Bank of America News

Bank of America And Washington Mutual Directors to Face Election Challenge

Announcement Completes CtW's "Subprime Director" Focus List for 2008 Proxy Season

WASHINGTON, Feb. 12 PRNewswire — Citing risk management failures that cost shareholders $71 billion in 2007, the CtW Investment Group has called on three directors of Bank of America (NYSE:BAC) and three directors of Washington Mutual (NYSE:WM) to describe what they did to protect shareholders from excessive mortgage-related risk over the past two years. Absent a compelling response, CtW said it will urge shareholders to vote against the directors at the banks' 2008 annual meetings in April.

CtW made its request in letters to Bank of America directors Jackie M. Ward, Frank P. Bramble, Sr. and Robert L. Tillman and Washington Mutual directors Mary Pugh, Stephen E. Frank and William G. Reed, Jr. The six directors sit on the board committee designated to oversee risk for their respective banks: the Asset Quality Committee at Bank of America and the Finance Committee at Washington Mutual. CtW sent the letters last week and released them today via its web site.

"The meltdown of the U.S. mortgage market is among the worst financial disasters of the past 50 years," said Bill Patterson, Executive Director of the CtW Investment Group. "At the epicenter of this crisis are Bank of America, Washington Mutual and four other U.S. banks whose failure to manage mortgage-related risk not only destroyed almost $300 billion in combined shareholder value, but also helped destabilize the global capital markets and precipitate a credit crunch that now threatens to throw the U.S. economy into recession."

The addition of the two banks' directors completes CtW's "Subprime Director" Focus List for the 2008 proxy season. CtW previously announced that it will work to hold accountable those directors most culpable for the risk oversight failures at Citigroup, Merrill Lynch, Morgan Stanley and Wachovia. All six Focus List banks are expected to hold annual meetings in April, starting with Morgan Stanley, which could file its proxy statement as soon as next week.

CtW's six Focus List banks account for 88% of the $87 billion in total subprime-related writedowns and credit losses announced by large U.S. banks since the beginning of 2007, according to a recent analysis by Bloomberg.

"It is difficult to comprehend how [Bank of America] could have added $7.8 billion to its CDO exposure [in the first nine months of 2007] when the market for subprime mortgages, a key component of most of the bank's CDO exposure, was already in trouble," wrote Patterson in his letter to the Bank of America directors. To the Washington Mutual directors, Patterson wrote: "Our analysis of the volume of risky housing-related lending and the share of such loans in Washington Mutual's portfolio reinforces the view that the Company chose to increase exposure to highly price sensitive assets at the peak of the housing bubble."

"The directors bear ultimate responsibility for these failures," noted Patterson, referring to the NYSE listing requirement that a board's audit committee, or other designated committee, must review major financial risks and assess the steps management has taken to control such exposure. "Moreover, unlike at the vast majority of public companies, oversight of credit risk at both Bank of America and Washington Mutual is entrusted to a committee that is not wholly independent. Director conflicts of interest may have compromised the committees' ability to rein in excessive risk taking by management."

The CtW Investment Group works with pension funds sponsored by unions affiliated with Change to Win, a coalition of unions representing nearly 6 million members, to enhance long-term shareholder value through active ownership. These funds, together with public pension funds in which CtW union members participate, have about $1.4 trillion in assets and are substantial long-term shareholders of the six Focus List banks.

SOURCE CtW Investment Group

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