TAKING STOCK: Another amoral bank, another reluctant recommendation

Dear Mr. Berko:

Thank you for steering me away from Bank of America at $12 in June of this year. I had intended to buy 1,000 shares and would have suffered a $6,000 loss.

I've been watching Bank of New York Mellon because, at the current price, I think the shares have hit bottom. I think its revenues and earnings are going to be up next year, and I think the stock price could rise too. What are your thoughts on this bank stock?

PR, Wilmington, N.C.

Dear PR:

The original Bank of New York Mellon (BK-$21) was founded in 1784 by Alexander Hamilton, one of America's most successful financial crooks and someone whom Thomas Jefferson would have wanted to put in jail. Hamilton later became secretary of the Treasury under Washington's administration while Jefferson became secretary of state.

Today, 230 years and a few name changes later, BK has locations in more than 100 markets, claims 49,216 employees, boasts more than $26 trillion under custody/administration and may still be run by a bunch of crooks. Recently, the states of Florida, Virginia and New York filed lawsuits seeking well over a billion dollars in damages and penalties and accused BK of overcharging its pension funds on foreign currency transactions.

It's a walk in the park to shave a few tenths of a cent from the buy side and sell side of any currency transaction. And when multiple transactions involve hundreds of billions of dollars, those teeny tenths turn into huge multi-million dollar bonanzas.

And this may be the tip of the iceberg for BK, as well as J.P. Morgan, Bank of America, Citigroup, Goldman Sachs and other huge Money Center banks, all of which have abused their trust over the public purse.

Now, PR, I can't recommend BK or any of the other big banks, most of which I believe are as crooked as a row of bad teeth. Your request is like asking me to recommend a pedophile to baby-sit at a nursery school. And this bankster scoundrelism is not a one-time occurrence. BK and other Money Center banks have been peeling the skin off public and private pension plans for decades, and it took a whistleblower to bring this travesty to court.

Pension plan beneficiaries -- common folks like us, who need those dimes and dollars -- are easy marks. Yet the trading patterns of those big banks are so obvious that even I could smell the stink. And the state employees who monitor these plans are either a bunch of stupids or in league with the banks -- or both.

BK is a magnificent institution and a reigning member of what I call the Blue Blood Mafia. Its shares were trading in the low $40s during the worst of the 2007 and 2008 markets. Still, during the last 12 months, BK generated $15 billion in revenues and nearly $3 billion of net income and maintained a book value of $28 a share plus $147 billion in cash. And Wall Street reckons that BK's numbers will improve by at least 10 percent next year.

At $18 a share, BK hasn't traded this low in 20 years, which should give you some inkling of how damaging these charges might be. However the shares could move higher on speculation that BK may divest itself of some assets to protect its value if these suits become sticky widgets.

But in the meantime, management will lawyer up with the slickest mouthpieces and the most powerful lobbyists on the Street, and then it'll call in IOUs from influential members of Congress with whom BK is thick as thieves. BK will not be ignored by these influential members of Congress, and that augurs well for a share-price recovery to the $25 to $30 level in the coming 12 months.

The 52-cent dividend yields 2.8 percent and is certain to be raised (some believe) to 75 cents in 2012 -- if earnings meet projections of $2.40 a share. Meanwhile, BK's officious CEO, Robert Kelley, who doesn't look down his nose at people but rather looks down his chin, has been asked to resign. He's leaving with a super-generous package, most of which will not be revealed. However, the stories he could tell would make Gordon Gekko seem like an angel.

----------

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2011 Creators Syndicate Inc.

Published: Mon, Nov 14, 2011