Posts Tagged ‘Bank of America’

What do the companies that cool your apartment in 90 degree weather, ensure you don’t miss an episode of HBO’s Girls, transport you to your Caribbean vacation and connect you to your friends online all have in common? We hate them.

According to latest American Customer Satisfaction Index, the list of the 15 most disliked companies in the country (see full list below) is dominated by utility companies, cable provides, airlines, insurance companies, Bank of America and. . .  FACEBOOK?

Let us examine the list further and determine the root of the issues. Most utility companies and cable providers operate as regional monopolies. This structure often breeds limited choices, higher prices and lower customer service. No one likes those things.

The other common thread between these companies is that many have served as the poster children for the country’s financial ills. Between the airlines’ bankruptcies (and subsequent acquisitions and luggage fees), Bank of America’s ill-fated decisions, and Facebook’s botched IPO, these companies have been the subject of many Wall Street Journal headlines.

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Following his annual meeting with Berkshire Hathaway investors over the weekend, Warren Buffett sat down with Becky Quick from CNBC for a special edition of Squawk Box. At exactly 6:52 AM, they started to discuss whether or not the banks today are “too big to fail.” Andrew Ross Sorkin (who, as author of the best-selling book Too Big to Fail, certainly understands this topic) asked Buffett about Glass-Steagall, and if he thought the 2008 crisis would have happened if the act hadn’t been repealed. Buffett’s answer essentially was, well, it’s complicated.

For those who aren’t caught up on their Depression-era history, the Glass-Steagall Act of 1933 effectively built a wall on Wall Street, separating banks that did risky investing from those that did basic lending. In 1999, President Clinton signed a bank deregulation bill, Graham-Leach-Bliley, that broke Glass-Steagall as if it were… glass. Graham-Leach-Bliley is often cited as a cause of the ‘08-‘09 meltdown. Warren Buffett here acknowledges that while the act likely did contribute to the financial meltdown, it’s much more complicated than “too big to fail.” Buffett’s exact words, actually, were “size did not solve the problem!”

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The Week Unpeeled

The week’s business headlines were dominated by a rogue trader and Euro bank news, with UBS announcing that London employee Kweku Adoboli allegedly lost $2 billion of its money from its Delta One desk, the same type of operation from where Jerome Kerviel of Societe Generale lost $6.8 billion in 2008. The news immediately raised concerns from investors and regulators about the safety and risk management of the Swiss Bank and whether the only delta that should take place is in the processes in overseeing these operations. No doubt many headlines to come, especially since the trading took place among the fast-growing world of exchange traded funds.  Elsewhere:

  • Central banks from the US, Japan, Switzerland and Europe said they would coordinate efforts to provide dollars to Euro banks to fund operations through the end of the year;
  • John Mack said he would step down from as chairman of the Morgan Stanley board by the end of the year;
  • Bank of America announced plans to cut 30,000 jobs as part of a $5-billion cost-reduction plan;
  • Tech Crunch’s Michael Arrington and AOL defriended and delinked amid controversy that Arrington had started CrunchFund, which was launched to invest in tech startups similar to the ones covered by the blog;
  • Scientists discovered a planet that circles two stars and another 74 exoplanets, a supposed big deal among astronomers; and
  • Stocks rose five days in a row last week to end their second best week of the year, with the Dow up nearly 5% to close at 11,509.

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The Week Unpeeled

The days leading into the Independence Day weekend saw the Dow free itself from its recent slide (see below); DSK, the former IMF chief, freed from house arrest (amid amazing admissions from the hotel maid) in a story that covered more than three pages in The New York Times on Saturday and carried on throughout the long weekend; and Newscorp freed itself from MySpace, selling the music and entertainment site to Specific Media, an ad-targeting firm that is teaming up on the deal with Justin Timberlake, for $35 million after acquiring the property six years ago for $580 million.

Elsewhere:

  • Online gamer Zynga filed for an IPO that could value the company for as much as $20 billion (perhaps real farmers should become virtual farmers);
  • The New York Times sold half its 17 percent stake in the Boston Red Sox;
  • Bank of America settled claims to pay investors $8.5 billion who lost money on mortgage bonds and will take approximately $20 billion charge in the second quarter to cover the mess;
  • Novak Djokovic beat Rafael Nadal at Wimbledon over the weekend for the men’s title and Pertra Kvitova beat Maria Sharapova for the women’s title; and
  • The Dow scored its biggest weekly gain in two years, gaining 5.4 percent to end Friday at 12,582.

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TransoceanI could have told you how this movie would end as soon as it started.

Last week officials from Transocean, the world's largest offshore-rig company, which owns the now-infamous Deepwater Horizon rig, announced that they were giving themselves bonuses based partly upon their exemplary safety record for the year.

Four days later they announced they were donating their bonuses to charity.

As far as PR hurdles go this one had a degree of difficulty that would make an Olympic gymnast cringe, and one that I am sure battered and bruised Transocean executives are wishing they never tried to attempt.

This was the worst oil spill in the history of America and for months it outraged our nation. To suggest that the company executives deserved a bonus, regardless of how stellar the rest of the year was, was a tough sell.  As Bill Raftery, the great CBS College Basketball announcer would say, "Onions."

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