The global banking crisis continues but should we really be worrying about doom and gloom? Not according to Bank of America Chief Executive Kenneth Lewis.
Bank of America (BAC) Chairman and Chief Executive Kenneth Lewis strongly believes that his bank, the largest in the U.S., is successfully navigating the credit crisis.
However, not everyone buys Lewis’ story, even if his bank’s second-quarter results bolster his case. BofA reported earnings of 72¢ per share, down from $1.28 a year ago, but above the 53¢ that analysts were expecting. It’s the latest big bank to beat Wall Street’s low expectations this quarter, following Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC).
I’m not convinced that Bank of America’s recent purchase of Countrywide was a good move. I’m even less convinced that being a customer of Bank of America is a good move. That’s why I recently stopped doing business with the bank. Bank of America operates on a typical big bank model – a model that isn’t friendly to small business customers. The bank gave me a fee free two-year trial when I opened my account. The month after that two-year “grace period” ended the fees started being withdrawn from my business checking account.
Perhaps that is a good business model for Bank of America – they weren’t making any real money off my limited funds. However, if I ever become rich and famous, it’s unlikely I’ll do business with Bank of America again. They left a sour taste in my mouth.
Let’s get back to that Countrywide purchase for a moment. What was Bank of America thinking? I’m not sure.
BofA’s problems in real estate lending are many. Leading the list are home equity loans, hit hard by the drop in home prices. But the biggest challenge for BofA may be its July 1 acquisition of Countrywide Financial. The purchase of the U.S.’s largest mortgage lender is designed to help BofA dominate the mortgage industry in the long term. But in the near term, the Countrywide buyout brings BofA lots of trouble. The quality of Countrywide’s loans is much worse than the loans on BofA’s balance sheet.
In fact, according to the linked article referenced above, Bank of America absorbed $40 billion in problematic loans. In my mind, that’s antoher 40 billion reasons not to give my business to the bank. What do I know though? I’m not smart enough to understand why a quasi private shadow entity runs the U.S. banking system and I haven’t been able to wrap my mind around the concept of fiat currency yet. As far as I can tell, it’s all just made up money.
Maybe someone from the Federal Reserve Bank can drop by this blog and explain to me why our dollar is spiraling downward in value and how we’re not really in economic trouble.