BofA + BofA 4ever!
Maybe it's just that I've been paying closer attention -– it's football season, after all, so the TV gets a lot more "on" time in my house -- but I couldn't walk past the television in the last few days without seeing a video valentine to Bank of America, with love, from Bank of America.
A number like $700 billion, the approximate sum of the 2008 TARP financial bailout, is almost impossible to get your head around. But five bucks? That’s a gallon of gas and change, a fast-food burger meal, a super-sized Starbucks with an extra shot.
Five bucks, everybody understands.
And BofA customers now understand that that's what their bank will be charging most of them each month for the privilege of buying stuff with their own money by using debit cards.
Until recently, most debit-card issuers charged a business an average of 44 cents every time a customer used a debit card to buy something, whether it was a $3 latte or a $3,000 big-screen TV. (The word "swipe" has been appropriated to describe these transactions. "Swipe" is a venerable, wonderfully useful and vivid slang word for stealing. Come to think of it, maybe it's not such a stretch after all.)
The Dodd-Frank law imposed "reasonable" fees for such transactions, and retailers said that 44 cents was beyond reasonable. The Fed had originally decided that "reasonable" for a debit-card transaction fee was around 12 cents, but financial institutions yowled that that would send them straight to the poorhouse. So the Fed agreed to set it at 21 cents.
Card issuers are still peeved over that number. It's the reason that several financial institutions will be charging various new fees to bank customers, to make up the profit difference that they're not getting from merchants any more.
My columnist colleague David Lazarus says that the Fed estimates that every debit-card transaction costs the card issuer 4 cents. Four cents. Eighty percent of a nickel. Which means that 21 cents would still be quite a handsome profit. Did I say handsome? I underspoke. We're talking Prince Charming. If 44 cents was a 1,000% markup on a 4-cent cost, 21 cents still represents a 500%-plus markup -- and financial institutions are complaining that they're being stiffed, that those debit-card transactions cost them a lot more than 4 cents.
How much more, they won't say. Trade secret, you know.
A trade secret? Seriously? The mystery ingredient in Coca-Cola is a bona fide trade secret. If banks contend the Fed's figure is wrong, then it's up to them to show some hard figures.
Now just as Coca-Cola had its own flirtation with mercantile disaster with the launch of New Coke, Bank of America has been mired in very bad PR over that $5 surcharge.
Coke was smart enough to walk back New Coke -- more like turning tail and running it back. But with the $5 debit-card charge doubling down on BofA's robo-signing and foreclosure problems, the bank's idea of image rehab is to spend who-knows-how-many millions to advertise its warm and fuzzy side: all those charities, all those convenient ATMs and all those small business loans and mortgage modifications it's been falling all over itself to make.
That's a whole lot of $5-a-month debit-card fees spent to advertise to the world that BofA really is a good corporate citizen.
A sardonic send-up of BofA ads is here.
A spokeswoman for the Center for Responsible Lending told Reuters that the ads were "irrelevant." What matters is that "they and other banks clean up their servicing operations so they can do more loan modifications and never do the same thing to the economy again."
Meanwhile, Occupy Wall Street has set up its own branch right there in Charlotte, N.C., the home of BofA.
BofA will be on television again Tuesday, and not just with its ads this time. It'll be revealing its third-quarter earnings.
Let us not forget that Bank of America began in 1904, in San Francisco, as Bank of Italy. Its founder, Amadeo Giannini, famously lent money to people to rebuild when San Francisco was at its moment of most desperate need, right after the 1906 earthquake. What happened to that BofA in this 21st century financial earthquake?
-- Patt Morrison
Photo: Bank of America has 57 million consumer and small-business accounts. Credit: Mario Tama / Getty Images