It's so weird to see these giant banks failing while a lot of community banks in my area are doing quite well. Under $1B in assets, usually 10 branches or fewer. Economies of scale sometimes only look good on paper, or in an investment banker's presentation.

@Ash78: I agree with that. Three "big" local banks around my area - Banner Bank, Frontier Bank, and The Bank of Washington - are all doing awesome.

It's weird too that BofA is in this position. Six months ago, they were towering over all these failing banks, and were the strongest in the country. Now look at what's happening...

This makes me glad I jumped ship to USAA a few months ago because I was afraid of this.

Now, if BofA would just send me my damn 1099 so I can do my taxes!!

Economy of scale seems to work OK for Wal-Mart, whether people like them or not.

I'd tend to believe that the community banks were more conservative (i.e., sane) with their lending and acquisitions and that that is why they are doing well, rather than scale, as such.

I don't mean to tell BoA how to run their business, but if they stopped sending me (and the rest of America) applications for credit cards, they might save a few bucks on printing and postage.

@downwithmonstercable: A lot of local banks have the advantage of not being in the secondary mortgage market, at least for buying. So they're not stuck holding CDOs or MBSs, and any sub-prime loans they have are ones they made themselves. As long as the real estate market isn't collapsing in your areas, the local banks should be fine.

That lawsuit is a joke, they are working for the share holder's which is why they keep failing. The entire collapse of all the banks can be directly attributed to working for the shareholders. You think banks would have given out tons of crappy loans if they didn't have to meet unattainable levels of growth to keep the stock high? NO. We should be suing the share holders of these banks for running all these companies in the ground because all anyone seems to be worried about is short term growth to keep stock always increasing. No one seems to cares if a 20% growth year means complete failure 2 years down the road.

@B: Yep exactly right. A lot of the local banks didn't get into risky mortgages either. They all stuck with traditional 30 year fixed type deals. They trailed behind the big guys who were raking in the dough at the time, but I bet they're feeling pretty good now.

@Ash78: It really does come down to greed. I have heard more than a few commercials from local banks announcing they are in great shape because they didn't participate in the sub-prime mortgage debacle. The greed that contributed to these banks getting so massive is the same greed causing them to fail. To me, it doesn't seem that much different than falling for the Nigerian scammers. They desperately want to be as rich as possible and they'll do anything to get there, even if, in the back of their minds, they know it must be too good to be true.

Well, I guess I'm kind of glad they laid me off two years ago. I still wish I was with MBNA, but hey, what can you do.

@Ash78: Community banks make loans to people they know, real people that walk into the branch and that have other accounts with them. The lendor knows the street they want to buy a house on, knows where they work and has a good ability to smell BS.

BOA and the other big players have computer models that take basic information to determine your ability to pay.

They hit $3.77 a share at 9:50 in the morning. A year ago you could have bought it for $43.00.

If the bank is nationalized, even the people who bought at $3.77 will most likely be wiped out.

Imagine what your late fees/charges/expenses will be then.

@Ash78: Enter the Community Reinvestment Act...

For the past 20-30 yrs, in order for banks to merge, they needed a good approval rating from the CRA. They got this approval rating by promising to lend to low / middle income households - typically seen as high risk (subprime) - and we all know how the risk turned out.

We had a regulatory culture that rewarded risky banks by letting them buy out other banks. Banks who avoided the higher risk could not merge...and remained the small "local" banks...that are now surviving.

@Yossarian: Fine for Wal-Mart, fine for China, not so fine for American manufacturing.

@downwithmonstercable: Yeah, my father's bank in Southeast Washington is also doing fine - in fact the regulators just finished auditing them and said they'd be back in 18 months which means they consider the bank's position to be very strong (normally banks get audited yearly, and banks that are in poor shape can see auditors every 6 months).

Basically all of the banks that are having problems got into the CDO market. The smart ones saw right from the start that they were bad ideas and stayed far away from them.

Let them fail. I know, I know, it will be bad. But will it be worse than being on the hook for a bad bank that lives on, zombie like? Controlled by politicians?

Actually, it'll be the the THIRD back of America.[en.wikipedia.org]

Thank goodness Andrew Jackson is not around to hear this. Or maybe it would be good if he was. I seem to remember him smacking the crap out of folks and promising to hang bank owners.

Just don't tell him that we still have Native Americans.

Lots of good points on community banks.. My two Local Banks wanted 20% down when I was looking for a mortgage several years back, a national bank only wanted 1% down..

@Skiffer:
I swear, If I hear another ignoramus blame the CRA for the plight of the big giant monster megabanks problems, I'm going to go postal.

Get this through your thick skulls: The reason that these institutions are failing is because they were run into the fucking ground by the managements.You people blaming the CRA are just parroting the nonsense that you have been told to parrot by the talk show hosts that do your thinking for you. The CRA was passed in the fucking 1970's .There were no subprime mortgages or CDO's or Credit Default Swaps or third order derivatives back then. Mortgages had to have 20% (or more) down and reams ,REAMS , of paperwork to get done.When the risk from writing the mortgage was seperated from the loss on default is when the market went boom (via securitization). No bank has EVER been told to write a specific mortgage to anyone,anywhere.
Even if they did,they could lay that mortgage off on the unsuspecting public via securitization. If they did write a loan that they didn't like,they could sell the damn thing and be done with it.

I am begging you, pleading with you, on my arthritic knees- Stop being so gullible and stupid and read something besides what you want to believe.

I will buy your helicopter for about $3.50, BOA. Call me!

@Plates: How was American manufacturing doing before Wal-Mart rose to power?

@Snarkysnake: It's also important to note that EVERY bank has to follow the CRA -- from the biggest of the big to the smallest community bank. They all do it, they all make loans to low and moderate income families, and yet the local banks don't have the problems of the major banks. I can has logic?

@Skiffer: Lies. Entities like Countrywide, arguably the biggest offender in the entire subprime mess, weren't bound by CRA since they aren't traditional banks (or something like that).

@Snarkysnake: Thank you!

@ClutchDude: Also, I seem to remember some government regulation coming out of that event that essentially declared the US government couldn't run or own any banks. I may be remembering completely wrong, though.

@theblackdog: They can't afford the paper to print those on anymore. Sorry. lol

@nicemarmot617: I'll double nicemarmot617's offer to $7, but if you pay late - FEES FEES FEES! Heck, I'll even consider not closing my accounts if you throw in a jet (but I'll need you to cover parking).

Maybe this will help BOA improve their craptastic service.

According to Mariner Kemper of UMB, there has been a 'flight to quality' from investors. They are looking for stability, not fast bux, and the local/regional banks that didn't fall for the CDS and MBS scams are making out like bandits.

@theblackdog: I did the same jump except with Wachovia to USAA. Will NEVER look back.

@Plates: You clearly understand the redistribution of fine in this global economy.

bank of america isnt even in the article you guys cited

@Blueskylaw: I wish articles like these would disappear, its killing the stock that I have with them.

NATIONALIZE THE BANKS NOW!!!

Shareholders and bondholders should not be receiving taxpayer money.

What, you mean buying out everyone as quickly as possible ISN'T a sustainable business model? o.0

Oh, the irony...

@Snarkysnake: amen. this is starting to get around a lot (as in, it's starting to hit my backwoods crappyass newspaper oped page) - who is peddling this nonsense?

bankers want nothing more in this world than to eliminate CRA provisions altogether (except maybe the elimination of credit unions) - & b/c of a bunch of people that know nothing about banking, they're going to succeed.

@downwithmonstercable: Haha, Banner Bank. The Inlander ran an article two weeks ago about the bailout, and mentioned that Banner Bank was awesome for actually using the bailout money for its intended purpose (more credit in the market) instead of just sitting on it like some other banks in the region.

If I hadn't already gone with US Bank when I moved up here, I would've considered them :\

@Corporate_guy: As opposed to executives who can make millions by pumping up values and then dumping the company soon after?

Yeah, those $40,000,000.00 bonuses have no effect on how they have to run the company, no siree.

@Xkeeper: US Bank was a good choice - they completely avoided the subprime loans and are now one of the top banks in the country, and are perfectly financially sound.

Wait... so Bank of America is having trouble with their purchases of Merrill Lynch and Countrywide? Wow, that kinda sounds like a lot of Americans that have been buying up everything they could think of the last several years... maybe they should have frozen their own credit card in a block of ice.

@theblackdog:

Thats all well and good if you qualify for an account there, but most of us suckers don't.

Wasn't the CEO of Bank of America on 60 Minutes just a few months ago touting his bank and saying that it didn't really need the bailout money?

@lars2112: The smaller banks don't manage too many of their own mortgages anymore. From my experience (worth?), they write the mortgage, then immediately sell it to a larger national bank. So they get to profit from the risk, without actually taking the risk.

@mac-phisto:

"who is peddling this nonsense?"

Okay, you asked, so I will name names.

The dumbasses peddling this big lie are (in no particular order)

Sean Hannity
Rush Limbaugh
Neil Boortz

Of course there are others,but these three reach a lot of people daily.People that don't want to take the time and effort to think for tehmselves.These guys have no accountability to anyone but themselves,soit's easy to find a "them" to blame.In this case,it's the low income borrowers that have benefitted from not being discriminated against.
You need to know how these shows work. They VERY tightly screen callers to make the host look intelligent. If the caller starts making the host look like a liar or a fool,they "have to go to break" or the host starts talking and the caller "disappears" and is thanked. The people that believe this CRA BS are no better than the people that get their "news" from People magazine or Entertainment Tonight.

Pick up a book,you zombies. Read. Learn.

How would this effect BOA customers?

Is a nationalized bank going to cancel my credit card? Will bank tellers be replaced by armed federal goons? Will I have to put a quarter in the meter when I park?

@B: And if they made sub-prime mortgages, chances are they did it with someone for whom it was actually appropriate. Local lenders have a much better opportunity to know something about you and your situation and your real potential to repay, not just your on-paper numbers.

@Snarkysnake: Sigh. CRA was signed into law in the 70s originally but has been modified five or six times since then. Changes to it in the mid-90s do play a strong part in the financial crisis. No it's not made up. No it's not Republican conspiracy. Yes, there is question as to the extent of its influence as a cause.

[en.wikipedia.org]

@Snarkysnake: so well put you brought tears to my eye : )