They received a massive amount of your taxpayer money in the first bailout, but what do you know about the Bank of America? In the latest installment of her ongoing Melville House “Live Book” project, Kari Lydersen looks into one of the key players in the takeover story ….

Chicago, January 28, 2009 — The company now known as Bank of America started as the Massachusetts Bank on July 5, 1784, five years before George Washington became the nation’s first president. John Hancock signed the bank’s original charter. It was the second bank to receive a state charter and one of three commercial banks in the country at the time.

The website for the bank’s Heritage Center in Charlotte, N.C. says, “Generation after generation, the financial institutions that are part of the Bank of America legacy have played a role in the development of our nation’s culture and economy.”

Times have changed a lot in the 224 years since the founding of the bank’s predecessor.

Now it is a trillion-dollar-plus institution with operations throughout the U.S., Europe, Asia, the Middle East and Latin America. In the U.S. it has about 6,000 bank offices serving 55 to 60 million customers. Its global operations cover sectors including consumer and retail, financial services, natural resources (ie oil, natural gas) real estate and gaming, health care, media and telecom, and industries including chemicals, aerospace and defense, paper and forest products and automotive.

The bank’s net income comes 63 percent from global consumer and small banking business (Republic Windows would probably fall into this category). Four percent is from global corporate and investment banking, and 14 percent from global wealth and investment management.

In Tough Times, a Giant Gets Bigger

In 2007 the bank had $68 billion in revenue, compared to $73.8 billion in 2006, according to its 2007 annual report. Total assets in 2007 were $1.7 trillion, compared to $1.45 trillion in 2006. At the end of 2007 the market share price for common stock was $41.26, down from $53.39 at the end of 2006.

The bank’s 2007 annual report says, “2007 was a disappointing year for our company. While our financial performance was very strong in the first half of the year, results in the second half were severely depressed by rising credit costs and the impact of the unprecedented turbulence in the financial markets.”

While the report expressed hope this situation would improve in 2008, that turned out not to be the case. Its fourth quarter 2008 losses caused its financial ratings to be downgraded. (Read more an analysis from Barron’s here).

Like most of the country’s large financial institutions, Bank of America has been mired in the mortgage crisis and ensuing economic crash of the past year and a half, though it has spent the time acquiring other floundering financial institutions, with aid from a federal government desperate not to see these institutions collapse. In October 2007, Bank of America acquired LaSalle Bank, giving it a market leadership in Chicago and Detroit. (It also acquired U.S. Trust in 2007, MBNA in 2006 and Fleet Boston in 2004.)

In July 2008 it took over Countrywide Financial Corporation, one of the more notorious subprime lenders, in a $4 billion transaction which made it the country’s largest mortgage lender. In a news release announcing that deal, Bank of America pledged to “continue its long-established policy of not originating subprime mortgages,” and noted its commitment to work on $40 billion worth of troubled mortgages to help 265,000 homeowners stay in their homes. (A future blog will focus on a Chicago Mexican immigrant family facing eviction from a foreclosed building partly owned by Bank of America.)

In October 2008 Bank of America was granted $25 billion in bailout funds as part of the $700 billion federal TARP (Troubled Assets Relief Program), a program which garnered much criticism for throwing money at banks while doing little to help distressed mortgage holders. In the first days of 2009 Bank of America completed its takeover of Merrill Lynch, a once mighty brokerage firm facing possible implosion as part of the larger Wall Street meltdown. On Jan. 16, 2009 the U.S. Treasury granted Bank of America an additional $20 billion in TARP funds to help with the rocky Merrill Lynch takeover. Theoretically the bank was undertaking the acquisition as its own private business deal, but reportedly the federal government leaned heavily on Bank of America and insinuated its financial support to save Merrill Lynch. (See the Mother Jones report, and another report from the Time magazine.)

Shortly after the acquisition, Bank of America CEO Kenneth Lewis forced Merrill Lynch CEO John Thain to resign, in light of $15.3 billion fourth quarter losses at Merrill Lynch and Thain’s reported “behind the scenes lobbying for a multi-million dollar bonus,” according to The Wall Street Journal. (Thain, known for a lavish lifestyle, celebrated the fourth quarter losses by heading off to vacation in Vail.)

The New York Attorney General is investigating other bonuses given at Merrill Lynch as part of a probe into executive compensation at companies receiving TARP funds. It appears Merrill Lynch speeded up the payment of massive executive bonuses before the Bank of America acquisition swallowed up its assets (as per this Agence France Presse wire story.)

In December Bank of America announced likely layoffs of 30,000 to 35,000 employees from its own and Merrill Lynch’s workforces, representing up to 11 percent of the bank’s global employees. That’s in addition to 11,150 people it already laid off, among more than 186,000 people losing their jobs at banks since the financial crisis started in July 2007. (See this New York Times report.)

Many of these laid-off employees are bitter they are out in the cold – like the Republic Windows workers – while the majority of CEOs (nine out of 10 according to a recent Associated Press investigation) who led their companies into dire financial straits are still at work earning top dollar. The Associated Press quoted a laid-off Kentucky Bank of America worker, struggling mother of three Rebecca Trevino:

“The same people at the top are still there, the same people who made the decisions causing a lot of our financial crisis. But that’s what tends to happen in leadership. The people at the top, there’s always some other place to lay blame,” she said. “It is surprising that leadership can make decisions that lead to financial ruin for so many, and then get bailed out for it.” (Read more here.)

Bank of America and Latinos

Like most financial institutions and businesses in general, Bank of America has recognized the huge and growing importance of Latino immigrants like the majority of the Republic Windows workers. The bank advertises and provides services in Spanish and has programs to send money to Mexico; its website says it was the first bank to eliminate transfer fees to Mexico, in January 2005. The bank offers first-time checking accounts called Nuevo Futuro (“Our Future”) aimed at new immigrants, and it accepts the Mexican Matricula Consular as a valid form of ID (making the bank accessible to undocumented immigrants).
The company’s website says it is the number one lender to Hispanic-owned businesses, and the Bank of America Foundation promises a significant part of its $1.5 billion philanthropic commitment will go to “address critical needs” in Latino communities.

Public Image, Green Investment

Like most major financial institutions and corporations, even in times of economic stress Bank of America seeks to bolster its public image. The bank sponsors the Chicago Marathon, sponsored the 2008 U.S. Olympic team and is the official bank of NASCAR. It has made environmental commitments, including agreeing in 2008 to a moratorium on financing related to mountaintop removal coal mining.

A quote from Bank of America CEO Lewis on the company’s website says, “Bank of America helps build strong communities by creating opportunities for people — including customers, shareholders and associates — to fulfill their dreams.”

Presumably protecting or improving its public image was the main motivation for Bank of America to agree to the new loan for Republic Windows, since as previously noted it had no legal obligation to do so. Green building component producer Serious Materials’ interest in buying Republic Windows adds a new wrinkle to this trajectory, since Bank of America has promoted its commitment to a green economy.
Its 2007 annual report notes the bank’s “10-year, $20 billion initiative to support the growth of environmentally sustainable business activity” and “build ‘green partnerships’ with environmental groups, government agencies and our friends in the business community.”

As the primary secured creditor, it is largely up to Bank of America whether to okay the sale of the still-shuttered Republic Windows factory to Serious Materials. The bank could decide this is in its best financial interest, as opposed to liquidating the factory’s assets. Or even if it does not determine the sale is its most lucrative option, bank officials could chalk up a sale to Serious Materials as part of their touted commitment to building community and green partnerships.

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