Bank of America angers Democrats, loses billions

Neil Munro White House Correspondent
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Bank of America’s troubled stock took another hit Tuesday as bank industry professionals complained about political grandstanding, following yesterday’s criticism of the bank by top Democrats.

The criticism came after the bank levied debit-card users $5 per month to offset the financial losses caused by Congress’ decision to cap the debit-card fees levied on retailers.

The company’s stock was worth $6.12 a share on Sunday, but fell to $5.50 a share by Tuesday morning. Late on Tuesday, the stock jumped up to $5.75 a share after bank officials announced they would close or sell a money-losing mortgage division. That decision pushed the market cap back up to $62 billion.

In late August, Warren Buffet bought $5 billion worth of company stock at $7.65 a share. That stock has fallen by almost a quarter since then, costing him roughly $1.2 billion.

The stock value has fallen partly because of the new debit card regulations, which will cost the bank roughly $1 billion per year. That loss worsens the company’s already-troubled balance sheet, which still holds many mortgages created during the government-stimulated property bubble.

Wall Street analysts disagree over the bank’s prospects and give it a slightly better than mid-way grade between ‘buy’ and ‘sell’ recommendations.

The bank’s problem were exacerbated by the partial failure of its website on Friday.  On Tuesday, a message posted on the bank’s website said “we’re sorry, our site is running slowly.” The bank is one of the primary employers in Charlotte, N.C., which is expected to be a critical battleground state in the 2012 election.

On Monday, President Barack Obama and Sen. Dick Durbin, the second-ranked Democrat in the Senate, slammed the bank for charging its customers.

Bank industry advocates pushed back Tuesday. “It’s disappointing and puzzling that the President would attack a private corporation for responding to government price fixing that has fundamentally altered the economics of offering a debit card,” said an Oct. 4 statement from Frank Keating, president of the American Bankers Association. “Unfortunately, this proves that whenever government tries to control pricing of a product or service, consumers lose,” he said.

On Monday,  Durbin gave a speech from the Senate in which he urged “Bank of America customers, vote with your feet. Get the heck out of that bank. Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day,” Durbin declared Monday. (RELATED: Dozens arrested at Bank of America headquarters)

The bank levied the new monthly $5 charge after Durbin led a successful effort to enact legislation that curbed banks’ ability to levy debit-card charges on retailers. Once those curbs came into force, the financially strapped bank shifted the levy from retailers’ prices over to customers’ monthly accounts, prompting the political complaints.

Bank officials said the debit card fees levied on retailers have earned it roughly $2 billion per year. The regulatory cap will slash that income by roughly half.

Obama also criticized the bank. “Banks can make money, they can succeed, the old-fashioned way, by earning it by lending to small business and by lending to consumers, by making sure we are building the economy together,” Obama told ABC’s George Stephanopoulos in a Monday afternoon interview.

Obama used the interview to champion more federal oversight of the banking industry, and to urged the Senate to confirm Richard Cordray to head the new Consumer Financial Protection Bureau. (RELATED: Bank of America will slash 30,000 jobs)

“Without those kinds of protections, we’re going to continue to see these kinds of problems,” he said. “If you say to banks, ‘You don’t have some inherent right to get a certain amount of profit if your customers aren’t being mistreated, that you have you have to treat them fairly and transparently,” then some will hopefully get the message, he said.


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