BankThink

August was a difficult month for bank stocks. The KBW bank index fell at one time during the month by over 20% before recovering to a month-end 13.4% decline. This pattern has been consistent for bank stocks, which have retreated from their April highs due to the return of macroeconomic concerns. The KBW index is down 23.1% while the broader S&P 500 is only off 3.7%, year-to-date.

Seventy percent of healthcare organizations report that they have exposed personal information in the past 12 months. Most of the information was exposed by nosy employees.

Receiving Wide Coverage ...What Next for B of A? The papers continue to explore the implications of Tuesday's management shake-up at Bank of America. One Journal story profiled Darrell Darnell, one of the two newly minted co-chief operating officers. He may seem an odd pick to lead the company's sprawling consumer operations, having a background in mostly business lending, but the story notes he has a "reputation for maintaining client relationships while also cutting costs-the key objective of Tuesday's restructuring." Another Journal story reports that Darnell has reassured Merrill Lynch's brokers their pay structure won't change. But "Lex" in the Financial Times says that cutting pay across Bank of America is the one lever that the new management team can pull to improve results, as compensation makes up half of noninterest expenses. The Journal's "Heard on the Street" reiterates a point that the paper already made a day earlier: that the reorganization signals Merrill is unlikely to be spun off. More déjà vu as the Journal revisits the implications of Sallie Krawcheck's departure for women on Wall Street — and this time, the paper is joined by the Times. But another Times story pursues a less-predictable angle on Krawcheck's ouster — the implications for FINRA, the securities industry's self-regulatory body, where she was recently elected a governor. "It is unclear exactly what happens next; the Finra bylaws do not account for such management shake-ups. For now, Finra will not eject her from the position. But to keep the seat she will have to join another large brokerage firm in a 'short period of time.' " The Times also has a curtain-raiser for the hotly anticipated speech CEO Brian Moynihan will give on Monday outlining the "New BAC" strategy; like the FT's story a day earlier, this one warns that thousands of jobs may get the ax. Finally, National Public Radio's "Marketplace" presents an interesting interpretation of Moynihan's C-level housecleaning: it's his attempt to shore up support from his fellow veterans of FleetBoston who sit on B of A's board.

Foreclosures continue to decimate communities around the nation, with black neighborhoods being the hardest hit. Some pundits and politicians point to federal policies that encouraged homeownership in low- and moderate-income communities, coupled with reckless behavior on the part of greedy homeowners, as the crux of the problem. One example is the statement by Fox News reporter Neil Cavuto that "loaning to minorities and risky borrowers is a disaster." To the contrary, our recent research demonstrates that it is outside investors living in other, predominantly white neighborhoods, not local homeowners, who account for the adverse impact on our nation's black communities.

President Obama should acknowledge that something is seriously wrong with the government's response to the financial crisis of 2008 and chart a new course. The wisdom in comic strip legend Pogo's famous remark comes to mind, "We have met the enemy and he is us."

Receiving Wide Coverage ...Shake-Up at B of A: Bank of America reshuffled its executive ranks, and in the process ousted two well-known executives, Sallie Krawcheck and Joe Price. Krawcheck's departure in particular is garnering a lot of attention because she is one of the most prominent women in financial services. The Journal's "Deal Journal" blog noted that before joining B of A, Krawcheck had been demoted and then cashiered by her previous employer, Citigroup. She's in good company, the blog noted, as Erin Callan (formerly of Lehman Brothers), Zoe Cruz (formerly of Morgan Stanley) and Heidi Miller (formerly of JPMorgan Chase) all rose to senior positions, only to be shown the door in recent years. "Each top woman who leaves or is forced from her post will spark anew the 'whither women' questions and stories about why Wall Street is dominated by dudes. At this point, Wall Street would love a few more top-ranking women, if only to stop those pesky questions." (We might add that there may be heightened sensitivity since this news broke the same day that Yahoo ousted CEO Carol Bartz.) Another Journal story says the management restructuring shows that a spin-off of Merrill Lynch is unlikely, because B of A's business units are "being further aligned, making a spinoff much harder…. The restructuring puts the wealth-management business of Merrill's thundering herd under David Darnell, now a co-chief operating officer in charge of the bank's retail arm and all consumer units. …Meanwhile, the investment bank operations are being consolidated with corporate banking operations and other units tied to companies and institutional investors, which will be headed by Tom Montag, the other newly minted co-chief operating officer." Plus, the story says, Krawcheck had become "the face" of the brokerage business and thus the logical head for a newly independent Merrill, and now she's on her way out. Let's zoom out to look at the bigger picture: Bank of America announced the changes after a trading session in which its stock price once again dipped below $7, leading us to once again wonder how close the company's market cap is coming to the value of one of Angelo Mozilo's bespoke suits. B of A Chief Executive Brian Moynihan "is expected to set out thousands of job losses across the bank as part of a presentation next week on 'New BAC' — his turnround strategy," according to the FT. Wall Street Journal, New York Times

In the 1980s Freddie Mac had a marketing campaign "The Gnomes Know," touting their expertise in mortgage markets. Now the Federal Housing Finance Agency has filed a $200 billion lawsuit against 17 of the nation's largest mortgage lenders arguing that during the subprime lending debacle of the last decade the gnomes didn't know!

Is it worth delaying a bottoming-out of the housing market, and allowing some delinquent borrowers to freeload for a time, in order to prevent the rare but documented instances of someone being wrongly foreclosed on?

Major tech companies are assessing the scope of the recently disclosed July breach of digital certificates, which Web browsers use to verify the legitimacy of any sites they display to users.

Receiving Wide Coverage ...A Somber Commemoration: As the 10th anniversary of 9/11 approaches, the Journal and the Times have published "look-back" stories focusing on financial services companies that were located in the Twin Towers: Keefe, Bruyette & Woods and Cantor Fitzgerald, respectively. Both firms are thriving despite the recent financial crisis, but the scars from the attack, both figurative and in some cases literal, remain.