Doomed: Should Bank of America Stop Firing People and Immediately Declare Bankruptcy?

Bankruptcy makes more sense for BofA than firing thousands of people whose jobs and business units are profitable.

CEOs fire lots of employees when they are desperate and attempting to project an image of control and determination. Executives often frame this as 'making the tough decisions,' but it is frequently just the opposite: an attempt to avoid the tough decisions that might embarrass the institution and threaten their position.

As Henry Blodget (no stranger himself to the impact of bad decisions and public perceptions) comments in Business Insider, bankruptcy would probably save jobs and revive the institution, if not the CEO's reign. JL:

Bank of America is doomed, says bank analyst Chris Whalen, the founder and managing director of Institutional Risk Analytics.

Importantly, this dour outlook as nothing to do with the company's operating businesses, which Whalen thinks are fine. In fact, says Whalen, there's no need for the bank to be restructuring them and firing thousands of employees (40,000 is the latest estimate) to improve its bottom line.

The part of Bank of America that's not fine, in Whalen's view, is the ongoing liability from the mortgage underwriting that Bank of America's subsidiaries did during the housing bubble. The litigation exposure from this could be so humongous, Whalen argues, that it will bankrupt the company, forcing regulators to step in and restructure it.

And Whalen doesn't think the country should wait for that day.

Instead, Whalen says, the government should just seize Bank of America and restructure its debt, equity, and legal obligations now. The company's operating businesses--branches, commercial lending, wealth management, and so forth--should continue operating, and the company could then be refloated with a new ownership structure.

This would leave Bank of America clean, lean, and competitive--just like the strengthened GM after the forced auto-company bankruptcy.

But in the meantime, none of this is under discussion. Instead, says Whalen, Bank of America is rearranging chairs on the deck of the Titanic. And firing thousands of people who don't need to be fired.