Bank of America - Merrill Lynch Merger

[atlrvr]

Advertising is good, can't run a business without advertising. If they were advertising rates on loans, then even better, as that would indicate they are trying to drive demand for loans they were unwilling to make until the bailout.

[gman430]

Advertising is good, can't run a business without advertising. If they were advertising rates on loans, then even better, as that would indicate they are trying to drive demand for loans they were unwilling to make until the bailout.

That's true, but where are they getting the money to advertise? I thought they said they needed billions from the taxpayers to stay out of bankruptcy. Interesting how they have money for advertising but don't have the money to stay in business. Oh and the newspaper ad I saw this morning was a message from the company about how they plan to stay in business and not go bankrupt. Nothing about getting a loan from what I saw.

[atlrvr]

Advertising is part of staying in business. As far as where are they getting this money from? From cash on hand. It's not like TARP dollar bills have been marked with a special pen to know which dollar goes where. BofA certainly had cash before, and probably wasn't advertising much, if their intent before TARP was to make few loans. They will obviously spend money on neccesary operating expenses needed to drive customers to get loans (EDIT, or it sounds like preventing a run on deposits), now that it has been given the cash needed.

I mean we could criticize them for not shuttering every branch and firing all the staff too, as they aren't really that necessary when you have deposit via ATM and loan applications on-line, but that wouldn't make much business sense either.

Now, for them putting naming rights on Yankee Stadium, I think there is a fair argument that is too far, but I could be convinced otherwise with some nifty charts and statistics that have proven similar expenditures to be revenue positive.

[monsoon]

Advertising is part of staying in business. As far as where are they getting this money from? From cash on hand. It's not like TARP dollar bills have been marked with a special pen to know which dollar goes where. ...

This isn't a question on advertising to stay in business because normal business processes and assumptions no longer apply to BofA. The public now views this company as one views a cancer to the body and because of that, they risk being put out of business. Some of this is undeserved but the vast majority of the anger towards BofA is due to their own sorry actions of late. So anything they do, especially in terms of advertising should be tempered with that in mind. I am assuming they are not because there is still a gross level of incompetence, cluelessness or arrogance behind the decisions that continue to be made by this bank that keep putting it in a negative light. The fact that a post was made here about an advert in the paper is testimony to that.

The public believes that banks such as BofA have misused TARP and BofA needs to do everything it can to keep re-enforcing that image. Full page adverts and naming rights on professional sports stadiums don't do that. Then bank needs to learn when it is time to go hide under a rock and hopefully wait this out instead of keeping it's name in the press in a very negative way.

[monsoon]

In listening to Obama's speech tonight and seeing the standing ovation that he got to his comments on banking, I get the impression that bankers have become the new pariahs of American society. And if bankers are pariahs then investment bankers and anyone associated with the big bailed out banks are especially deserve contempt for what they have done to the economy. This may or may not be deserved, but it was the impression that I got in the description from his speech. I get the feeling there is new regulation coming down the pipeline that banks have never seen before and which will fundamentally change it.

It has come out today, that another TARP bank has been caught throwing lavish parties at the Ritz in Chicago. Something to do with the Northern Trust (bank) golf tournament. The bank has said it is marketing. In response, Barney Frank said today that banks have no business doing marketing when they won't make loans. He also added that they added a provision in the stimulus package that allows any TARP bank to give all the money back. In other words if they don't like the government interfering in their business activities, then give all the TARP money back. So far, there are no takers.

[rockhilljames]

So in essence, the government leaned on Banks and financial institutions to make risky loans, didn't enhance regulation at all when the real estate bubble continued to build, and then lambasted the banks when the bad loans went into forfeit.

Now those same legislatures are mad that the banks have tightened the loan process and are mad that they still engage in activities that almost all major institutions do.

Brilliant. Of course they're pointing their fingers at the banks, they don't want to shoulder any of the blame themselves.

[monsoon]

^I realize you believe this mess was caused by lending money to poor people, but the vast majority of the problem has come from two things. First it was the real estate investment market. Go to Miami if you want to see what I am talking about. (opps, there is 210 Trade and The Park if you don't want to travel) Second was the business of financing loans that were never meant to be repaid. They were meant to be re-financed. Hence more fees and the loans could be packaged and resold for huge potential profits, and no interest for home buyers. The problem with this is that when home prices fall, that scheme falls apart. The government did not push the banks for get into either market but it is a huge part of the problem. It was the Gramm Leach Bliley Act that made this possible. I do admit the government was very remiss in removing regulation but the bankers said they needed this to compete in the open market. Now the pendulum swings back the other way.

[49er]

I don't think people are just mad at the banks. Those were POLITICIANS giving the standing ovations, not the American public.

To be completely honest, most people I know are more irritated at their irresponsible neighbors for buying homes they couldn't afford, running up credit cards, buying cars they couldn't afford, using their homes as atms, etc. The notion that the responsible among us gets nothing from the bailout and have to shoulder the burden of the idiots who made bad choices is what really grinds most peoples gears.

[monsoon]

^Obama gets 80% positive in the polls of this speech last night. It's an amazing number.

[monsoon]

My niece who is a school teacher in SC, has good credit, and isn't likely to lose her job went to BofA last December to get a Ford Focus financed. This is someone doing all the right things looking to buy an auto made in America by an American company. She went to her local BofA branch and was told they didn't handle loans such as this in the branch, she would have to go to their website. So she goes to the website and submits the application and gets back a notification they were not making loans of this type at this time. This is a bank that got $25B from the government to do such things. She of course, and rightly so gets pissed off as she has had an account with them for years. Her next step was to go to to a credit union. The immediately said she was more than qualified, pre-qualified her, and even helped in dealing with a rather difficult Ford dealer. It was a huge difference. She has since closed her BofA account. It is this type of crap as to why BofA is failing and why it deserves to have the hammer brought down on it by the government. IMO.

[rockhilljames]

^I realize you believe this mess was caused by lending money to poor people,

You hate it when people put words into your mouth so stop putting them in mine. That's not what I said nor what I believe. It was, however, a contributing factor. A majority of the bad assets in the sub-prime mess are loans given out to people that had NO business getting them. There's a reason Fannie Mae and Freddy Mac were at the forefront of this. We had (and to an extent still have) a culture of widely speculative loans that ran the gamut of economic spectrums. There is plenty of blame to go around, I'm just angry that the politicians are painting bullseyes on other people without looking at what they've done (and are doing) as well.

[atlrvr]

My niece who is a school teacher in SC, has good credit, and isn't likely to lose her job went to BofA last December to get a Ford Focus financed. ... Her next step was to go to to a credit union. The immediately said she was more than qualified, pre-qualified her, and even helped in dealing with a rather difficult Ford dealer. It was a huge difference. She has since closed her BofA account. It is this type of crap as to why BofA is failing and why it deserves to have the hammer brought down on it by the government.

This is a good example of the disadvantages to a large financial institution such as BofA, or Wells Fargo, or Citi. They are too big to have taylor made products for the average customer, and have since given up underwriting individuals, and really underwrite statistics. On the positve, someone who lives in Charlotte and does business in NY or LA can walk into a bank to resolve and issue, or use their ATM free of charge, or have access to supposedly highly skilled money managers.

I think the big banks serve a decent function for certain slices of Americans, but certainly someone who has basic financial needs would be served much better by a small, local bank or credit union.

[rockhilljames]

Agree. I just refinanced my van and didn't even approach our bank (Wachovia/Wells). Went straight to the three credit unions I bank with as well and let them fight it out. Got two points lower than what I was paying and will have it paid off a year early.

[monsoon]

.. They are too big to have taylor made products for the average customer, and have since given up underwriting individuals, and really underwrite statistics. ...

I am not sure how a car loan would be considered something these banks would not be involved in. They are retail banks after all. Should all these individuals that are too small for them to take notice, move their money out of these institutions too?

This grilling isn't being directed at you as I don't doubt it and it is the reason that it is being said now they are too large to succeed. It's says that the experiment of 25 years ago to allow banks to start crossing state lines so they can grow to their current size as been a complete failure.

Agree. I just refinanced my van and didn't even approach our bank (Wachovia/Wells). Went straight to the three credit unions I bank with as well and let them fight it out. Got two points lower than what I was paying and will have it paid off a year early.

Good for you. I am assuming that none of these institutions needed or received TARP money. Kinda proves my point.

[tiblerbrit]

But online banks run across state lines and are very useful. I get over 3% on my savings account which is much higher than local banks or credit unions can offer.

[atlrvr]

My point about car loans was not that they are a taylor made product, rather that since they are so large, they make blanket decisions, and at the moment, it appears no car loans. This is what I meant they underwrite statistics (car loans generally performing poorly) as opposed to underwriting people (your neice being a responsible person/worthwhile risk).

I guess my point is that there are different sets of rules for different classes of customers at BofA. Unless I had $1M in investible wealth, I wouldn't consider them if I was primarly a local branch customer, as the level of service you receive are greatly different. Even with BB&T that I've banked with primarily my whole life, and gives what I consider strong customer service, treats clients differently. As evidence, I had a very large CD for a period of time with BB&T though really it was jointly held with my parents, and their money. However, whenever I sat down with a relationship banker during the period the CD was in my name, I was treated even better than average, with free perks thrown at me and generally treated with a whole new league of respect.

However, there are times that BofA would make sense for someone living on modest means. For example, I purcahsed a condo in Boston with a 2nd mortgage at Sovereign Bank, primarily because they offered me a better interest rate if I agreed to have payments drafted from a Sovereign checking account. Now that I have relocated back to Charlotte, I am stuck with using Sovereign as my primary bank for checking since I don't want to lose the preferred interest rate. When I recieve checks mailed to me (as opposed to direct deposit), I must now deposit them at BB&T, then wire the money to Sovereign, which costs about $35 a transaction. This is expensive and inconvenient. If I had BofA, I could avoid that hassle, however I avoid them due to poor customer service experiences in the past.

This is an example where bigger could be better for some customers.

[monsoon]

But online banks run across state lines and are very useful. I get over 3% on my savings account which is much higher than local banks or credit unions can offer.

I don't think this would be prevented under the old rules. Prior to the rules being changed that allowed banks to cross state lines, you could always bank with your bank from another state. Obviously the WWW has made this easier. The limitation is that banks could not build branches in other states or own banks in other states. This would effectively limit how large they could get.

[Charlotte_native]

Obviously the WWW has made this easier.

Honestly this has changed most everything regarding the need for a physical branch near you. I have a friend heading back to Iraq soon and I was going to help with some of his local bills (he's been before and we helped before). He doesn't need the help any longer because he can access everything he needs from any computer -- all he needs is a deposit done for him occationally at the branch. State lines obviously don't matter a whole lot if being half a world away in a war zone doesn't.

[swh1972]

I am assuming that none of these institutions needed or received TARP money. Kinda proves my point.

As recently as last week, the Credit Union National Association was apparantly considering seeking access to TARP funds. I am not sure of the ultimate result of this, but thought it was relevant to this discussion.

[monsoon]

I usually don't like to post links to articles but I find this article to be a fascinating explanation of the disaster in banking we are seeing now. If you believe it, then it would also explain the utter futility in the attempts so far to fix it. And I am talking about the $1 Trillon+ of tax money that has been dumped into the system.

It's a problem that could have never happened to the scale that it has, if banking had not been allowed to consolidate into a few very large corporations.

[Charlotte_native]

I know this is off topic (not BofA or Merrill), but what happened to the big boys was spelled out to me very easily a month or two ago. A group I work with had been seeking funding for a big (to them) project (small in reality) that they just couldn't get anyone to fund. They are good credit folks, good credit company, with plenty of reserves. The big banks were willing to take applications that they quickly turned down -- seemingly as if they knew they would from the start but still went through the motions. We had a two hour meeting with all principals and the CFO of a small local, locally funded, bank. He ended up discussing why they were in great shape and why the big boys were reeling. The lesson I've taken from this is stay small, and stay local. I've seen how protective the big banks have become after their own mistakes, and how it is, IMO, keeping us in the predicament we are in. Little local bank funded them -- made some cach, my folks did too, all a happy ending.

Like many, I'm very jaded to the big banking community. I certainly want them to survive and recover, but only so the rest of us can. As I see it, they are trying to protect themselves so much that they are actually insuring that the problem will continue.

From buyers of single condos to single homes, to small level businesses, to large credit lines, money won't flow which creates what they are trying to avoid -- more foreclosures, more inventory (homes and condos) that won't sell because of lack of financing, more bad debt (because homeowner can't sell so they let the bank take it)...everything just seems to be on pause.

I could go on, but as I see it, and I'm no expert, the banks are their own worst enemies.

[monsoon]

Even the Observer has started to call out Ken Lewis and the BOD for driving this bank into the ground. As I said in the other topic, hell is certainly freezing over. BofA probably isn't real happy about this. I have seen elsewhere that Lewis is sending internal memo about this kind of treatment.

[Commoner]

My niece who is a school teacher in SC, has good credit, and isn't likely to lose her job went to BofA last December to get a Ford Focus financed. This is someone doing all the right things looking to buy an auto made in America by an American company. She went to her local BofA branch and was told they didn't handle loans such as this in the branch, she would have to go to their website. So she goes to the website and submits the application and gets back a notification they were not making loans of this type at this time. This is a bank that got $25B from the government to do such things. She of course, and rightly so gets pissed off as she has had an account with them for years. Her next step was to go to to a credit union. The immediately said she was more than qualified, pre-qualified her, and even helped in dealing with a rather difficult Ford dealer. It was a huge difference. She has since closed her BofA account. It is this type of crap as to why BofA is failing and why it deserves to have the hammer brought down on it by the government. IMO.

So which is it??? Do we get our pitchforks and head to 100 North Tryon and Washington, DC, demanding the fat cats' heads on a plate? Do we ask our dear leaders to crush them while they're vulnerable and already under the public boot?

Or do we acknowledge that if we want to recover anything (or a lot) on the enormous investment already made in these institutions that it will take an effort to understand how to emerge from the morass and an admission that many of the people who are (some rightfully and some wrongfully) villified are the ones who will get our investment through it?

The schizophrenia is cathartic and appeals to the lowest common populist denominator, but is it useful?

Also - if it wasn't for GLBA (one of your favorite whipping boys), you would have seen the bankruptcy of Bear Sterns, Lehman Brothers, Merrill Lynch, Morgan Stanley and Goldman Sachs. The ripple through the "main street" economy would have made September-October 2008 look like a tea party. Investment banks - not just for fat cats and antique commodes.

Do you know why walls between commercial/retail banks, brokerages, insurance and securities underwriters would have made this worse?

[monsoon]

So which is it??? Do we get our pitchforks and head to 100 North Tryon and Washington, DC, demanding the fat cats' heads on a plate? Do we ask our dear leaders to crush them while they're vulnerable and already under the public boot?....

I think I answered that above several times. I even used the pitchfork and tar and feathers analogy myself. Maybe you missed it.

The people didn't like it, but I think last October there was general acceptance that these institutions (the large ones) had to be given the money or the USA faced economic Armageddon. What has happened since then is that while the people were willing, unhappily to make the sacrifice, the bankers in control have appeared to have treated this as an entitlement and have done nothing to even superficially to make it appear that they do care about what happens to people like my niece who was asked to pay taxes to support this institution. BofA was wildly irresponsible for investing $Billions in the Chinese economy after getting $25B in public money and turning around and asking for more. Yet it won't make loans to responsible people here in the USA. It was a very stupid move and this is just one example.

It was an amazing dereliction in corporate duty of these executives, CEOs and BODs who if anything should have immediately taken steps to close down the frivolous spending, and lay the law down inside their corporations these are the new rules for behavior given that we are taking public money and the public doesn't like it. I don't understand how they could not have realized this wasn't going to happen but it has and now they will no doubt pay the consequences for not managing their behavior in regards to how it might be perceived.

So yes in the minds of the people hot tar, feathers and pitchforks are too good for many of these people. Nobody has explained why letting them continue to exist, in their present form, while taking easily a Trillion dollars in public money, is good for anyone but the bankers. The Trillion dollars could have no doubt been spent in other ways that would have done more people good, than it is doing now.

...you would have seen the bankruptcy of Bear Sterns, Lehman Brothers, Merrill Lynch, Morgan Stanley and Goldman Sachs. The ripple through the "main street" economy would have made September-October 2008 look like a tea party. Investment banks - not just for fat cats and antique commodes...

I say good riddance and I think the effects of their failure is way overstated. These places wanted to have free market capitalism so lets let it be dealt with in the free market capitalism way.

[monsoon]

So as you might have seen in the local news, Lewis was summoned to NY State court to testify about the Merrill Lynch bonuses paid out at the end of the year. It sounds as if Thain might have contradicted Lewis's testimony to congress where he said that he had little personal knowledge of it. In addition the Court wants the names of the executives and traders that got the bonuses and both Thain and Lewis are refusing to hand that list to the court. This should be an interesting story to watch.

However, this gets back to the post I made yesterday on perceptions of BofA. I was at a cookout yesterday and the news was on the TV where a lot of the people had sat down to eat. ABC News cut to a story and spent a couple of minutes covering, in detail, Lewis's trip from Charlotte to NYC in the $50M BofA private jet (1 of 9 apparently) and that it was costing $5000/hour to operate. They were there with cameras when he got off the plane. They then made the comparison that a plane ticket from the USAirways Hub to NYC (huge number of flights/day) would have cost $400. The people watching this were incensed and the comments came up "they ought to throw the f**k** bas*a*ds in jail and throw away the key." I won't get into the debate over whether this was warranted or not, but it is an example of what is infuriating the people enough to get out the pitchforks, tar and feathers.

The government today is expected to announce that it is essentially taking control of Citigroup and will have the ability to directly toss out the BOD and the CEO if it chooses.