Guest Post: Ten Reasons Not To Bank On (Or With) Bank Of America

Tyler Durden's picture

Submitted by Nomi Prins

Ten Reasons Not To Bank On (Or With) Bank Of America

Charging customers for a debit card is just one reason not to bank at BoA. 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 bank." 

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 action status.

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 positions.

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 followed.

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 his departure.

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 upper-management-approved fraud.

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.

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FunkyMonkeyBoy's picture

11. It's got the word 'America' in the title. A true sign of evil. Stay away from evil.

legal eagle's picture

So categorical in your thinking.  You're a dope.

Deadpool's picture

we are all dopes...we are the 99%.

andybev01's picture

'we're all dupes...'

 

fixed that for ya.

tickhound's picture

BAC is just one part of that huge economic drain-team of welfare dependants hiding behind and protected by the false label of capitalism.

eureka's picture

HELP TBTFs FAIL - DON't PAY YOUR MORTGAGE.

Then - you can buy more consumer junk from China - isn't that what US life is all about?

nickt1y's picture

Do not pay your mortgage! Instead invest in the metals Siver, Gold, Brass, and Lead (the last 2 come together in a convient package).

beardeus's picture

How did that need fixing?

haibop's picture

but everyone wants to be the 1% - right? memory foam

Unprepared's picture

12. When you go BAC, you never come black*

 

*black as in black Friday

Ruffcut's picture

"a billion ways to leave your lover."

Ain't got no stash, Nash, ain't got no doe, joe, got too much fraud, claude. So burn the mother fucker down, clown.

Betty Swallsack's picture

I may have sped-read too fast....what number was this under:

"Bank of America is shifting derivatives in its Merrill investment banking unit to its depository arm, which has access to the Fed discount window and is protected by the FDIC."

Weeeee, now we all get to pay for the $79 trillion of derivatives/gambling debts/fraud.  Isn't that awesome? 

What this means for you is that when Europe finally implodes and banks fail, U.S. taxpayers will hold the bag for trillions in CDS insurance contracts sold by Bank of America and JP Morgan.

Hmm....79 trillion divided by 300 million citizens.....$263,333 (plus compounding interest - mmmmm)....yea, you're all f'd...for at least the next 10 generations.  Okay, I was being an optimist....you're never paying that back (not that it was ever yours to ever repay, but they'll make you do so)!  EVER!  What a thought process that this all is....each newborn kid is/will be immediately indebted for life. Bwah-ha-ha-ha!

And you thought that transferring your slave wages to a credit union was going to save you? HA!

http://www.sott.net/articles/show/236509-Holy-Bailout-Federal-Reserve-No...

...and becuase you need this...this man is MY fucking prophet!

http://www.youtube.com/watch?v=i5dBZDSSky0

 

Buck Johnson's picture

This is horrible, truly horrible.  When Europe implodes, it will definitely take down the US.

Bob Sacamano's picture

Has to be ok -- it was approved by the BHO administration. 

ResFam's picture

Folks like Peter Schiff, Brandon Smith and others have the most common sense solutions to change the system... Stop participating in it! It's very simple; If you don't like BoA, switch to a credit union or a small local bank... If you don't want to be in debt servitude for the rest of your life because of student loans that benefit Wall Street, go to school overseas where education is vastly cheaper.

Thinking radically different about student loans, college, or even where you bank doesn't require a ton of effort. The establishment tries to convince you that the only solutions out there are the ones they offer. That's nonsense. If you want to make the corrupt establishment obsolete, turn your back on their corrupt system altogether and create your own.

The only way to win is to refuse to play...

 

 

ToNYC's picture

"If you don't like  the news, go out and make some of your own"

-Wes "Scoop" Nisker (1968)

Betty Swallsack's picture

Sorry ResFam, there is NO escape.  Not when BOA's gambling debts have been shifted to the depository arm, guaranteed by both the Federal Reserve and the FDIC, to the tune of 79 trill.  Going to a credit union is a 'feel-good' solution.  it'll give you the sensation the you're keeping some of of that fiat currency to yourself while it's value plummets further.

ResFam's picture

Fair enough... Then move your accounts overseas.  Buy gold or silver.  Buy hard assets.  The sentiment stands. 

I think I need to buy a gun's picture

my boy said there is a national movement growing, it smells a little bit too coordinated to me. Just like occupy half the people don't know why they are marching. I smell BAC going under and the government going to make it look like the people caused it so everyone feels good

I did it by Occident's picture

So keep buying some cheap Way OTM puts on BAC?  and just wait for the inevitalbe...

Ruffcut's picture

Shithole bank is always "under"

Under in value

Under the law

And under my sore ass. Did I mention they are also "behind" alot of shit?

tamboo's picture

"

"Follow the trail people. House of Rothschild ----- George Soros ------ Open Society Foundation -------- Tides Foundation ------- Adbusters ------------- Occupy Wall Street. There you have it. PRS ­ Problem - Reaction ­ Solution.

Now, what is this REALLY all about? Could the ultimate goal of these Satanic human pieces of excrement (AKA the Global Elite) be Martial Law imposed in every U.S. City leading then to the total financial collapse of the U.S. economy following the tried and true model of the Bolshevik (Rothschild-sponsored) Revolution of 1917?"

 

http://www.rense.com/general95/red.htm

Ruffcut's picture

Very possible.  When disinfo campaigns and market pumping no longer pacify the masses, then martial law and tyranny rule.

You getting a frontrow view, sheeples. Ignore it at your own peril. Go long and prosper on bogus financial, broke institutions. Only a moron will not predict the result.  This game has become the dual of good verses evil. Evil has the upward bias. technicals of fraudulent fundamentals backs up my thesis.

Uncle Remus's picture

I say we let this thing fester a bit longer - let it really swell up.

KingdomKum's picture

sounds like a slamdunk put play to me

Ruffcut's picture

No it don't. I've held puts for as long as these shitbags got countryshitbagnotworthafuckingdime wide.  This is not alot new info. The people should pull their cash out and kill it before it eats everything in its sights.  Give em what they have comin.

Melin's picture

Let's break the government's hold on the economy and then banks will have to earn their living honestly.

Separate the economy from the state.

NotApplicable's picture

You're gonna have to get rid of the IRS first. As long as they are able to shake-down employers and merchants, there is no mechanism for relief.

NOTW777's picture

STOP STOP with the disinformation. OWS is NOT protesting against banks. They are campaigning for obama, NWO and socialism.

How many OWS outfits have bank accounts and how many are forming corporations

Hot Apple Pie's picture

Also, they want to rape your sons, force you to smoke the reefer and make everyone a Muslim.

Quinvarius's picture

They are protesting against the banks and the socialism that allows them to live and steal.  I'm not sure what kind of nonsense you are trying to spread.

Flakmeister's picture

That would explain all the "End the Fed" and Ron Paul posters at the NYC #OWS protest I checked out on Saturday. The *only* campaign related posters were the Ron Paul people....

Quit making up bullshit and spewing it here.

Betty Swallsack's picture

Muddying the waters, are we?

UTICA CLUB XX PURE's picture

BAC?

Blood-Alcohol-Content? 

krispkritter's picture

BAC - Blood (for) Account Closure.

There, fixed it...

monopoly's picture

Everyone I know that had an account there is now gone. Worse than the Giant Squid, and that is bad.

Melin's picture

Where does "squid" originate in relation to GS?

eatthebanksters's picture

vampire squid...coined by Matt Taibbi....meaning a creature that wraps its tentacles around society and sucks out the lifes blood (or savings). I would say that's a pretty good description of the TBTF banks.  And, even thought the OWS incident in Oakland was unique, rare and possibly caused outside troublemakers, I think it's a sign of things to come.  As our President incites a class war and divides the population, nutballs will follow his example and use it to justify extreme actions. It will have a bad outcome except for one thing:  it will eventually change the way the TBTF banks do business, if not break them up.  Note to Jaime Dimon and the rest of the TBTF CEO's:  find a safe island to retire too and keep the jet engines idling.

Melin's picture

thank you. 

I have no proof but, if leftists want violence, a leftist city sure seemed happy to oblige.

weinerdog43's picture

Have a junk for such an ignorant comment.  A veteran was demonstrating and was shot by the cops.  He is(was, don't know current status) in critical condition.