Bank of America CEO Moynihan Expects Sluggish Recovery, Concerned About Pending Legislation

Bank of America Corp (NYSE: BAC) CEO Brian Moynihan recently said in a speech to the North Carolina Bankers Association that he expects the economy to face a slow recovery that will include a high unemployment rate. Moynihan also expressed concerns over the re-instatement of the Glass-Steagall Act.

Moynihan commented, “We continue to be worried about the fragility of the economy. We still have a way to go before we can pop the cork.” He also commented that he expects that the U.S. gross domestic product will grow by more than 3% this year.

Moynihan also expressed concerned over a growing reform movement in Congress to re-implement a firewall between commercial and investment banking. Recently U.S. Senators John McCain (R., Ariz.) and Maria Cantwell (D., Wash.) proposed to reinstate the 1933 Glass-Steagall Act which prohibited traditional banks from underwriting securities like new stock issues. Moynihan said he is “concerned with the view that somehow the integration of capital markets and commercial banking is a flawed structure for companies in our industry. It is not.”

Any efforts to re-instate Glass-Steagall regulations would certainly be a major threat to Bank of America, after it purchased investment banking titan Merril Lynch in late 2008 as the recession threatened the continued existence of the company. The purchase of Merill lynch pushed Bank of America into receiving more than $45 billion worth of taxpayer aid under the Troubled Asset Relief Program as credit losses from Merrill Lynch skyrocketed.

Moynihan’s predecessor, Kenneth Lewis, received significant scrutiny related to the company’s handling of the merger and later resigned his position. Some believe that the company had failed to disclose certain credit risks from Merrill Lynch to the company’s shareholders while discussions for the purchase were happening.

After being unable to recruit any outside candidates into the company, Bank of America’s board of directors appointed Moynihan, a Bank of America insider, to the position.