Bank of America angers Democrats, loses billions
Bank of America’s troubled stock took another hit Tuesday, one day after top Democrats slammed the bank for charging customers for use of its debit cards.
The new charges were established after Congress capped the fees that banks can charge retailers who accept payments via debit cards.
The bank’s stock began trading Tuesday at $5.50 a share, and immediately plunged 30 cents, before recovering to just under $5.40. That’s a loss of roughly two percent, and it slashed the company’s value on Wall Street by another $1 billion to $54 billion.
The company’s stock was worth $6.12 Monday morning. That was 75 cents per share, or $7 billion in total, higher than Tuesday’s mid-day report.
In late August, Warren Buffet bought $5 billion worth of company stock at $7.65 a share. That stock has fallen by almost a third since then, costing him roughly $1.3 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 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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