On causes
The combination of no-money-down mortgages, speculation on home prices, and some dishonest brokers and consumers who out-and-out lied will cause damage for years to come. This, in no way, absolves the poor underwriting judgments made by us and other institutions, and it certainly doesn’t absolve anyone who mis-sold loans to consumersOn regulation
With great hesitation, I would like to point out that mistakes also were made by the regulatory system.
That said, I do not blame the regulators for what happened. In each and every circumstance, the responsibility for a company’s actions rests with us, the CEO and the company’s management. Just because regulators let you do something, it does not mean you should do it. But regulators have a responsibility, too. And if we are ever to get this right, it is important to examine what the regulators could have done better. In many instances, good regulation could have prevented some of the problems. And had some of these problems not happened, perhaps things would not have gotten this bad.
On risk management
We regularly do stress tests for our company, always projecting forward our capital and liquidity. We think our capital ratios will maintain their extremely strong levels throughout the government’s “adverse economic environment.”
You also should know that your company will be prepared for an environment even worse than the one just described.
On dividends
Out of an abundance of caution to be prepared for the future during this uncertain environment, we believed it was prudent to reduce our quarterly dividend..On the future
..We maintain a long-term commitment to the dividend and still view a 30%-40% payout ratio of normalized earnings as ultimately reasonable
We see that the largest global economic downturn is being met with massive global government actions – and while the specific outcome is uncertain, there is good reason to think that the governments will eventually win.
