Bank of America CEO defends loan modification work

It's been a rough two years for Bank of America.

It acquired Merrill Lynch, only to discover it had lost $15 billion in a single quarter. It lost its chief executive officer, Ken Lewis, when he resigned. And, critics complain it's done too little to prevent mortgage foreclosures.

To steer it through the tough times, the bank tapped Brian Moynihan as the new chief executive. He is a former corporate lawyer who joined Bank of America in 2004 and most recently led its retail bank and credit card operations.

Moynihan was in Tampa Wednesday meeting with bank employees and clients. The Tribune spoke with him about issues including the continuing controversy over bank bailouts and loan modifications.

Q. Bank of America got $45 billion from the Troubled Asset Relief Program, although you've paid that back. What did the public get out of TARP?

A. I think what they got was the economy stabilized. The banking system and the economy are linked together. If one's successful, the other's successful.

And what the public got back was all the money back, plus interest, plus a good return on it. On top of that they got the biggest bank in the United States to continue to lend throughout the crisis all that we could lend. That was the desired outcome from (Treasury) Secretary Paulson and others at the time.

Q. You've been criticized for being too slow to modify people's loans and prevent foreclosures. Why haven't you done more?

A. We have now over 20,000 people working on this area for us. So we had to set it up right. Smaller companies can get a higher percentage fast, because they didn't have the sheer volume. If you look what happens on a monthly basis now, of every three permanent modifications done in the United States we're doing one.

We have 600,000-plus trial modifications and 70,000-odd permanent modifications, and we're still in the process. So judging the success of the pull-through rate today, when we're still working through it all, is premature.

Q. Data from the University of South Florida's Small Business Development Center show your SBA loans in the Tampa Bay area fell from more than 400 loans in 2006 to just eight last year. What happened?

A. I think SBA loans are just one product. If you've looked at what we've done for businesses that are $50 million in revenues down to the very small revenues, I think this year we've done $8 or $9 billion more through the first half of this year than we did last year. Our pledge was to do $5 billion more.

Our small business default rate (most of which were non-SBA loans) had been as high as 18 percent. The very small loans, $100,000 loans, had risen as high in the third quarter as 18 1/2 percent. We're down to 14 or something.

Q. This area has a lot of back-office financial jobs, but recently PricewaterhouseCoopers said it would move 500 high-end jobs overseas. What's the future of back-office jobs?

A. We've been relatively neutral on this. We don't have any major plans to move jobs. We're a relatively static employer. Our headcount will come down over time because we're getting more efficient and we're getting through some of the collection costs of dealing with the tough assets, but it's (outsourcing) not a major initiative of ours one way or the other way.