Bank of America Review - Big Bank Can Bring in Customers - Can it Keep Them?

Bank of America, headquartered in Charlotte, North Carolina is a banking giant. As a big bank, second in holdings only to JP Morgan Chase, Bank of America attracts many customers because of the vast number of locations and the huge offering of services of products. Some customers seek out big banks like Bank of America for the feeling of security; others become customers by default as Bank of America gobbles up other institutions like Merrill Lynch and FleetBoston Financial Corp. Many customers are drawn to the competitive rates of Bank of America and others are lured in by special online deals and gifts. So Bank of America now has over 53 million customers including individuals and businesses but are Bank of America customers "happy customers?'

Bank of America's Comprehensive Products are a Plus

Bank of America is no doubt a full service bank offering about any financial product a banking customer could desire including checking accounts, savings accounts, home loans, school loans, car loans, business loans, certificates of deposit, credit cards, brokerage services and much more.

Bank of America's Customer Service Options:

Bank of America has branches in most medium to large cities in the United States. They also have a website, bankofamerica.com, for account access and bill pay. The website also offers a myriad of customer service phone numbers.

Can Customers have a "Happy Meal" at a Super-sized Bank?

Most customers are happy with the selection of products offered by Bank of America. Those with good credit have found it easy to get competitive rates. Many have taken advantage of temporary low rates, made at least the minimum payments on time and paid off the balance before the rate skyrocketed. These are the happy customers.

While the products are vast and the rates are competitive, many customers share the same stories of customer service frustrations. Unhappy customers are blasting away in forums about negative experiences with phone calls to Bank of America customer service reps.

Our own experiences with Bank of America have included phone calls resulting in long holds, many transfers, unresolved questions and customer service reps that seem to want to pass us off.

On the other hand, our experiences with the Bank of America web site have been favorable. It is easy to access, easy to use and fast.

Bank of America also offers many cash incentives to bring in new customers. As with all fine print, with Bank of America you'd better read it carefully. For example, a $50.00 cash gift for opening a new account will only be made 50 days later and sometimes standard fees reduce the "gift" before you ever get it.

Bank of America recently announced Brian Moynihan as the new CEO. Moynihan admits, "We have a lot of work to do, and I'm ready."

Bank of America has an impressive number of services and products but unfortunately, many customers just feel like a number, and not a very high one, when dealing with this big bank.

Bank of America boosting credit card rates

Again. This time the letters have gone out to cardholders who carry a balance on accounts with an interest rate below 10%.

They’ll see their interest rate increased “to the low- to mid-teens” in their June statements, according to spokeswoman Betty Riess.

Bank of America says it has to do this because the cost of providing
credit has significantly increased. “In the current environment, the portion of the portfolio that’s under 10% is underpriced relative to current market conditions,” Riess told us.

Really? The Federal Reserve is flooding banks with cheap money and CD rates are pathetic. So it’s hard to imagine that the cost of raising money is the problem.

A rising default rate is the only reason Bank of America’s costs could be going up. And if it that’s the problem, then what does it think will happen when it imposes higher rates on customers who are carrying a balance?

Cause more defaults, perhaps?

Of course Bank of America isn’t the only credit card provider raising rates.

Citigroup. JP Morgan Chase. American Express. They’re all doing it. Even stores like Target are increasing their credit card rates.

But that doesn’t mean you have to accept a rate increase.

Customers can opt out by notifying Bank of America in writing or by phone using the contact information provided in the rate increase notification letter.

You can then pay off your outstanding balance at your existing rate, but the account will be closed and you can’t make any additional charges on the card.

If you make just one purchase, or allow one automated charge from your gym or parking garage, then you’ve accepted the new terms, voiding whatever you may have done to opt out.

Another option is move that debt to another credit card offering a good rate on balance transfers.

Check out, for example, the Pulaski Bank Visa card’s great deal — no balance transfer fee and 0% interest for 6 months.credit has significantly increased. “In the current environment, the portion of the portfolio that’s under 10% is underpriced relative to current market conditions,” Riess told us.

Really? The Federal Reserve is flooding banks with cheap money and CD rates are pathetic. So it’s hard to imagine that the cost of raising money is the problem.

A rising default rate is the only reason Bank of America’s costs could be going up. And if it that’s the problem, then what does it think will happen when it imposes higher rates on customers who are carrying a balance?

Cause more defaults, perhaps?

Of course Bank of America isn’t the only credit card provider raising rates.

Citigroup. JP Morgan Chase. American Express. They’re all doing it. Even stores like Target are increasing their credit card rates.

But that doesn’t mean you have to accept a rate increase.

Customers can opt out by notifying Bank of America in writing or by phone using the contact information provided in the rate increase notification letter.

You can then pay off your outstanding balance at your existing rate, but the account will be closed and you can’t make any additional charges on the card.

If you make just one purchase, or allow one automated charge from your gym or parking garage, then you’ve accepted the new terms, voiding whatever you may have done to opt out.

Another option is move that debt to another credit card offering a good rate on balance transfers.

Check out, for example, the Pulaski Bank Visa card’s great deal — no balance transfer fee and 0% interest for 6 months.

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Recent reports state that Bank of America has decided to give Florida a sizable chunk of change in an effort to relieve its foreclosures. The amount of $10.7 billion represents 6.4% of Bank of America's total amount loaned in its distribution program. The purpose of the money is to help sustain economic development and relief programs to benefit both small businesses and consumers alike. The distribution ultimately looks to generate jobs and general morale in the midst of a housing market in ruin, and will hopefully see a drop in Florida foreclosures.

Although Florida foreclosure numbers dropped in April, REO foreclosure numbers were on the upturn. Strangely enough, REOs were down only the month before. On a state-by-state basis, Florida remains one of the top in terms of foreclosures (third place in April, fourth in March, respectively). Meanwhile, states such as California are actually dropping in rank in terms of state foreclosure property numbers (from second to fourth).

Most of the money allocated by Bank of America is going to South Florida due to the fact that the area is hitting record numbers of distressed properties within the state. $3.8 billion has been given to the area, representing about 35.5% of the total amount distributed. Within South Florida, Miami saw the largest chunk of change with $1.5 in an attempt to relieve Miami foreclosures. Most of South Florida's foreclosure numbers come from condos, with state government attempting to pass legislation to aid such areas.

In short, the Bank of America cash is looking to give the state some large-scale relief, creating jobs and providing some overall recovery.

The Tobin Tax - Making Wall Street Pay Its Fair Share

"Regular people know that they got done in by excesses on Wall Street, and they see a Democratic administration shoveling trillions of dollars to the same Wall Street banks that caused the mess.... What is overdue is a little bit of populist retribution against the people who brought down the system - and will bring it down again if the hegemony of the traders is not constrained."

--Economist Robert Kuttner

In the midst of the worst recession since the Great Depression, Goldman Sachs is having a banner year. According to an October 16 article by Colin Barr on CNNMoney.com:

"While Goldman churned out $3 billion in profits in the third quarter, the economy shed 768,000 jobs, and home foreclosures set a new record. More than a million Americans have filed for bankruptcy this year, according to the American Bankruptcy Institute. A September survey of state finances by the Center on Budget and Policy Priorities think tank found that state governments faced a collective $168 billion budget shortfall for fiscal 2010. Goldman, by contrast, is sitting on $167 billion in cash...."

Barr writes that Goldman's "eye-popping profit" resulted "as revenue from trading rose fourfold from a year ago." Really. Revenue from trading? Didn't we bail out Goldman and the other Wall Street banks so they could make loans, take deposits, and keep our money safe?

That is what banks used to do, but today the big Wall Street money comes from short-term speculation in currency transactions, commodities, stocks, and derivatives for the banks' own accounts. And here's the beauty of it: the Wall Street speculators have managed to trade in practically the only products left on the planet that are not subject to a sales tax. While parents in California are now paying 9% sales tax on their children's school bags and shoes, Goldman is paying nothing to sustain its gambling habit.

That helps explain Goldman's equally eye-popping tax bracket. What would you guess - 50%? 30%? Not even close. In 2008, Goldman Sachs paid a paltry 1% - less than clerks at WalMart.

SPEEDING TICKETS TO SLOW DAY TRADERS?

All this suggests a tidy way we the people could recover some of their billions in bailout money. The idea of taxing speculative trades was first proposed by Nobel Prize winning economist James Tobin in the 1970s. But he acknowledged that his proposal was unlikely to be implemented, because of the massive accounting problems involved. Today, however, modern technology has caught up to the challenge, and proposals for a "Tobin tax" are gaining traction. The proposals are very modest, ranging from.005% to 1% per trade, far less than you would pay on a pair of shoes. For ordinary investors, who buy and sell stock only occasionally, the tax would hardly be felt. But high-speed speculative trades could be slowed up considerably. Wall Street traders compete to design trading programs that can move many shares in microseconds, allowing them to beat ordinary investors to the "buy" button and to manipulate markets for private gain.

Goldman Sachs admitted to this sort of market manipulation in a notorious incident last summer, in which the bank sued an ex-Goldman computer programmer for stealing its proprietary trading software. Assistant U.S. Attorney Joseph Facciponti was quoted by Bloomberg as saying of the case:

"The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."

The obvious implication was that Goldman has a program that allows it to manipulate markets in unfair ways. Bloomberg went on:

"The proprietary code lets the firm do 'sophisticated, high-speed and high-volume trades on various stock and commodities markets,' prosecutors said in court papers. The trades generate 'many millions of dollars' each year."

Those many millions of dollars are coming out of the pockets of ordinary investors, who are being beaten to the punch by sophisticated computer programs. As one blogger mused:

"Why do we have a financial system? I mean, much of its activity looks an awful lot like gambling, and gambling is not exactly a constructive endeavor. In fact, many people would call gambling destructive, which is why it is generally illegal....

"What makes Goldman Sachs et. al. so evil is that they offer vast wealth to our society's best and brightest in exchange for spending their lives being non-productive. I want our geniuses to be proving theorems and curing cancer and developing fusion reactors, not designing algorithms to flip billions of shares in microseconds."

Gambling is an addiction, and the addicted need help. A tax on these microsecond trades could sober up Wall Street addicts and return them to productive labor, and transform Wall Street from an out-of-control casino back into a place where investors pledge their capital for the development of useful products.

THE TOBIN TAX GAINS MOMENTUM

Various proposals for a Tobin tax have received renewed media attention in recent months. President Obama gave indirect support for the idea in a Press briefing on July 22, when he recommended that the government consider new fees on financial companies pursuing "far out transactions". UK Prime Minister Gordon Brown, who has resisted pushes for a Tobin tax in the past, said at the G20 meeting in Scotland on November 7 that a tax on financial trading could prevent excessive risk-taking and fund future bank rescues. It "cannot be acceptable," he said, that banks enjoy the rewards of their successful trades yet leave taxpayers to pick up the cost of their failures. Governments spent more than $500 billion in the past year bailing out banks. U.S. Treasury Secretary Tim Geithner opposed the tax, but the fact that it was being seriously considered was a major development. The French finance minister said, "It's not so exotic and it even seems reasonable."

In the U.S., a bill called "Let Wall Street Pay for Wall Street's Bailout Act of 2009", proposing to tax short-term speculation in certain securities, was introduced by Rep. Peter DeFazio (D-OR) last February; and a different bill to regulate derivative trades was approved by the Financial Services Committee in October. Derivatives are essentially bets on whether the value of currencies, commodities, stocks, government bonds or virtually any other product will go up or down. Derivative bets can cause shifts in overall market size reaching $40 trillion in a single day. Just how destabilizing short-term speculation can be -- and just how lucrative a tax on it could be -- is evident from the mind-boggling size of the market. The Bank for International Settlements estimates that in 2008, annual trading in over-the-counter derivatives amounted to $743 trillion globally - more than ten times the gross domestic product of all the nations of the world combined. Another arresting fact is that just five super-rich commercial banks control 97% of the U.S. derivatives market: JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co.

Promoters of international development have suggested that a mere.005% tax could raise between $30 billion and $60 billion per year, enough for the G7 countries to double international aid. Other proponents favor the larger 1% tax originally proposed by James Tobin. The much-needed income from a U.S. tax could be split between federal and state governments.

PROS AND CONS

Opponents of the tax, led by the financial sector, argue that it would kill bank jobs, reduce liquidity, and drive business offshore. Supporters respond that Tobin tax profits could be used to create new jobs, and that while the speculative market would shrink, the small size of the tax would hardly affect overall cash flows. More than raising money, the tax could be an effective tool for discouraging short-term traders, who often make money on very small margins. Dani Rodrik, Professor of Political Science at Harvard, writes:

"The beauty of a Tobin tax is that it would discourage short-term speculation without having much adverse effect on long-term international investment decisions. Consider, for example, a tax of 0.25% applied to all cross-border financial transactions. Such a tax would instantaneously kill the intra-day trading that takes place in pursuit of profit margins much smaller than this, as well as the longer-term trades designed to exploit minute differentials across markets.... Meanwhile, investors with longer time horizons going after significant returns would not be much deterred by the tax."

Besides technical questions about how to implement the tax internationally, the offshore argument probably presents the most serious challenge. Should a Tobin tax pass in the U.S., investors would be likely to move to other markets beyond its reach. The U.S. could penalize traders for doing business abroad, but governments in major markets like Germany and London would no doubt need to endorse the tax for any meaningful shift to be seen. Some experts have argued that the Tobin tax would be best implemented by an international institution such as the United Nations. But other observers see any international tax as a move toward further strengthening the power of the global financial oligarchs. Just the fact that the United Nations, the G20, and the Bank for International Settlements are discussing this option, however, suggests that we the people need to jump in and stake out our claim, before we lose the proceeds to international bodies controlled by global bankers. The tax needs to be collected by the U.S. Treasury and go into U.S. coffers. It needs to reach Main Street, where it can be used to stimulate local business and investment.

Officials from the International Monetary Fund insist that implementing a Tobin tax would be logistically impossible. But Joseph Stiglitz, a Nobel Prize winning economist and former World Bank leader, disagrees. In Istanbul in early October, he said that a Tobin tax was not only necessary but, thanks to modern technology, would be easier to implement than ever before. "The financial sector polluted the global economy with toxic assets," he said, "and now they ought to clean it out."

Economist Hazel Henderson proposes a computerized system for imposing a graduated tax that is designed to kill "bear raids" (organized attacks by short sellers). Bear raids directed at vulnerable currencies have been known to collapse whole economies. She writes:

"Such a currency exchange tax would be simple to collect using a computerized system, which can be installed on trading screens, such as the Foreign Exchange Transaction Reporting System (FXTRS). This system operates like an electronic version of Wall Street's venerable 'uptick rule'... to curb naked short-selling. The FXTRS computerized uptick rule would gradually raise the tax up to a maximum of 1% whenever a bear raid starts attacking a weak currency. Such bear raids are rarely to 'discipline' a country's policies, as traders claim, but rather to make quick profits."

Henderson notes that world economies have become so interlinked that such win-lose strategies are no longer sustainable:

"In systems terms, the global economy, by virtue of its real-time technological inter-linkages, has become a de facto global commons, a common resource of all its users. Such commons require win-win agreements, rules and standards applicable to all users. If normal competitive behavior (win-lose) continues, the result is lose-lose as competition between players leads to sub-optimization and the system itself absorbs risks and eventually can break down, as witnessed in the current crisis."

The financial rescue operations to date have been win-lose, with Main Street being sacrificed at the altar of Wall Street. Some 48 states have faced budget crises in the past year, forcing them to cut libraries, schools, and police forces, and to raise taxes on income and sales. A sales tax on the exotic financial products responsible for precipitating the economic crisis could help level the playing field and put some points on the populist side of the scoreboard.