Epiphanyblog

All about ideas…

TBTF Bank Fraud Continues…But the Decision to Put Profits First Is Nothing New

leave a comment »

Matt Taibbi, of Rolling Stone, published a lengthy article on Bank of America’s failure of ethics regarding credit cards accounts. His reporting cites robo-signing abuses, failure to document customer records, and outright fraud. Yet, BofA continues to be protected by our government as a Too Big to Fail bank.

Bank of AmericaHowever, BofA’s malfeasance…and arrogance towards its customers…is neither new nor only a decade long. BofA has a long history of a management that has made poor decisions and expected their regular customers to financially bail out the bank.

Bank of America’s problems began long before the company moved its headquarters from San Francisco to Charlotte, NC. In the early ‘80s, I went to work for one of BofA’s ad agencies – one of many spread around San Francisco. Not long after, BofA found itself in deep financial trouble as a result of overexposure in the California housing market which was undergoing a price decline and an even larger exposure to So. American loans that were failing. BofA was in a panic as their losses mounted, particularly on the So. American loans.

You’d think they would have had some humility about their losses, but instead management became even more arrogant. They began increasing fees on their regular banking customers while at the same time treating those customers with distain. Customers who complained about errors or unknown fees were regularly treated with derision. The attitude was “we’re better than you so go suck a lemon.”

At the same time, BofA decided it could make more money by catering to the wealthy. No longer did their marketing focus on regular banking customers who needed a checking account or a home mortgage or a credit card at reasonable interest rates or a savings account that gave a decent rate of interest return. Bleeding the poor suckers was fine with management if it shored up the bank’s huge losses.

Instead of maintaining Giannini’s record being a bank for average, hardworking families, BofA refocused their moneymaking strategy on Private Banking to attract wealthy customers. They offered wealthy customers a personal banker who was intimately familiar with the customer’s finances; a haute couture private lounge, complete with designer coffee and wine, so their wealthy customers never had to rub shoulders with the riff-raff; and a culture within the bank to make the wealthy feel superior.

Within a year, BofA saw a mass exodus of their regular banking customers. But don’t take my word for it, look up what Charles Schwab said about BofA’s attitudes towards its customers during this time period.

It didn’t take long – a year or so – for BofA to realize the mistake they made in driving off regular, middle income banking customers. Thousands, if not hundred of thousands, of ordinary middle income customers had deserted BofA. As a result, BofA began to court these customers with a vengeance because they realized the bank could not survive without them.

Within a few years, BofA, in its search for every higher profits, became one of the largest credit card offerers, from an insider’s marketer position, in the marketplace because credit cards became enormously profitable – and became the bank’s largest profit center, outstripping anything other product by huge margins.

After the merger which moved BofA’s headquarters to Charlotte, the arrogance of management did not recede. It became worse as management decided their customers were little more than cash cows which the bank could bleed to their hearts’ content…and they used every trick on the books to do so.

But BofA is not alone in this type of thinking or attitude. Each and every one of the TBTF banks is complicit in the same kind of behavior.

I’m sure A.G. Giannini, were he alive today, would mourn what became of his workers’ bank…and deeply ashamed of his bank’s modern day management that chose to put its’ profit over its customers well being.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: