Thursday, January 15, 2009

So Much for Bank of America Using Those Government Bailout Funds for Loans on Main Street

Not too long ago I mused that Bank of America did not do anything with the $25 billion it received in federal bailout capital to help people get good loans (even though they claimed to). And every once in while I get a comment from some banking apologist who tells me that BoA never asked for the bailout money and it was doing fine on its own.

Well, now BofA is asking for more federal bailout money, not for home loans or local developments but to prop an ill-advised purchase they made of Merrill Lynch (on top of the ill-advised purchase they made of Countrywide last year), which turned out to be in worse shape than BoA anticipated. Go figure. According to some, Bling of America "overreached." You don't say. So much for doing fine on their own. And I come to find out that BoA's stock dropped 27% this morning (it is currently down 15%), because of their mounting credit losses. So, if BoA cannot make a free extra $25 billion work, why should we assume that they are doing fine on their own?

If Congress and the White House do give them any more tax revenues, they should come with strings attached, including stipulations that BofA sell off assets to raise money and devote a specific percentage of revenue to home mortgage loans.  BofA should be made to suffer, executive salaries should drop, and heads should roll for the bank's lack of foresight regarding their purchases in the last six months.

UPDATE: Here are some places to start the budget cutting. Give up the naming rights to "Bank of America Stadium" in Charlotte. BofA paid in excess of $100 million for those naming rights. Give up the naming rights to "Bank of America Arena" in Seattle.  BoA paid $9.1 million for those naming rights. I'm not sure how expensive being the "Official Bank of Major League Baseball" or the "Official Bank of NASCAR" are. Naming sporting venues as a means of advertising expense seems like a luxury when your stocks are dropping and you are having to ask for government handouts.

1 comment:

  1. Great points. I just don't understand how a company can possibly be called "too big to fail", if they still need to achieve a level of brand-awareness that requires maintaining the naming rights of TWO stadiums? Why is the government continuing to allow us to be turned upside down and shaken over a barrel to pay for these things when so many of us now need jobs and basic healthcare?