Closing My Bank of America Account: The Parable of the Ungrateful Servant

"Therefore the Kingdom of Heaven is like a certain king, who wanted to reconcile accounts with his servants. When he had begun to reconcile, one was brought to him who owed him ten thousand talents. But because he couldn't pay, his lord commanded him to be sold, with his wife, his children, and all that he had, and payment to be made. The servant therefore fell down and kneeled before him, saying, 'Lord, have patience with me, and I will repay you all!' The lord of that servant, being moved with compassion, released him, and forgave him the debt.

But that servant went out, and found one of his fellow servants, who owed him one hundred denarii, and he grabbed him, and took him by the throat, saying, 'Pay me what you owe!' "So his fellow servant fell down at his feet and begged him, saying, 'Have patience with me, and I will repay you!' He would not, but went and cast him into prison, until he should pay back that which was due. So when his fellow servants saw what was done, they were exceedingly sorry, and came and told to their lord all that was done. Then his lord called him in, and said to him, 'You wicked servant! I forgave you all that debt, because you begged me. Shouldn't you also have had mercy on your fellow servant, even as I had mercy on you?' His lord was angry, and delivered him to the tormentors, until he should pay all that was due to him." Matthew 18:23-35

I thought about this parable from the Gospel of Matthew as I closed my Bank of America account at the start of the New Year. I had a long-time checking account (for more than a decade) in which I had dutifully kept the $750 minimum balance to avoid a monthly maintenance fee. In December I received a statement that showed $14 missing. At that point I read more carefully the letter I had received from Bank of America on new fee structures. It explained that to avoid a $14 monthly fee I now needed a $1500 minimum balance. I did not like either choice-paying the $14 per month or adding another $750 to the minimum balance.

It is bad enough that the interest banks pay on deposited money is negligibly small. Now you must provide the bank with large amounts of free capital or your deposited money will be appropriated. Prior to the 2008 financial crisis, institutions such as Bank of America generated large amounts of revenue from usurious interest rates on credit cards and hefty fees for overdrafts and late payments. However, new laws forbidding some of the more egregious practices have sharply curtailed that revenue stream, so banks are instituting new fees to make up the difference.

I decided to shop for a new bank and I was struck by some advice given while conversing with a local businesswoman. "Never do business with a bank that has more than three branches. Banks with three or less branches are too small to be of much value to bigger banks, so there is little risk of a buyout." On hearing this advice, I remembered that I had never opened an account at Bank of America. I opened an account at a large regional bank that was bought by Bank of America. The same is true of another bank I do business with-M & T. I originally opened an account with First Maryland Bank, which was bought by All First, which then disintegrated in a currency trading scandal and was acquired by M & T.

I went to Farmers and Merchants, a small community bank with only three branches, all in northwest Baltimore County. They offered me totally free checking with no minimum balance. I opened a new account and the next day went to Bank of America and closed my account before any additional fees could be assessed.

There are, of course, some tradeoffs with switching to a small local bank. I can only visit the bank when I'm near my house, not anywhere in the country, which was the case with Bank of America. I can only have free use of an ATM machine at one of those three branches, anywhere else I have to pay a transaction fee. But, with proper planning and use of the Internet-even small banks offer online banking-these inconveniences should not be much of an issue. I have to ask myself, is $14 x 12 months, or $168 per year worth it for the additional accessibility Bank of America offers. I would never have the need to use ATMs far away from my house often enough to justify paying $168 per year to access Bank of America's nationwide ATM network. If I have to do that occasionally, I'll pay the $2 transaction fee.

When I closed my account at Bank of America, the manager noted that I had been a long-time customer and asked my reason. I told her that I was unhappy with the new fees being imposed. I said that it reminded me of the parable of the ungrateful servant. She didn't seem to understand the biblical reference. She handed me the cash for the remaining funds in my account and had me sign for it. No counter offer or apology for the new fee structure was made.

Bank of America and the other large banks created an unsustainable business model that generated revenue from high fees and usurious interest rates on high-risk loans. When the model failed they were shielded from the market consequences with billions of dollars in taxpayer bailouts on the condition that they end many of the practices that caused the failures. But it appears that rather than comply with the intentions of the new law, Bank of America is looking for loopholes in order to revive their old business model.

Of course, the large banks insist that even though they are exempt, all their customers should abide by the rules of the market place. That being the case, I think we the customers need to shop more for banking and ignore much of the slick marketing. We also need to overcome our inertia and be willing to change banks when market conditions change. It is easy to close an account and open a new one at another institution.

Ask yourself, if I were shopping for a bank today and considering all the available options, would I choose the bank that I currently have? If the answer to that question is no, then it is time to change banks. Look around and you will find many community banks and credit unions that offer excellent services at fair prices.

When I think about it, there is really no reason for Bank of America and its ilk to even be in business. In fact, if not for the billions of dollars in bad debt forgiven by the taxpayers, they would not be in business. But, Bank of America was not about to forgive the new fees they were imposing on me. It is time for customers to stop paying for all the lunacy and take their business elsewhere.

Wall Steet Compensation: Gaming the System

I have written about the practice of re-labeling expenditures with a different, nicer sounding name. Financial service companies are masters at this practice. Want to advertise an eye-catching low interest rate. Use a different word for the finance charges. Labels such as: transaction fee, points, rebate, origination fee, can all be used as reasons take money from consumers without using the emotionally charged label “interest.”

Given that financial institutions are masters at re-labeling, I am completely mystified by their use of the word “bonus” in labeling parts of employee compensation. This past week John Thain was fired when it became public that the day before his failed company, Merrill Lynch, was taken over by Bank of America he dispensed over $4 billion in bonuses. At the same time, the full extent of liabilities Bank of America had assumed was not fully disclosed. Probably because no one really knows just how much bad debt Merrill Lynch owned. Bank of America, after discovering that it had acquired a deeper and possibly bottomless money pit than it previously thought, was forced to go back to the government and plead for more bailout money.

Meanwhile a report that total year-end bonuses on Wall Street exceeded $18 billion brought a rare public display of anger from President Obama and promises to rein in Wall Street compensation packages. The practice of executives rewarding themselves while their companies and clients are ruined is described succinctly in a Forbes Magazine piece titled “Five Legal Scams” by William Baldwin. One scam labeled “Heads I win” is this: “Be a hedge fund manager. Pocket 20% of the gains if you are lucky, but chip in for none of the losses if you aren't.”

Executives on Wall Street defend bonuses as being performance-based and necessary to attract top financial talent. Which makes me wonder why they haven’t re-labeled “bonuses” with the word “commission.” From their defense of the practice its sounds to me that the kind of compensation they are describing is known as a “commission” in most other industries. The public might wonder why anyone would pay for the kind of “performance” and “talent” that created the mess on Wall Street. But, if a car dealership went belly-up no one would dispute that the salespeople should still receive their commissions.

However, the fact that it has never occurred to these executives to use the word “commission” is a telling statement about the kinds of products they sell. Auto salespeople are paid commissions for selling a tangible product. Each car manufactured has a vehicle identification number that is recorded and tracked by the manufacturer, dealership, state government, insurance company, lien holder and owner. As cars arrive and leave the lot it is nearly impossible to fake selling them. It is difficult for dealers to simply make up sales figures.

For financial services firms, making up numbers to describe profits and losses is easily doable. As the financial system unravels it is apparent that many firms did make up numbers. The fact that someone like Bernie Madoff could get away with a $50 billion Ponzi scheme for more than a decade is telling about the lack of real accountability in the financial services sector.

Perhaps instead of a different label executives should rethink their compensation packages and incentives. As it stands now, workers and managers have an incentive to “game” the system. I have written in my book, The Two Headed Quarter, about what I call “The Numerical Outcome Principle.” Once a number is used to judge outcomes, people will adjust their behavior to maximize that particular number. The actual outcome no longer matters. Because numbers are so fluid on Wall Street that is exactly what happened.

Joseph Ganem is a physicist and author of the award-winning The Two Headed Quarter: How to See Through Deceptive Numbers and Save Money on Everything You Buy