Unstructured Finance

Bank of Asbestos

September 11, 2011

By Matthew Goldstein

All too much of what we do in financial journalism is rush around to get the “scoop” on some big announcement by some corporate chieftain. Things like, the announcement of a new product, a management reshuffling or a bunch of firings. All important stuff and all stuff that could impact earnings and stock movements. But sometimes the big picture of what really is working for a company or is ailing it, gets lost in the scoop chase.

So that’s why we took a step back to look at some potentially radical solutions for fixing Bank of America, which right now has come to represent much of what remains broken with the U.S. housing market.

The point of the story was to look at ideas that bank CEO Brian Moynihan might be reluctant to do. Ideas that would drive shareholders and bondholders batty. But the kind of ideas that ultimately may be necessary to not only fix the bank, but also repair the nation’s sick housing market and equally sick economy.

When even bullish Bank of America investors admit the nation’s biggest bank is a “zombie bank,” there’s something unsettling about that. In our Reuters Special Report: Extreme Makeover Bank of America: An asbestos solution, we look closely at one radical idea, which is setting up a litigation trust to deal with all of the bank’s looming exposure to the mortgage crisis. It would be a trust that would address claims not only by government agencies and private mortgage bond investors, but homeowners who were persuaded or duped into buying far more home than they could afford.

Maybe a litigation trust like the kind set-up to deal with the asbestos crisis isn’t the ultimate answer. But maybe this kind of story will get the conversation moving beyond whether Moynihan should lay0ff 30,000 to 40,000 low-level bank tellers and other workers to get the bank’s expenses in order. It’s the kind of conversation starter that the folks at Zerohedge, in that blog’s own provocative way, is initiating as well.

Here’s a PDF link to our story, written by Jenn Ablan, Dan Wilchins, Kristina Cooke and myself. Let’s know what you think.

 

 

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