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Nomi Prins
NationofChange / Op-Ed
Published: Tuesday 1 November 2011
“Bank of America is officially rated the biggest, scariest bank.”

10 Reasons to Hate Bank of America

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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 Araised 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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This work by NationofChange is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

This used to be a great bank

This used to be a great bank that cared about its customer and was focused on customer satisfaction...but over the past 6 years I've watched this bank go from terrible to worse! They lie, they cheat, they steal, and then they pretend to care with a lame apology and nothing ever gets fixed or corrected. They'll charge you fees for free accounts and then make to spend hours of your time and effort getting them back, only to respond, "Sorry, our mistake, we fixed the problem"...and yet it happens again. You'll never get repaid for the time you waste with this bank. They will steal your transferred credit card points and say that you acknowledged the transfer expiration of 90 days that was NEVER disclosed. They'll place holds on pending authorizations for days until the statement has closed in order to prevent you from using points and causing you to carry over a small balance for the next statement! They will sell your private personal information to anyone and everyone-regardless of your right to OPT-OUT and in violation of state and federal law. They will routinely route your calls to oversea call centers when they recognize you are calling from a number that they've marked as, "trouble maker"...their definition mearly being anyone who ever calls to have something corrected that they caused in error. They will answer you calls and questions with textbook responses that have nothing to do with the reason you're calling, but rather just a rewording of what you just said out of context; they'll laugh at you and press mute while you speak earnestly to try and have your situation addressed and they will go out of their way to ask so many personal verifying questions at times that any reasonable person can see that they are just attempting to frustrate you more into hanging up...they will purposely pretend that they cannot hear you and ask you to constantly repeat yourself, or they will intentionally enter incorrect information forcing you to be transferred to the fraud department to have your account unlocked...Trust me, I've been down the road with this bank for years with both personal, business, credit, loans, and mortgages! I've recently closed all of my accounts except for my credit cards for fear of harming my credit score and in an attempt to cash out on the numerous points I've accumulated over the past years-but you can't; new policies require all points to be redeemed in increments of 2500 and can no longer be transferred across accounts in any smaller increments...they stole 10's of thousand of my points that I had transferred over the phone and swore that I acknowledged a disclaimer that they would expire in 90 days if not used-yet they refuse to review the phone call that was supposively recorded...all this for a lousy $12.50, yeah crazy huh, spend a whopping $2,500 dollars with them and those 2500 points will only net you $12.50. I HATE THIS BANK...YOU'VE STRESSED ME OUT, CAUSED ME GRIEF, STOLE FROM ME, WASTED MY TIME, ALL FOR BEING A LOYAL CUSTOMER THAT NEVER MISSED A PAYMENT AND KEPT TONS OF MONEY IN YOUR BANK AND USED YOUR CREDIT CARDS ON A DAILY BASIS...YEAH, NO MORE! THANKS FOR NOTHING PRANK ON AMERICA!!!

What's even sadder than your

What's even sadder than your story is that BOA is still in business, still raping the average American on a daily basis. The doomed $5 fee for having a debit card was just another indication of the bank's hubris. I visited and saw how 1 person's petition was largely responsible for the bank reversing that doomed fee. I have posted my own petition in hopes of bringing together other voices of frustration with the bank's callous treatment of people in need. Please visit/sign my petition and encourage others to do the same. The only safe bet that we have with BOA is to tie them up with their own bureaucracy by voicing our angst. I'm glad you're out of there.

Why anyone would put up with

Why anyone would put up with Bank of America is beyond my imagination. I have kept my checking and savings account at a small, family owned bank in Minnesota for the last thirty years. When I call the bank, a person answers, a person who knows me and can deal with what ever I'm calling about faster than it would take you to make it through all the button presses at B of A - landing more than likely in someone's voice mail. I did have a mortgage with Bank of America, which ended up so mismanaged by them that a court has dismissed the bank's claim to the property. This, by the way, was for a mortgage that had been in good standing for nine years. The problem that ended in the California court's action was result of Bank of America's mismanagement, and their complete arrogance when the problem was brought to their attention. In other words, had Bank of America kept competent people in their jobs, people who knew the business and could take care of problems, I would still be paying them. But that's not how Bank of America thinks. The good people cost them money. Out with the expensive and in with the incompetent. As a result, I no longer owe Bank of America over three hundred thousand dollars; and they had to pay the court cost. Investors should take note: does this seem like a safe bet?

Brooklyn Dame's picture

Thanks for this article! The

Thanks for this article! The way I see it is that there are far more than 10 reasons to hate BoA AND every other 'too big to fail' bank. Customers are being duped and government continues to let them slide by not doing enough to reverse the damage caused by 30 years of deregulation.

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