BofA's Moynihan: There's No Magic Bullet for US Economy

Tuesday, 14 May 2013 08:08 AM

By John Morgan

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Bank of America CEO Brian Moynihan sees nothing flashy in the comeback of the American economy — just a slow and steady slog that will continue.

Moynihan told The Globe and Mail he still observes an abundance of caution among the bank's clients, both business owners and entrepreneurs, despite it being five years since the 2008 financial crisis.

"They are pretty conservative right now because of the uncertainty ... It is kind of 'I will do everything to make money and serve my customers well, but I will do it really thinking through whether I am overextending myself.'"

Editor's Note:
Economist Warns: 50% Unemployment, 100% Inflation Possible

There is no quick solution that will restore the confidence of U.S. businesses, according to Moynihan. He noted the housing market appears on the mend, consumers are repairing their personal finances and unemployment is improving – but the progress is gradual.

Part of the solution lies with the government getting the nation's fiscal house in order.

"The capitalistic animal spirits start to come alive faster than people think when we see some certainty," Moynihan told the The Globe and Mail

"But is there any one thing? No. It's just the business community generally, when I talk to our clients, would really like to see more of a permanent solution in Washington."

The suboptimal growth of about 2 percent in the U.S. economy is "not what we want, but it's better than the alternative, which is going backwards."

"House prices quit going up in 2006," Moynihan said. "You're closing in on seven years since they quit going back up. That's the thing you sometimes forget — is how long we've been through this."

Moynihan said the series of huge settlements that BofA has been signing stemming from its role in the subprime mortgage crisis may soon be dwindling, and in the meantime, the bank's wealth management business is flourishing.

U.S. homebuilding trends will continue to be a bright spot, Bloomberg predicted, and the cost of living is under control — both proof that the economic expansion is unlikely to be go off course.

"I wouldn't expect consumers to rein in their horns a lot," said Paul Edelstein, director of financial economics at IHS Global Insight. "The fiscal tightening is a negative for growth. Even when the economy is growing slowly, housing is going to do much better."

One possible economic drag is that higher taxes may be starting to pinch household budgets, Bloomberg said.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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