Raise your hand if you love bureaucracy and red tape.
Yeah… that’s what I thought.
And that right there is another reason several major banks in this country are dead men walking. They are leveraged to the hilt. They’re bursting at the seams with foreclosures. The proprietary trading they relied on, like the manufacturing of sub-prime loans, is a thing of the past. And they have wrapped themselves so tightly in that aforementioned red tape they’re now too inflexible to do what they must to save themselves.
Take Bank of America for instance.
As a bank with essentially two main tasks – lending money and making money – it’s a screaming failure. Because there is little profit in traditional banking right now, banks have tacked on crazy fees to boost their bottom lines. You need look no further than its aborted attempt at a $5/month debit card charge. Just because this one fee was reversed, doesn’t mean that the bank is done with desperate attempts at self-preservation.
If you haven’t already guessed, I banked with Bank of America. I don’t invest in the equity shares of this bank because that would be stupid. FDIC protection – and until recently convenience – are the only reasons I did not jump ship sooner.
However, Bank of America was determined to lose my business.
Signs of Desperation
I pay my bills online, as I’d imagine many of you do too. Let’s face it, I save the price of a stamp and the hassle of the process of physical invoices by doing it this way. Plus, it makes the amounts that go in and out of my checkbook easy to balance.
This system also makes a lot of sense for the bank because it streamlines the payment transfer system. No need to process physical checks with illegible numbers and names. Simply move numbers and decimal points among accounts in the sky and everyone’s happy.
It’s a win-win. Until it isn’t.
Last fall, I used Bank of America’s e-bill pay system to send a check for $150 to my daughters’ school. As it turned out, I only owed $60 so the school kindly returned the physical check to me. Great! Except one thing… I now had a physical check made out to the school.
The thing with e-bill pay is that, when you process a payment to a business, the money is withdrawn from your account two days later, whether the recipient has banked the check or not.
You can see where this is going, right?
So there I sat, with a physical check made out to the school, and the money gone from my account. I emailed the bank to request it credit my account the $150. No response.
Three weeks later I took the check into the bank, only to be told Bank of America didn’t write the check. Northern Trust did. As it turns out, subcontracting physical check generation is the norm in our banking industry.
So there I was, in my bank, with a check I had generated from my bank account, and what I was holding was a check from another bank. Perfect.
The teller tried to help, suggesting I deposit the check back into my account. At first, this worked. My balance increased by $150. Then a week later Bank of America credited my account with $150 as a reversal of the check the school didn’t cash, and I was charged $12 for a returned check.
That, as they say, is when the fight started… the idea that I am charged a fee for money that never left my account is appalling, but it makes sense, because Bank of America is desperate to bring in money. It got into the sub-prime game just in time to pick up huge liabilities from Countrywide… without any profits. It picked up headaches with the purchase of Merrill Lynch. The bank has tremendous unrealized losses on its books in the form of Home Equity loans that will never pay.
Now they’re trying to bleed their customers dry just to survive. First the proposed $5/month debit card charge. Now ridiculous fees for your money to go nowhere. What’s next? A donation box at the door of every branch?
I, for one, am leading the charge away from those too-big-to-fail banks like Bank of America. They’re all dead men walking.