America has overcome wars... natural disasters... and an economic calamity much greater than this one, without sacrificing our dignity, our hope or our spirit of unity.
Our history of hard work and success provides our roadmap today. After all, economic cycles do not come and go mysteriously and without reason, like waves on the open sea.
They are the result of people engaging in economic activity.
They are not to be passively endured - they are to be worked through and overcome.
Those who are discouraged because they've lost something in this downturn need only look around to see people who have lost even more... people who are responding by working even harder... becoming even more determined... more creative in their efforts to wring a little progress from the grip of hardship.
For all that we’ve lost in this recession, there is so much more that we still have, and that will help us rebuild: our abundant natural resources... the best higher education system in the world... a flexible and dynamic economic system... the work ethic and values of our people... and a culture of innovation, risk-taking and entrepreneurism that has made us the world's economic leader for more than 100 years. Today, the world needs our leadership more than ever.
At Bank of America, this is our singular focus: Doing all within our power to turn around our company... to help rebuild our industry... and to help individuals and businesses across America... and around the world... find the confidence to take risk again... to place their bets on the future... and to build a new prosperity.
It's a task we undertake with determination... and humility.
Thank you.
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