Tuesday, April 29, 2014
What could be more embarrassing than a major bank publicly admitting that it erred in its math? This is the situation in which Bank of America finds itself for miscalculating its capital adequacy. As a result, it has had to suspend both its dividend and stock buyback program. The travesty feeds critics who say that major banks are too large to manage and should be broken up. It angers shareholders who thought they would be seeing a return. It spooks customers who wonder whether the bank is safe with their money. The question Bank of America's CEO should be asking is how did it come to this? Who goofed and what now? How does one communicate to shareholders that nothing is coming in the mail? Look for an obstreperous annual meeting and a CEO who will be verbally assaulted, even if he tries to explain the error. There are mistakes that a bank shouldn't make and this is one. It is a self-inflicted PR mugging.