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More Clean-Up Coming In 2011 For BofA

In taking the helm of Bank of America a year ago, CEO Brian Moynihan said it was time to take advantage of what the bank already had. "We have everything," Moynihan told BofA employees. "It's about execution. It's about execution for our customers. It's about execution for our leader, Ken Lewis. " Moynihan used the word "execution," but analysts say he's had to focus more on cleaning things up during his first year in charge. Bank of America took on a massive load of troubled mortgages and investments when it swallowed Countrywide and Merrill Lynch. WFAE's Julie Rose spoke with half a dozen analysts who say Moynihan and Bank of America can expect to deal with more of the same in 2011. Imagine Brian Moynihan in his office up on the 58th floor of Bank of America headquarters with a to-do list on his desk. "I just kind of see him ticking off the boxes - and he's doing it pretty fast, actually," says banking industry analyst Nancy Bush, with NAB Research in New Jersey. Questions of Moynihan's allegiance to Charlotte still provoke angst here. He has opted to keep his primary home in Boston and spends only part of his time in Charlotte. But Bush says worries of loyalty are silly. "There seemed to be some sort of thought on the part of the Charlotte bunch that there was this God-given right for somebody from Charlotte to be the head of that company," says Bush. "People still say, 'Well if somebody from Charlotte was running this we wouldn't be having these problems.' Well yeah you would. Because somebody from Charlotte ran it into the ground." Bush reserves her harshest criticism for the last CEO Ken Lewis. She - like many of the analysts we spoke with - thinks Moynihan's done a solid job. "He's not particularly articulate in getting his goals out and his sort of grand vision and that sort of thing," says Bush. "But that's not Brian. Brian is somebody who hones in on a problem and gets it solved." Early on, the problem most people were talking about was Merrill Lynch. Remember the congressional hearings? The lawsuits over whether or not shareholders got a bum deal? And there's a real culture clash between the Wall Street Merrill folks and the Charlotte bankers. But Merrill Lynch is hardly the largest of the bank's problems at this point. Analysts generally think Bank of America has already taken the worst of the hit from Merrill's losses, says UNC Charlotte Banking Professor Tony Plath. "The irony is the bank took a lot of criticism for that acquisition but that acquisition essentially created a lot of earnings for the bank in the last two years," says Plath. "And they needed those earnings to offset the losses they were experiencing in the Countrywide acquisition." Insert a collective groan here at the mention of Countrywide. "In a word, the source of the bank's problems for the moment is Countrywide," says Plath. "Countrywide was clearly an inferior originator," adds Bush of NAB. Have the markets decided that acquisition was a mistake? "I think so," says James Early, a senior analyst at The Motley Fool. Not only is Bank of America sitting on a mountain of Countrywide mortgages that have gone bad - more than a million customers are behind on their payments - there's also that messy controversy about banks foreclosing on people without proper paperwork. All 50 state attorneys general are suing. Former banking executive and Duke Law professor Lawrence Baxter says a few isolated instances of the bank wrongfully taking people's homes make for particularly bad PR. "People remember a foreclosure story," says Baxter. "They probably know somebody who's been in that situation. And it seems to be a highly individualized act of nastiness." So the stories get endless mileage in the media and blogosphere. Bank of America pops up in so many of the stories mainly because the Countrywide mortgage portfolio is among the largest in the nation. Size makes the bank an attractive target. "It's kind of the big behemoth, the BORG," says The Motley Fool's James Early. "(Bank of America) is the default bank in the U.S. When you want to get mad at a bank, there it is." Now, Christopher Whalen thinks there's another reason why Bank of America seems to be having a harder time getting past the financial crisis than it's other big peers. Whalen is cofounder of Institutional Risk Analytics, and he points out that Bank of America acquired Countrywide and Merrill Lynch before those companies could go into bankruptcy. Compare that to Lehman Brothers and Washington Mutual, which also had big problems. But we don't hear about either of those banks anymore now. "Because they went through bankruptcy - all the unliquidated claims have long since been settled," says Whalen. "Neither Countrywide nor Merrill was cleaned up through bankruptcy. All legacy claims are still there - that's the real horrible mistake." In the last week, Bank of America made a big step toward cleaning up the Countrywide mess - a $2.8 billion deal to settle with government entities Fannie Mae and Freddie Mac. Fannie and Freddie were demanding that Bank of America buy back the shoddy Countrywide mortgages they had been sold. Now Bank of America can focus on settling similar claims from private banks and insurers. Allstate has brought one of the major lawsuits on that front. Analysts generally think the cost to settle private claims will be much higher than the Fannie and Freddie deal. Meanwhile, Bank of America has to figure out how to make money in the face of tighter regulations, which likely means basics like checking and savings: "Banks are going back to boring, stable, dividend-paying machines," says Motley Fool analyst James Early. Bank of America's stock price is down 12 percent over last January. Quarterly earnings per share were $1.28 at their peak in 2007. Now they're closer to 30-cents, and the bank has issued more stock in the last few years, so it has to make that much more money to balance out the earnings-per-share equation. A tough road, analysts all agree. Oh, and there's the threat of Julian Assange. He's the founder of Wikileaks, who has intimated Bank of America may be the target of his next big data dump. Analysts aren't taking that threat too seriously. "I'm highly skeptical that whatever Wikileaks has is going to bring down key people at Bank of America," says banking consultant Bert Ely. Many analysts figure that with all the congressional hearings, lawsuits and government probes Bank of America has faced, what more damage could Wikileaks possibly do?