Now on to a somewhat less happy topic, namely the US banks, especially the so-called ‘TBTF’ banks. As long time readers are probably aware, we have always held that people will tend to underestimate the ‘stickiness’ of the down cycle in real estate. However, there are a number of historical examples of which the most pertinent is probably Continue reading →
Push came to shove, and we shoved hard. Millions of voices around the world were heard as hundreds of thousands of people closed out bank accounts starting in October and pushing through with strong and loud protests in solidarity with Occupy Wall Continue reading →
In an analyst note, Bofa/ML’s Ethan S. Harris drops a bit of a bombshell prediction:
We expect a moderate slowdown in the beginning of next year, as two small policy shocks—another debt downgrade and fiscal tightening—hit the economy. The “not-so-super” Deficit Commission is very unlikely to come up with a credible deficit-reduction plan. The committee is more divided than the overall Congress. Since the fall-back plan is sharp cuts in discretionary spending, the whole point of the Committee is to put taxes and entitlements on the table. However, all the Republican members have signed the Norquist “no taxes” pledge and with taxes off the table it is hard to imagine the liberal Democrats on the Committee agreeing to significant entitlement cuts. The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan. Hence, we expect at least one credit downgrade in late November or early December when the super Committee crashes.
This is quite a stunning prediction, mainly because nobody is talking about this. And though the experts were 100% wrong in thinking that a downgrade would increase borrowing costs, it did cause a major market jolt when it happened, leading to a major blow to confidence in August and September.
Another round of that would certainly not be helpful.
Hense Harris’ note is titled “Enjoy It While It Lasts.” We have a nice little upswing in economic data, but next year could be rough again, when these confidence shocks hit.
As for the immediate term, Harris sees 2.7% GDP for Q3 (the advance estimate for which will be released this coming Thursday) and 2.3% GDP for Q4.
Over the past two weeks, I have been closing down and moving money out of my Bank of America accounts. I have done my personal and business (I own a consulting business) banking there for over ten years but have decided to vote with my wallet and express my displeasure with the system by removing my money from their clutches. One by one, I have zeroed out the balances on various accounts by transferring and consolidating via their website. After each transfer I then called to close the accounts over the phone without issue. Yesterday was different. I visited a branch to make a business deposit and when I arrived, there were signs on the ATMs indicating that the system was down and that customers should come into the branch. Before I got to the business customers’ line, I was stopped by a banking associate and asked the purpose of my visit. I told him I was there to make a deposit and he waved me to a desk. When I sat down the banker first asked for my account number.
I don’t know it, so I handed him my ATM card. That’s when he explained that all of their computers were down, and although they would accept the deposit, without the account number they would have to give me a generic receipt. Say what huh? When I told him that my newly opened accounts at a local (small, community) credit union would like the deposit he insisted that their computers were down too. Fifteen minutes after leaving BoA I found that to not be true and the money was happily deposited into a new account at the CU without issue. Later in the afternoon I hit up a different branch of BoA and found their computers working just fine. I went in, asked to speak with a banker and was seated in an office. When the young associate came in and asked the purpose of my visit, I handed her my ATM card and requested that she tell me the balance. When she did, I then asked for a cashiers check in that amount. That’s when things got wonky.
She froze, stumbled over her words and asked why I needed that amount (It was not a small sum). This gave me an opportunity to explain that althouth I personally would not be affected by their new fees I know plenty of friends and family that would feel the pain. In solidarity with them, I wished to close the account and move on. She unwittingly suggested that if I just use my debit card once a month then there would be no fee. That was good for a belly laugh from me, then I again requested the balance to be issued to me in the form of a cashier’s check. She then told me that there would be a $10 fee for this service. Another laugh. I guess it didn’t sink in when I told her that I was fee adverse. There was an easy work-around anyway – I requested the cash. That finished my time with this associate banker as the amount I was requesting was “well past” her daily limit for withdrawals. I asked if there would be an issue with securing the cash and she said “I honestly don’t know if we have that here” and walked out to get the branch manager. The manager was pleasant enough and very direct. After introducing herself she flat out asked “What can we do to change your mind?” “We don’t want to see you go” she emphasized. This opened a door for me to further explain my decision to leave the bank and why I was doing it. Amazingly, it did not fall on deaf ears. She indicated that understood where I was coming from and actually showed genuine surprise at some of the facts I provided her about the less than consumer friendly policies and mechanations of her employer. She did make some feeble counter-arguments and repeatedly asked me if I would change my mind (with a hint of desperation!).