Free Essay

Downside to Bank of America

In: Business and Management

Submitted By Cheating33
Words 796
Pages 4
Eric Woodland
Money and Banking

Bank of America Corporation is one of the Big Four banks in the United States servicing as an American multinational banking and financial service institution. It is the second largest bank holding company in the United States by assets and the fifth largest by total revenue. Bank of America operates in all 50 states of the U.S, the District of Columbia and more than 40 other countries. Its retail footprint covers approximately 80 percent of the United States population. It was founded in 1904 as the Bank of Italy until the merger of NationsBank and BankAmerica in 1998. Although Bank of America has had its share of success and the privileged to hold the title of the “Bank of America”; this institution has become less popular with its customers and potential customers. Bank of America leads the big banks in fraud lawsuit settlements. The bank meant to be for the people is now being talked about as one of the nations most scrutinized banks and for good reason.

Bank of America has been under speculation because there is a lot of money that has not been accounted for. For instance, they received a $15 billion bailout in 2008 and a $25 billion taxpayer bailout January 2009 but they still didn’t pay any taxes in 2009 or 2010. Also in 2011 they didn’t pay any Federal income tax and got almost $1 billion from taxpayers. Bank of America has one of the longest corporate rap sheets among Wall Street big banks over the past several years. This bank has billions of dollars to settle in lawsuits, which has caused it to become one of the main contributors to ensuing economic troubles. Bank of America has heavily blamed the economy for layoffs when they have contributed to the high unemployment rates, lying off approximately 30,000 employees. On the contrary, though they insist the high volume of layoffs is a product of the economies state, former CEO Ken Lewis received a $63 million dollar retirement plan. On top of the money that has not been accound for Bank of America has also been accused of charging fees that generate a very high profit for them, rather than reasonable fees that cover cost to provide debit card services. According to a letter to the Bank of America chief Brian Moynihan, from the Consumers Union, the costly fees were employed to generate income to make up for their bad business decisions. Brian Moynihan claims, “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.” In 2012, Bank of America placed a five dollar debit usage fee for its customers with less than $5,000 balance and no mortgage with the bank. This was soon protested and was soon overturned due to the extreme unsatisfactory of numerous customers. Bank of America even had an incident where protestors fighting against the greed and irresponsibility of Wall Street were not allowed to close their personal accounts. Their reponse was “you can not be a protestor and a customer at the same time”

Due to Bank of Americas poor reputation it is hard to enjoy the share price dramatically rising since late 2011 because troubling allegations continue to surface. Like in early 2013 former employees alleged in federal court that Bank of America frequently lied to homewoners who were trying to modify their mortgages under the Home Affordable Mortgage Modification Program. They were told to lie to customers and say that Bank of America had not received documents requested and trial payments that they had in fact receieved. Also employees claim they were rewarded for increasing the number of foreclosures. Bank of America has even had a similar allegation from the Department of Justic, accusing the bank of defrauding investors. A jury in fact ruled that a unit of Bank of America defrauded Fannie Mae and Freddie Mac by selling them tens of thousands of defective mortgages, in which Bank of America agreed to pay 10.3 billion. Bank of America was one of 10 mortgage servicing companies that paid more than 8.5 billion in cash payments and other assistance to help borrowers. The bank agreed to pay almost $42 billion to settle numerous legal disputes from 2010 through 2012. Among the thirty major brands studied in American Banker’s 2013 Survey of bank reputations Bank of America deservingly came in last place. It is shown to have the lowest reputation among its own customers as well as non customers. The Bank accounted for 23% of all complaints filed with the Consumer Financial Protection Bureau over a 16 month period. Compared to the 14% for Wells Fargo and the 11% for JPMorgan.

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