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Evaluating Bank of America (management/marketing)

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Bank of America's history dates back to 1904, when Amadeo Giannini founded the Bank of Italy in San Francisco to cater to immigrants who were denied service from other banks. Shortly following the opening of Bank of Italy the San Francisco earthquake struck, causing most banks to halt all lending practices. Giannini managed to rescue funds to start lending within a few days of the disaster to those who was willing to rebuild. Bank of America was formed when Giannini consolidated his Bank of Italy with Bank of America. As of 2010, Bank of America is the 5th largest company in the United States by total revenue, as well as the second largest non-oil company in the U.S. (after Walmart). In 2010, Forbes listed Bank of America as the 3rd biggest company in the world. (CNN Money)

As one can imagine, all industries from mom and pop stores to multi million corporations have felt the wrath of the economic downturn. To make the statement that any bank is performing desirably would be a slight exaggeration. Prior to the recession, banks (including Bank of America) were content with relaxed lending guidelines, contracting out any brokers, and questionable appraisers. The above noted coupled with American's constant desire for more, set the United States up for a perfect storm. The share price, like the US banking market in general, has dipped significantly from its relatively recent highs. The last twelve months have remained painful, many are optimistic but in actuality the share price has not been significantly different from that at the end of December 2008. For now, it appears that Bank of America is continuing to struggle like the majority of the banking industry. Banks were forced to reevaluate spending and lending practices due to the weaker marked and new government regulation that will cut their profits.

One of the major effects the economic downturn and changes in regulations had on business it that it minimized the profit margin for business, with this being said many businesses had to make drastic cuts so they would not have to feel the burn of dwindling profits. Bank of America is not exempt for being forced to reduce cost. They plan on cutting annual spending by $5 billion in the next two years by eliminating 40,000 jobs, Reuter's reports. Most of the reductions will come from the firm's consumer banking and bank systems architecture, CEO Brian Moynihan said, according to Reuters." The company built itself through acquisitions over decades and has not properly integrated systems and closed unnecessary branches," Reuters writes. "Bank of America has about 50 senior employees reviewing some 150,000 ideas for cutting costs." (CNN MONEY) Bank of America has plans to eliminate 6,000 jobs this year and expects a significant part of their reductions will come from attrition and the elimination of unfilled positions. Simply cutting jobs is not the only thing that Bank of America is doing to improve their economic position, Goldman Sachs plans to cut as much as $1 billion in non-compensation expenses -- costs not directly linked to salaries, bonuses and benefits -- over the next 9 months. (K Engelmann)

Lending practices have taken a drastic turn towards the more conservative route. Moreover, obtaining a loan prior to the recession was relatively easy. Banks charged private mortgage insurance if you had the loan to value of above 80%, but they would typically lend up to 100% financing making it a better possibility for American's to become homeowners. Banks took into consideration your debt to income, loan to value, and credit score, those were the biggest deciding factors; if ones credit score was good enough, most banks would not verify income. Now lending guidelines have become extremely strict, the possibility of having an interest only, stated income, or 100% financing is unheard of. Bank of America was hit hard in the mortgage industry especially with the purchase of Countrywide Financial corp in 2008. They are set to lose nearly all the mortgage market shares, it gained by buying Countrywide Financial Corp in 2008, in the latest sign of how painful the acquisition has been for the bank ( S Orlofsky) Most of Bank of America's lending came from this acquisition, this has set Bank of America back thus forcing them to take the above noted measures to maximize on profits with the hopes of minimizing their financial bourdons. Bank of America is not the only one reporting negative mortgage figures in the current economy; financial analysis said "There is no question that 2011 will be worst mortgage lending year in a decade."

Ethical issues

Bank of Americas Code of Ethics contains the following key themes consistent with their Core Values:

* We honor our Code. * We act ethically. * We manage risk effectively. * We are fair and honest in our communications. * We safeguard information. * We protect Bank of America assets. * We conduct our financial affairs responsibly. * We care about one another. * We respect laws and regulations. * We will not misuse information. * We value our communities. (Bank of America Code of Ethics)

Bank of America's Code of Ethics contains the key points one would hope a large company who employees over 288,000 Americans would want to uphold. Bank of America culture was know very well throughout Delaware for it has many employees that reside here. The common perception of Bank of America as an employer was for the most part positive, slightly mirroring a cult but their employees truly believed in their mission and loved the company. Unfortunately, Bank of America (much as any bank that is not fee less like ING DIRECT) is scrutinized for nickel and diming their customers. The unstable environment makes any alteration (major or minor) in the cost of doing business with a company very important, Customer are less willing to pay for unnecessary items and/or fees because we are more conscious of our spending due to effects of the recession.

Having a free checking account is almost a thought of the past. Bank of America is leading the way in capitalizing on newly created fees. Prior to the most recent fee changes, many customer were only charged a fee if they did something the bank saw as negative, for example bounce a check or overdraw on your account. Customers adapted to these fees for they agreed with the punishment of the above items, now customer's feel like they are being penalized for doing nothing wrong, thus leading into how consumers view banks (with Bank of America in the front) as unethical for charging unnecessary fees in an already troubled economy. Customers are appalled to find out that Bank of America instituted a five-dollar per month charge for usage of its debit cards effective early next year (ABC News.) Consumers are not pleased with the news



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