Should Bank of America really be Bank IS America? This has not been a good year for a number of companies, with red ink becoming a common site on balance sheets across the country. However, there is one company that appears to personify everything that’s wrong with the American economy: Bank of America (BAC). This embattled institution, the largest bank in the country, has gone through a roller coaster of news in 2011 that could be seen as a parallel for what ails the nation as a whole.
Housing Crisis Hangover
Bank of America reached a settlement today with clients of its Merrill Lynch unit who claimed that they were misled about mortgage-backed securities. The holders of the securities began their lawsuit in December of 2008, claiming that they were shown “false and misleading” prospectus statements and that the “the registration statement materially misrepresented the credit quality of the mortgage loans underlying the certificates.”
High Unemployment Numbers
Tuesday also brought an announcement from Bank of America CEO Brian Moynihan that the company was already underway with the corporate-wide layoffs that were planned in September. With the ailing giant planning to trim some 40,000 jobs, many Bank of America employees may be about to feel the sting of the weakest American job market in generations.
Bank of America also got bad news last month when Federal Reserve Chairman Ben Bernanke announced the newest round of bank stress tests that would be implemented by early next year. Bank of America is going to be subjected to further scrutiny because of its high levels of exposure to European sovereign debt. The new tests will be even more rigorous, testing to see if the banks can maintain adequate levels of capital in the event of a European collapse and a subsequent recession in the United States. Now, many are less than optimistic about Bank of America’s chances of passing, especially given its history with the stress tests.
Protests in the Street
Perhaps the most public gaffe for Bank of America came earlier this year when the institution tried to implement a new $5 monthly fee to customers for using their debit card. This proved to be the straw that broke the camel’s back and prompted a furious reaction from consumers. Angry Bank of America customers flooded message boards and social media sites with angry vitriol and some even went so far as to protest outside branches and even burn their debit cards. The anger ultimately led Bank of America and other major institutions to scrap plans for the new fee. Anger over the fee culminated in Bank Transfer Day, a grassroots movement started on Facebook by Bank of America customer Kristen Christian that called for dissatisfied consumers to change to credit unions on November 5th. In the end, the National Credit Union Association reported that 40,000 people left their banks for Credit Unions.
Bank of America received a lot of bad press lately when it was revealed that its foreclosure practices were out of control, with little to no oversight and the bank mistakenly foreclosing on homes. However, now a spin-off of the Occupy Wall Street movement has started targeting Bank of America and other major banks with their new “Occupy Our Homes” movement. The movement is aiming at helping residents resist foreclosure and eviction through nonviolent resistance and all available legal means.
Bank of America is probably in the habit of denying people home loans of mortgages if their credit is no good (or at least NOW it is), but the bank itself received a credit downgrade from Standard & Poors. Bank of America’s exposure to European debt and lack of capital meant that S&P’s new criteria warranted its credit rating dropping from an A to an A-. Bank executives stated that the downgrade “could likely have a material adverse effect on our liquidity… .”
Slumping Share Prices
Okay, so this one is really more specific to Bank of America, but it’s still worth noting that the massive institution has seen its shares plunge by well over 50 percent so far in 2011. On the whole, the largest bank in the United States, that draws its namesake from the country, has followed a trajectory that seems oddly similar to what the nation is going through. Bank of America is probably just one rumor about ongoing filibusters grid-locking its Board of Directors away from this getting truly eerie.