Moynihan to give critical testimony
I've suggested before that the volume of legal responsibilities stemming from lawsuits is a huge issue for some bank CEOs.
At some point, you have to wonder when the heavy work load--every appearance generates a lot of prep work--will start to impinge on an executive's ability to do his or her job. I trust that boards are suitably on top of the issue.
This has been discussed mainly in the context of Goldman Sachs, but Bank of America also faces a lot, if not more, litigation, and that represents a huge burden on CEO Brian Moynihan.
TheStreet.com notes that Moynihan faces a May 18 deadline in a suit brought by MBIA against Countrywide, which Bank of America disastrously bought in 2008. A New York state judge has compelled Moynihan to testify in a case that could be settled for up to $2 billion. The bank cannot afford to let the CEO blow this off. A lot is on the line.
One analyst told TheStreet.com that, "There's downside from having Moynihan testify on the issue of successor liability and having that information potentially used by others who are suing B of A and also arguing it is liable for Countrywide's actions."
This analyst says that Bank of America might have to boost its reserves for mortgage securities it must buy back from investors balloon soar from $16 billion to as large as $80-100 billion if litigation with MBIA establishes precedent. You can bet the preparations for the testimony will be intense.
- here's the article