In 1904, A.P. Giannini, a son of Italian immigrants, founded the Bank of Italy in San Francisco with the vision that banks should serve more than the fortunate few.
In 1906, the great San Francisco earthquake gave him the opportunity to make his vision a reality. Rushing into the shattered city, he managed to have $80,000 in gold loaded onto a horse cart covered with vegetables before fire consumed the bank building. Other banks' vaults would be too hot to open for weeks.
He was open for business the next day at a makeshift desk in North Beach, offering to lend money "on a face and a name." Offering loans of $10 to $300 to anyone who had a job, Giannini convinced those in the working class that they should turn their tin cans of savings over to his bank.
Giannini later popularized home mortgages, auto loans, and other pioneering forms of consumer credit. His renamed Bank of America became the largest bank in the world and, a few years after his death in 1949, introduced the another new concept: the credit card. Personally, I signed up for my BankAmericard in 1965, while living and working in the San Francisco Bay Area, and it is still my primary credit card.
Over the last few decades, the US has transformed from a "real economy" (where capital market manias tend to be contained by the availability of savings and credit) to a "financial economy" where the unlimited availability of credit leads to speculative bubbles (read: the roaring '20s & '90s) which get totally out of hand.
Today
More than 1.3 million of the bank’s customers are behind on their home loans, all 50 state attorneys general are investigating the industry’s foreclosure practices and Bank of America has become a leading symbol of the mortgage mess.
When the founder of WikiLeaks, Julian Assange, bragged late last month that his group was about to “take down” an American bank with a mother lode of damaging insider documents, the scuttlebutt on Wall Street quickly turned to Bank of America, sending its shares down more than 3 percent in a day.
“Many investors are trying to put their arms around Bank of America’s problems and have been left fluttering in the wind,” says Mike Mayo, a bank analyst with Crédit Agricole in New York. “The company hasn’t given investors much assurance or confidence. It’s like they’re in the twilight zone.”
The problem facing Bank of America is stunning, both on an economic and on a human scale. Among its 14 million mortgage customers, nearly 1 in 10 is past due. Another 190,000 have not been able to make a payment in at least two years, and one-third of the homes facing foreclosure are vacant, making them harder to maintain and sell. Dealing with customer service, many homeowners say, is frequently infuriating.
A report that the Moody’s Corporation issued on Thursday found that, when it comes to resolving delinquent subprime loans, Bank of America had taken longer than the other six major servicers examined.
“Bank of America has a lot more to clean up than any other servicer or lender,” says Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. “And customers find themselves facing a bureaucracy where it’s hard to get answers, hard to understand what they’re telling you and certainly hard to get solutions.”
Countrywide has already cost Bank of America more than $5 billion in write-offs.
Countrywide also saddled Bank of America with many more homeowners in default than its system could possibly handle. The overload contributed heavily to the consumer abuses and dubious legal practices that led it to halt foreclosures across the country in October, after the news media, courts and regulators began questioning the bank’s operations.
Bad as the foreclosure mess has been for Bank of America’s reputation, Wall Street analysts say a bigger financial threat is looming: what if Bank of America and other giants are forced to buy back a portion of the hundreds of billions in mortgages gone bad?
Bank of America's Public Relations Defensive Move
The Wall Street Journal reported on December 23rd that in recent days, at least 439 Internet domain names that are critical of the bank’s top officials were taken off the market.
The registrations of the domain names, which include imaginative swipes at the bank’s CEO, such as BrianMoynihanBlows.com and BrianTMoynihanSucks.net, effectively stop BofA-haters from slamming the bank’s top executives and directors –- or at least blocks any slams using a couple of very specific pejoratives.
The Web addresses weren’t registered in Bank of America’s name, but by a company called MarkMonitor, according to domain research service WhoIs. MarkMonitor bills itself as a strategist for protecting corporate brands, and it is among the handful of firms that buy Internet addresses on behalf of big companies, according to domain-registration experts. MarkMonitor previously has registered domain names for Facebook and Apple, among other big companies.
Josh Bourne of FairWinds Partners, which advises companies on their digital brands, said companies can spend hundreds of thousands of dollars to $1 million a year on “defensive” registrations to help keep a lid on websites that may trash the company, or misdirect people to fraudulent Internet sites. Companies “are definitely not trying to close every doorway, which is impossible,” Bourne said. “But you can close some of the most important doors” to criminal behavior or just plain corporate nastiness, said Bourne about the defensive registration of Web addresses.
Safest U.S. Banks
Most of us think the term "deposits" mean funds that you deliver to the bank for safekeeping, but for nearly 200 years, the courts have sanctioned an interpretation of the term "deposits" to mean a loan to your bank.
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Source: The New York Times, December 12, 2010