Ten Reasons Not to
Bank On (or With) Bank of America
by Nomi Prins | Truthout
Charging customers for a debit card is just one reason not
to bank at BoA. (Note: On Nov. 1, Bank of
America announced it was dropping the $5 a month debit card charge.) Recent
Occupy Santa Cruz Bank of America incident illustrates how sensitive B of A is
to protest. This "too big to fail" bank may collapse like a
house made of junk bonds and become a taxpayer burden. Here are a few other
reasons why you shouldn't bank with them.
There is no shortage of hatred for the biggest banks.
Indeed, the Occupy Wall Street movement is leading a national revolution
against these Byzantine, powerful Goliaths for the economic devastation they
have caused. This makes it difficult to choose the worst of the bunch. That
said, a strong case can be made that Bank of America deserves the title of the
nation's most despised bank.
Here are ten reasons to take your money out of Bank of
America — and park it at a credit union or community bank near you. (And yes,
that may be near impossible if you have a mortgage with them, as refinancing
away from any big bank nowadays is a nightmare.)
1. B of A rejects the right of customers to protest. When
two Occupy Santa Cruz protesters in California marched into a local Bank of
America to close their accounts, the response was, "You cannot be a
protester and a customer at the same time," followed by a threat to call
the police if the women didn't leave. (The attending officer later
reiterated the bank manager's message.) Meanwhile, the fact that Bank of
America charges a fee for closing an account prompted Rep. Brad Miller (D-North
Carolina), who resides in Bank of America's headquarters state, to introduce a
bill to protect customers from such fees.
2. To recoup ongoing losses from its stupendously dumb
acquisitions of Countrywide Financial and Merrill Lynch, B of A pillages its
customers. Thus, despite massive public outrage, the $5 debit usage fee for
customers with less than a $5,000 balance and no mortgage with the bank will
begin in 2012. B of A was the first large bank to confirm it would charge this
fee, which is the highest in current discourse among the banks.
On October 18, Consumers Union wrote a letter to B of A
chief Brian Moynihan asking him to reconsider this fee, which impacts poorer
clients disproportionately. The
letter summed it up nicely: "Consumers should not be required to pay a
costly fee that appears to be arbitrary and designed to generate income to make
up for Bank of America's bad business decisions rather than covering the costs
of providing debit card services." Banks collect 24 cents from retailers
for each customer swipe, much more than the median 8 cents it costs a bank to
process the purchase. Senator Dick Durbin's (D-Illinois) response was to urge
customers: "Vote with your feet. Get the heck out of that
3. B of A's other fees are just as bad. According to its
last annual report, the bank has 29.3 million active online subscribers who
paid over $300 billion worth of bills in 2010. In May, B of A raised its checking account fees, which included e-banking, to $12, in line
with JP Morgan Chase's decision to do the same, up from $8.95 per month. In
June, it started a $35 overdraft fee, even on overdrafts of one cent. Next
year, it will incorporate basic checking with a new "essentials'' account structure that makes monthly fees unavoidable,
that will not include free bill pay, and that has a mandatory $6 minimum fee.
Last Monday, Bank of America was charged (along with JP
Morgan Chase and Wells Fargo) with colluding with the two major credit card
companies, Visa and MasterCard, to keep ATM fees high; in other words, they
were charged with "price-fixing," in direct opposition to antitrust
laws. This is the third of three such suits filed recently, each seeking class
4. Bank of America takes gross advantage of the military.
It is the official bank of the US military and has branches
by or on many bases, which provides the firm with another locus of extortion. B
of A can entice military personnel to take out loans at usurious rates.
Personal loans made to soldiers for a few thousand dollars can actually keep
them indebted for the rest of their lives.
Last May, Bank of America paid $22 million to settle charges
of improperly foreclosing on active-duty troops. The firm spun these
foreclosures as being Countrywide's fault for having started them before
becoming part of B of A.
5. Bank of America is officially rated the biggest, scariest
bank. Its stock price also fared the worst of the group of banks (which also
included Citigroup and Wells Fargo) when Moody's Investors Service downgraded it on September 21.
B of A's long-term holding company (parent bank) rating was
chopped two notches to Baa1 from A2, and its retail bank rating was cut two
notches from A2 to Aa3, placing B of A four notches below rival JP Morgan Chase
and one below Citigroup, the third-largest US bank. Its bank holding company
has the lowest rating among the top five banks with the largest derivatives
This caused great fear for investors involved in derivatives
trades with the Merrill Lynch division, prompting them to request trades be
moved to the part of the bank with the better rating - the retail part with the
insured (peoples') deposits. That way, B of A doesn't have to pony up as much
collateral to back the trades, as it would in a subsidiary with a lower rating.
The Fed was recklessly happy to approve, despite the Federal Deposit Insurance
Corporation's (FDIC) misgiving about having to insure more risk, even if it can
borrow from the US Treasury to do so. Meanwhile, Bank of America's stock price
got so crushed that Warren Buffett scooped up a $5 billion preferred stock
deal, effectively betting that the government won't let this big bank go bust.
6. B of A's derivatives position keeps rising. The total
amount of derivatives in the FDIC-insured portion of B of A as of mid-year was
$53.7 trillion, up 10 percent from $48.9 trillion the prior year, and up nearly
35 percent from its pre-fall crisis level of $40 trillion (the Merrill Lynch
securities division holds $22 trillion in addition.) The bank has $5 trillion
of credit derivatives nearly double its $2.7 trillion pre-Merrill amount. In
addition, because of its inherent zombie status and rating downgrades, the cost
of insuring B of A against a possible default continues to rise in the credit
derivatives market — a pattern that American International group (AIG) once
7. Bank of America got the most AIG money of the big
depositor banks. By virtue of having acquired Merrill Lynch's AIG-related
portfolio, B of A got to keep approximately $12 billion worth of federal AIG
backing, too. It also received more government subsidies than any other
mega-bank except Citigroup. Its stimulus package included an initial Troubled
Asset Relief Program (TARP) helping of $15 billion for the bank and $10
billion for Merrill, plus a second helping of $20 billion in January 2009 after
it became clear that Merrill's losses had spiked to $15 billion — in order to
ensure the takeover from hell went through and Fed chairman Ben Bernanke,
then-Treasury Secretary Hank Paulson, and then-Merrill Lynch executive John
Thain could pat themselves on the back for saving the world. The government
guaranteed $118 billion in assets, mostly Merrill's, in the new merged firm.
With the benefit of the Fed's nearly 0 percent money policy, and a depositor
base to plunder, B of A repaid that aid.
In terms of overall federal subsidies (including TARP), Bank of America was second only
to Citigroup ($230 billion compared to $415 billion). None of that got in the
way of former B of A CEO Ken Lewis' personal take, a $63 million retirement
plan, in addition to the $63 million he scored during the three years before
8. Bank of America leads the big bank fraud lawsuit
settlement tally. So far, it has racked up the largest settlement, $8.5 billion
in June, to settle claims related to $100 billion worth of Countrywide-spun
mortgage securities backed by faulty loans, with bigwig investors like Pimco,
BlackRock, and the Federal Reserve Bank of New York.
B of A is also being sued by state and federal regulators
for questionable foreclosure practices and a union benefits plan for hiding
foreclosure problems that impacted its share price. It is one of 17 major US
financial institutions being sued by the Federal Housing Finance Agency for
billions of dollars of mortgage-securities-related losses that may require B of
A to potentially repurchase $50 billion worth of allegedly fraudulent
securities. Earlier this year, B of A settled for $3 billion regarding bad
loans that they had repackaged by Fannie Mae and Freddie Mac, as well as agreed
to a $624 million settlement in a securities fraud class-action suit filed by
New York Sate and City pension fund regarding Countrywide stock losses. Then
there's AIG's August lawsuit, in which AIG wants $10 billion in damages for
mortgage-related securities it bought and against which it claims B of A
committed securities fraud.
That's a lot of pain for a Federal Reserve-approved $4.1
billion acquisition. Meanwhile, since the settlement didn't lead to a financial
restatement, under the supremely elastic (read: useless) Dodd-Frank Act,
executives get to keep their related bonuses.
9. Even after lawsuits, B of A would still rather please
investors than customers. Investors that won money in the $8.5 billion
settlement were upset that B of A was continuing to service loans, instead of
foreclosing on them more quickly. Now, B of A had a nasty incentive to kick
people out of homes faster, rather than work with them to refinance or
restructure mortgages. Two months later, their foreclosure process has, in
fact, sped up.
Bank of America foreclosure notices are surging again
following a slight robo-signing- related slowdown, meaning they are now sending
out a greater increase in default notices (90-day overdue loans) than other
banks. The bank has $30 billion in residential mortgage loans in default, which
will become foreclosures for thousands of families.
10. Bank of America, despite having been buoyed up by the
government, did not pay taxes, and, given its glorious ineptness, will be
laying off 30,000 workers. Not only did the bank pay
no federal taxes for 2010 (or 2009) by making use of its posted pre-tax
loss of $5.4 billion, it actually cited a tax benefit of $1 billion. Meanwhile,
it has announced plans to cut up
to 30,000 jobs over the next few years as part of its plan to save $5
billion, ostensibly due to the settlements it's paying for engaging in
Finally, consider the two reasons that any of this list is
possible. One is the Glass-Steagall Act repeal, which enables banks to comingle
straight costumer business with reckless securities creation and trading. The
second reason is coddling by a Fed that finances and approves every bad move. B
of A is the poster child for a Glass-Steagall repeal gone wrong. Lewis pulled
in a slew of other banks under the B of A umbrella, making it — at one time —
the country's largest bank, including the infamous Countrywide Financial and
Merrill Lynch. Now it has $2.26 trillion in total assets and $1.8 trillion
assets in insured subsidiaries, $1.2 trillion of customer deposits ($1.066
trillion in the United States) and about $804 billion in FDIC-insured deposits
— all part of the giant, risk-laden mess that is B of A.
Without being broken up via a new, strong Glass-Steagall
Act, when banks need to find ways to make money, they resort to extorting it
from their sitting ducks, er — customers. Meanwhile, that's where credit
unions, which are not-for-profits owned by their members and not by outside
shareholders, come in. They generally don't engage in crazy derivatives trades,
or charge unnecessary fees for holding your money or for letting you pay bills
with it, or for online banking. In terms of personal attention, among other
economic reasons, the credit and smaller community banks are a much better bet.
(Note: November 5 is Bank Transfer Day; for more information go to http://www.facebook.com/Nov.Fifth.