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Showing posts with label Bank of America. Show all posts
Showing posts with label Bank of America. Show all posts
December 2, 2007
August 25, 2007
Fed Bends Rules for Monopolistic Insiders
The bigger they are, the more monopolistic they are, and the more protection they get from the Federal Reserve. What's wrong with this picture in a competitive "free market" economy?
An August 24 CNNMoney.com article, "Fed bends rules to help two big banks" reports:
The Glass-Steagall Act, following the 1929 stock market crash, separated investment and commercial banking. It's claimed that Glass-Steagall worked for many years, but then became "anachronistic" as the financial sector modernized. "Commercial banks watched their market share of U.S. financial assets erode from nearly 50% to less than 32%." "Mutual fund assets grew 24% a year while [commercial bank] deposit growth has averaged just 3.4%." These comparisons in a March 1998 article by Nicole Olmstead Coulter are true, but one has to ask if the "modernization" was all healthy in the first place.
Experience suggests that the so-called "modernization" of laws is actually the rigging of arcane rules with the intent of making profits for the sector funding the lobbyists making the "modernization" pitch, and campaign donations, to the US Congress.
Coulter continues, "Through securitization, investment banks have taken away some of banks' traditional markets." "Increasingly, consumers demanded higher yields on their investments." Which could be followed by, "regardless of any underlying fundamentals." Who doesn't want more return? But should we do so if it is predicted to create boom/bust cycles? One can argue that, while in some ways securitization is beneficial, the greed-driven market is designed to drive "securitization" to the brink, as we are now witnessing the effects of runaway morgtage securitization. Cow manure has legitimate value as fertilizer and soil enhancement. Imagine warehouses of bullshit bundled and used as collateral for bonds (it probably exists).
The larger point is, however, that huge commercial banks can become huger if allowed to enter the brokerage business. In 1987, banking laws (Section 20) were changed to allow commercial banks to have subsidiaries that could offer investment services. By 1997, banks had successfully lobbied Congress, and Clinton, to allow banks to underwrite up to 25% of the subsidiaries' revenues. This "essentially wip[ed] out barriers toward bank acquisition of investment banks and securities firms," according to Coulter.
The merger and acquistion flood gates opened. The consolidation reduced diversity in the market place. The big banks accumulated more influence over the market, until ... they began influence the market, and that by text book definition is monopolistic. To help mitigate this, a limit on funding is still supposed to exist between commercial and brokerage operations. But, today's fiscal crisis is so bad, the Fed just bent the rules, proving my point. They can't let the big ones fail, because they too strongly influence the market.
The little ones? Too bad; the market isn't rigged to help the little guys. It isn't really a free market, and we all know it. A growing question is, given that the market is rigged, why don't we rig it to generate broader benefits rather than to enrich a few?
Sources:
CNNMoney.com article, "Fed bends rules to help two big banks", August 24, 2007.
Registered Rep, "Bank/Brokerage Marriages," Nicole Olmstead Coulter, March 1, 1998,
An August 24 CNNMoney.com article, "Fed bends rules to help two big banks" reports:
August 20 letters from the Fed to Citigroup and Bank of America state that the Fed... has agreed to exempt both banks from rules that effectively limit the amount of lending that their federally-insured banks can do with their brokerage affiliates.
The Glass-Steagall Act, following the 1929 stock market crash, separated investment and commercial banking. It's claimed that Glass-Steagall worked for many years, but then became "anachronistic" as the financial sector modernized. "Commercial banks watched their market share of U.S. financial assets erode from nearly 50% to less than 32%." "Mutual fund assets grew 24% a year while [commercial bank] deposit growth has averaged just 3.4%." These comparisons in a March 1998 article by Nicole Olmstead Coulter are true, but one has to ask if the "modernization" was all healthy in the first place.
Experience suggests that the so-called "modernization" of laws is actually the rigging of arcane rules with the intent of making profits for the sector funding the lobbyists making the "modernization" pitch, and campaign donations, to the US Congress.
Coulter continues, "Through securitization, investment banks have taken away some of banks' traditional markets." "Increasingly, consumers demanded higher yields on their investments." Which could be followed by, "regardless of any underlying fundamentals." Who doesn't want more return? But should we do so if it is predicted to create boom/bust cycles? One can argue that, while in some ways securitization is beneficial, the greed-driven market is designed to drive "securitization" to the brink, as we are now witnessing the effects of runaway morgtage securitization. Cow manure has legitimate value as fertilizer and soil enhancement. Imagine warehouses of bullshit bundled and used as collateral for bonds (it probably exists).
The larger point is, however, that huge commercial banks can become huger if allowed to enter the brokerage business. In 1987, banking laws (Section 20) were changed to allow commercial banks to have subsidiaries that could offer investment services. By 1997, banks had successfully lobbied Congress, and Clinton, to allow banks to underwrite up to 25% of the subsidiaries' revenues. This "essentially wip[ed] out barriers toward bank acquisition of investment banks and securities firms," according to Coulter.
The merger and acquistion flood gates opened. The consolidation reduced diversity in the market place. The big banks accumulated more influence over the market, until ... they began influence the market, and that by text book definition is monopolistic. To help mitigate this, a limit on funding is still supposed to exist between commercial and brokerage operations. But, today's fiscal crisis is so bad, the Fed just bent the rules, proving my point. They can't let the big ones fail, because they too strongly influence the market.
The little ones? Too bad; the market isn't rigged to help the little guys. It isn't really a free market, and we all know it. A growing question is, given that the market is rigged, why don't we rig it to generate broader benefits rather than to enrich a few?
Sources:
CNNMoney.com article, "Fed bends rules to help two big banks", August 24, 2007.
Registered Rep, "Bank/Brokerage Marriages," Nicole Olmstead Coulter, March 1, 1998,
June 20, 2007
Google Searches of B of A Credit Card Scam
I'm struck by the number of people who search for the phrase "Bank of America Credit Card Scam" on Google. How do I know their searching? They hit my blog post and I track my traffic. Here's a typical search string:
What's more surprizing, although a fair number of my blog posts come up in the top-ten for Google searches, try lebanon damage 2006, this B of A blog post doesn't come up very high. To me, that implies that even more people must be searching for "Bank of America credit card scam" than those that reach my site (most people don't look too far past the first page or two of their google search results before trying another search string.
It would seem that B of A has a credit card scam problem.
www.google.be/search?hl=nl&q=BofA scam on finance charges&meta=
What's more surprizing, although a fair number of my blog posts come up in the top-ten for Google searches, try lebanon damage 2006, this B of A blog post doesn't come up very high. To me, that implies that even more people must be searching for "Bank of America credit card scam" than those that reach my site (most people don't look too far past the first page or two of their google search results before trying another search string.
It would seem that B of A has a credit card scam problem.
March 30, 2007
Bank of America Credit Card Scam 2
I little while back I wrote about a B of A credit card minimum finance charge scam.
Recall, they sent a notice out saying they would start charging a $1.50 minimum finance charge, UNLESS they received a written request to reject the charge. Recall that I heard about this from a friend who also has a pseudo liberal Working Assets Visa. At the time I wrote that blog entry, I hadn't even found the small print describing this fee, which I thought was buried in the Privacy Statement.
Well, I found the notification of the finance charge, and Bank of America has a reason for assessing this finance charge:
Well NO KIDDING. They've changed their business practices to ... collect a finance charge.
Bank of America has also changed its Monthly Minimum Payment. Before, there was a cap on the minimum payment required each month. Now, the minimum payment is simply a fixed percentage of the outstanding balance. OK, I can live with that. But, again, the reason they give is a bit pathetic:
This surely is intended to make it sound like the government is forcing B of A remove the cap on the minimum required monthly payment. However, the reality is probably more like the following. Credit card industry lobbyists bought off Congress to "modernize" the credit card laws and create more "flexibility" so they could compete in the global economy. Then, the credit card regulators were lobbied to change the regulations to remove the cap on the minimum payment. In response, the regulators revised their guidance, allowing credit card companies to remove the cap on the minimum payment. This might even be a part of the bankruptcy reform law, in which the credit card holders receive a favor from big brother, designed to help them keep up with paying down their debt and avoid bankruptcy.
A year or so later, the credit card company, B of A in this case, turns around and tells the public, "As a result of federal guidance," we're going to add a little more pain to your life.
Surely, if the people were in charge of this country, they wouldn't let this kind of thing happen.
How to Reject the Finance Charge:
By May 1, 2007
WRITE TO:
B of A
PO Box 15088
Wilmington, DE 19850
Identify yourself and your card number
Say: "I reject the minimum finance charge of $1.50."
Recall, they sent a notice out saying they would start charging a $1.50 minimum finance charge, UNLESS they received a written request to reject the charge. Recall that I heard about this from a friend who also has a pseudo liberal Working Assets Visa. At the time I wrote that blog entry, I hadn't even found the small print describing this fee, which I thought was buried in the Privacy Statement.
Well, I found the notification of the finance charge, and Bank of America has a reason for assessing this finance charge:
We added a Minimum Finance Charge to your account primarily due to a change in our business practices.
Well NO KIDDING. They've changed their business practices to ... collect a finance charge.
Bank of America has also changed its Monthly Minimum Payment. Before, there was a cap on the minimum payment required each month. Now, the minimum payment is simply a fixed percentage of the outstanding balance. OK, I can live with that. But, again, the reason they give is a bit pathetic:
As a result of federal guidance, we are changing the minimum payment calculation on your account.
This surely is intended to make it sound like the government is forcing B of A remove the cap on the minimum required monthly payment. However, the reality is probably more like the following. Credit card industry lobbyists bought off Congress to "modernize" the credit card laws and create more "flexibility" so they could compete in the global economy. Then, the credit card regulators were lobbied to change the regulations to remove the cap on the minimum payment. In response, the regulators revised their guidance, allowing credit card companies to remove the cap on the minimum payment. This might even be a part of the bankruptcy reform law, in which the credit card holders receive a favor from big brother, designed to help them keep up with paying down their debt and avoid bankruptcy.
A year or so later, the credit card company, B of A in this case, turns around and tells the public, "As a result of federal guidance," we're going to add a little more pain to your life.
Surely, if the people were in charge of this country, they wouldn't let this kind of thing happen.
How to Reject the Finance Charge:
By May 1, 2007
WRITE TO:
B of A
PO Box 15088
Wilmington, DE 19850
Identify yourself and your card number
Say: "I reject the minimum finance charge of $1.50."
March 25, 2007
Bank of America Privacy Policy Credit Card Scam
If you're like me, you receive "Privacy Policy" statements from various corporations, and you either file them or toss them. Recently, Bank of America hid a little gem in their Bank of America Privacy Policy of for Consumers 2007.
How do I know? Well, as I write this, it's NOT because I've found it in the small type. Instead, a friend who also has a Working Assets Visa card told me. "You need to send a letter to Working Assets (AKA Bank of America) to opt-out of a $1.50/month finance charge by May 1, 2007." It's a legalized scam.
Yes, that bastion of liberal innovation, Working Assets, once affiliated with Fleet Credit Card Services, is now serviced by FIA Card Services, National Association (Bank of America). Working Assets is now party to this legalized scam.
The scam is simple. Bank of America is allowed by the U.S. Congress to impose a $1.50 monthly finance charge, with the presumed Democrat compromise language that the "consumer" has to be given the option of saying "No, I don't want to pay." Gee thanks. Great opposition party, eh?
So, who pays? People who don't read the fine print. I blame Working Assets.
Contact Working Assets. Tell them that you blame them too.
Side Note 1: Bank of America started the credit card concept, according to Wikipedia.
Side Note 2: A Bank of America branch in Santa Barbara (Isla Vista) was burned to the ground April 18, 1970. Kevin Moran was shot and killed by Santa Barbara City Police after working put out the fire.
Side Note 3: At least the B of A Privacy Policy write the USA PATRIOT Act correctly (all capital letters to indicate it is an acronym for Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism).
Side Note 4: How to Reject the Finance Charge:
WRITE TO:
B of A
PO Box 15088
Wilmington, DE 19850
Identify yourself and your card number
Say: "I reject the minimum finance charge of $1.50."
~
How do I know? Well, as I write this, it's NOT because I've found it in the small type. Instead, a friend who also has a Working Assets Visa card told me. "You need to send a letter to Working Assets (AKA Bank of America) to opt-out of a $1.50/month finance charge by May 1, 2007." It's a legalized scam.
Yes, that bastion of liberal innovation, Working Assets, once affiliated with Fleet Credit Card Services, is now serviced by FIA Card Services, National Association (Bank of America). Working Assets is now party to this legalized scam.
The scam is simple. Bank of America is allowed by the U.S. Congress to impose a $1.50 monthly finance charge, with the presumed Democrat compromise language that the "consumer" has to be given the option of saying "No, I don't want to pay." Gee thanks. Great opposition party, eh?
So, who pays? People who don't read the fine print. I blame Working Assets.
Contact Working Assets. Tell them that you blame them too.
Side Note 1: Bank of America started the credit card concept, according to Wikipedia.
Side Note 2: A Bank of America branch in Santa Barbara (Isla Vista) was burned to the ground April 18, 1970. Kevin Moran was shot and killed by Santa Barbara City Police after working put out the fire.Side Note 3: At least the B of A Privacy Policy write the USA PATRIOT Act correctly (all capital letters to indicate it is an acronym for Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism).
Side Note 4: How to Reject the Finance Charge:
WRITE TO:
B of A
PO Box 15088
Wilmington, DE 19850
Identify yourself and your card number
Say: "I reject the minimum finance charge of $1.50."
~
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