For want of a nail the shoe was lost; for want of a shoe the horse was lost; for want of a horse the rider was lost; for want of a rider the battle was lost; for want of a battle the kingdom was lost.
Is it possible after all the trouble Bank of America has found themselves in, the final nail in their coffin will be a $5 per month debit card fee?
When Bank of America acquired Countrywide Financial the pundits said it was a match made in heaven.
Well, I sure hope heaven never looks like this.
From robo-signings to subprime chaos, the acquisition trail has proven much more harmful than good.
TARP provided temporary relief; however, it also exposed the inadequate capital dilemma that BAC and others banks experienced, all as the credit crisis surged rapidly forward.
Sales of worldwide credit card divisions and prior foreign bank acquisitions gave some relief to the capital pressure, but apparently, not enough help.
As lawsuit upon lawsuit mounted from attorney generals, counterparties, and individuals, the pressure for action continued.
Yet, analysts were unrelenting in pronouncing a buying opportunity as the stock fell lower and lower. It was hinted the “powers that be” would never allow BAC to go below $5.
That price would create all sorts of holding requirements, so it would never happen, so they say.
Sale of assets offered one solution to the problem, and, of course, management changes presented yet another way out.
Still, there was no relief in sight.
Finally, as if everything else was not enough, another predicament arose.
According to the Fed, debit card transactions could no longer be charged $0.44 per transaction; it needed to be reduced to $0.22.
Facing a 50% loss of income, BAC’s solution was to impose a $5 monthly fee for utilizing the card, even if it was only used once per month.
Needless to say, it seems that customers were not annoyed or worried by the subprime mortgage shenanigans, multiple lawsuits, or even the liquidation of prime assets. However, when it came to reaching into their pockets for a monthly fee, customers were totally outraged.
This anger could result in a mass withdrawal of deposits, the last thing Bank of America either expected or desired.
As reflected by the current stock valuation, BAC is skating on very thin ice.
The last thing they need is a bank run created by their own greed and stupidity.
Before they acted they should have read the poem “For Want of a Nail.”
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at firstname.lastname@example.org and on Twitter @tatroshow.