-
Bank of America has lost more than $60 billion on its acquisition of Countrywide, including the cost of last week's big settlement with the Justice Department. But its issues are hardly over. The pain will continue for years as it has hundreds of thousands of delinquent, unsellable mortgage loans to work through.
August 27 -
Brian Moynihan has been in charge of Bank of America for nearly five years, and he has spent most of that time in lawyer mode, overseeing settlements worth $48 billion. He is generally praised for taking the bank to this point, but now comes the hard part: getting B of A to grow again.
August 21 -
Bank of America must pay a record amount for mortgage-related claims, but the accord still leaves questions about tax liability and other banks in the government's crosshairs.
August 21 -
When Sterling Bank rebranded following the financial crisis, we conducted focus groups with customers and employees. Engaging these groups ensured that any new or refined messages were believable and authentic to the organization.
December 10
Editor's note: A
Poor Bank of America. It scooped up mortgage-battered Countrywide Financial in 2008 for what looked like a bargain price, and it has been paying ever since.
Including last week's deal with the U.S. Justice Department, the acquisition of Countrywide has thus far cost B of A shareholders
In its
Moynihan's reluctance to dwell on Countrywide is understandable: the deal was a disaster for shareholders. But by staying silent, he reinforced the misperception that B of A was responsible for the worst excesses of the mortgage crisis. This confusion is rooted in a decision made years earlier to re-brand the Countrywide business with the B of A name.
Buying Countrywide was the handiwork of Moynihan's predecessor Ken Lewis. Ironically, under Lewis, Bank of America had been cautious about building up its mortgage business. As CEO, Lewis was often
A few months after the purchase, B of A launched a mortgage lending push under a newly created brand, "Bank of America Home Loans." It proudly announced in a
And so, with a single stroke, the B of A brand adopted all of Countrywide's problems.
Those problems were
So what could B of A have done differently?
For one thing, it could have retained the Countrywide name and re-launched it with a redesigned brand identity. Or it could have renamed its mortgage business entirely, if it judged the Countrywide name to be too damaged to salvage. (Think of GMAC
In truth, it would have been a tall order for B of A to truly distance itself from Countrywide. B of A was going to write the checks for any legal settlements regardless, and regulators, stung by criticism that they weren't tough enough on big banks, were going to keep B of A's name front and center in any enforcement actions. B of A may have also been operating under the assumption that a single brand would be more efficient and give it a better chance of cross-selling banking products to customers a common enough strategy, though the evidence for such cross-selling is mixed at best.
There's a lesson to be learned from B of A's woes. In a world where regulators are likely to be aggressive and persistent, a troubled acquisition can stay toxic for a long time. In the future, banks will need to be even more careful about where they put their name.
Richard A. Mahony is founder of