Bank of America might have taken the lead on reducing fees on overdrafts, but that doesn't mean that they are without their issues. The nation's largest bank is still gorging on fee income, and they are still paying most of their income out to their investors.
Bank of America canceled overdraft charges this week for some of the instances when a customer overdraws their account with their debit card. This is not a small feat, particularly at a time when banks are struggling to remain solvent.
It would be another thing altogether to infer that Bank of America was going to wean itself off of fee income and return to the days of making money by making loans. In 2009, Bank of America recorded non-interest income of more than $62.5 billion. That is quite a lot - indeed, it represents an increase of more than 120 percent from 2008. Bank of America turned on the fee spigot. In 2008, fee income constituted only $28.4 billion. That was consistent with 2007, when fee income was $28.9 billion. Fee income represents the ways that banks make money outside of charging interest. They make interest on loans. This includes more than $8.4 billion in service charges on domestic deposits alone.
Rich people aren't paying those fees. The bank actually gave money back to its venture capital customers, albeit only $2.5 million. The year before, venture capital customers paid $27 million in fees. Elsewhere, the rich were still doing fine by Bank of America. BAC paid out $4.8 billion in dividends. That amounted to 77.5 percent of all dividend income! Oh, wait, that's pretty much par for the course. BAC has been paying out most of its income to its investors for years. Nothing changed in 2009.
A lot of people have been concerned about salaries at Bank of America. Funny thing - their lackluster performance in 2009 didn't seem to influence how well everyone was paid. The average employee at Bank of America was paid $111,000 in 2009. In 2008? "Just" $77,000.
Bank of America did decide to stop charging overdraft fees when consumers go into the red on their debit cards. It's an
important change that will hopefully pressure other banks to follow suit. Still, its not as generous as it sounds. The benevolence only extends to when you use your card at a merchant. Take out too much at the ATM, and you'll still pay an overdraft. Ditto if you go into the red because of an automatic ACH payment.
These numbers are all courtesy of the Federal Reserve's National Information Center. The Federal Reserve knows what's going on at Bank of America. Why aren't they addressing this situation? What should make us think that in a CFPA that enhances the role of the Fed that they would do any better?