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Bank of America customers use an ATM on January 21, 2011 in San Francisco, California. Bank of America reported today that it has reached an agreement for an $8.5 billion settlement with a group of investors who lost money buying mortgage-backed securities from Countrywide Financial.
Recall, if you will, this past summer when Warren Buffett put a floor under Bank of America's then-plummeting stock, serving up a $5 billion "Buffett bailout." Now, as one of the worst years for bank stock ever winds down, Bank of America has been headed South again. Yesterday, it dropped through the symbolically important $5 per share level (it's back up over $5 today). As the Wall Street Journal reports, Buffett is now like a lot of people who hold BofA mortgages: $1.5 billion underwater.
Is Buffett concerned? Probably not:
Don’t worry about Buffett, though. He is guaranteed a profit on his BofA investment. The banking giant must repay Buffett’s $5 billion, plus a 5% premium, at any time. Plus, the world’s third-richest man will rake in dividends of $300 million a year from BofA, and he won’t give up those payouts no matter what sub-basement BofA shares tumble into.
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LOS ANGELES, CA - NOVEMBER 5: Police officers stand guard as Occupy LA protesters stop to demonstrate at a Bank of America during the Move Your Money March on what is being called Bank Transfer Day on November 5, 2011 in Los Angeles, California. Occupy movement members are calling for people to move their money from banks to credit unions today in support of the 99% movement. (Photo by David McNew/Getty Images)
When compared with Occupy protest movements in New York, Oakland, and now Berkeley, Occupy LA has seemed like a blissed-out band of peaceniks. No police confrontations. No tear gas. No rubber bullets. No truncheons.
Until now. Well, OK, there's been no real violence. But elements of Occupy LA did...actually occupy something other than the lawn of City Hall last night. They moved into a Bank of American branch lobby. KPCC's Corey Moore got the story:
About 50 protesters holding signs and chanting "Make banks pay" briefly took over the lobby of a Bank of America branch in downtown Los Angeles Wednesday night, calling for greater accountability. They were part of a march of about a thousand people demanding that financial corporations help resolve the state’s budget problems.
It's not clear yet whether the Occupy Movement is ramping up its provocations because it wants to...or needs to, given that the public and the media may be losing interest in the protests.
Wells Fargo is about do it. So is Bank of America. Huge financial institutions with billions in deposits are struggling with post-bailout legislation and passing costs on to their customers. People who've gotten used to swiping their debits cards for every imaginable transaction are about to see that service run them as much as $60 a month.
In the New York Times, Ron Lieber and Ann Carrns assess the pros and cons. But when you get right down to it, there basically are no pros. Here's why:
- Credit unions offer branch deposits. Online banks get dinged for not having a physical place where you can hand over cash or checks to an actual human person. But they don't have a monopoly on old-school, bricks-and-mortar banking. Credit unions also have branch offices — and in many cases are members of networks, so you get a collection of branches that's comparable with the Big Banks.
- Online banking is easy and technologically sophisticated. ING DIRECT, for example, offers a suite of checking accounts that actually earn interest. That's right, they pay you to hold your money. Setting up an account is a relatively simple process. And because money is pretty much just numbers flying around in the electronic ether, it really shouldn't be a problem to adapt yourself to this no-so-brave new world.
- There's no risk to not using a Big Bank. Deposits at BofA are FDIC-insured. But so are deposits at online banks. Credit union deposits are also insured, by the National Credit Union Association (NCUA).
- Not using a Big Bank may actually be BETTER for the Big Bank. Back in late 2009, Arianna Huffington, along with a group of finance folks, got involved with a project called Move Your Money. The idea was to, in a manner of speaking, take from the rich and give to the poor. With in this case the poor being local banks. The upshot would be an surge in funding to "Main Street" banks, which might enable the kind of small-business lending that the country needs to recovery from the Great Recession. And the Big Banks would in turn be less likely to pose a massive risk to the entire system.