Rather than put up or shut up, Bank of America tries to buy credibility

We appear to be replaying events from 2008.

As readers might remember, investors were very concerned about the solvency of the largest financial institutions in the US.  Warren Buffett saw this concern as an investment opportunity and purchased preferred stock in Goldman Sachs and GE.  Shortly thereafter, the US government proceeded to bailout the banks and Mr. Buffett was able to profit handsomely on his investment.

Since then, the US government has implemented a series of policies that masked, but did not address the solvency problem.

Recently, the solvency problem has reappeared as investors have questioned whether Bank of America is solvent or not.  BofA's management has reacted by vehemently denying that BofA has any solvency problems.

To resolve this debate, your humble blogger suggested that it was time for BofA to disclose its current asset and liability-level data because it is only with this data that market participants can determine for themselves whether BofA is solvent or not.  After all, the failure to disclose this data is the equivalent of announcing to the market that BofA has something to hide.

Rather than put up the data or shut up, BofA's management tried to buy credibility by accepting an investment from Mr. Buffett.  An investment that management had previously gone to great lengths to claim BofA did not need.

It is nice that Mr. Buffett is a highly regarded investor, but the market still does not have the data it needs to determine if BofA is solvent or not.

His investment of $5 billion in preferred stock does not appear to be enough on its own to recapitalize BofA if its critics are right that it needs $100 - $200 billion in additional capital.

Despite accepting an investment from Mr. Buffett, it is still time for BofA to disclose its current asset and liability-level data.  He will appreciate the disclosure if it shows that BofA truly did not need his investment!