Most stores have a 30-day merchandise return policy.
Even if you bring back the item within a month of purchase, in most instances, you’ll only get a store credit.
On the other hand, if you buy something “as-is” off the discount table, you’re stuck with it, no matter what.
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Bank of America, the largest U.S. bank by assets, which acquired investment bank Merrill Lynch and took over troubled California lender Countrywide, is having second thoughts about the wisdom of its pre-Christmas deals.
The Charlotte-based bank already has gotten $25 billion in federal bailout monies, and just posted its first loss since 1991. In conjunction with its recent red ink, B of A has also cut its dividend to a penny.
Here Is No. 2
Early this morning, the Treasury, Fed and FDIC announced that they had cobbled together a second $20 billion rescue package for Bank of America. This additional cash injection is just the beginning.
On top of the $20 billion, Washington said that it also will backstop up to about $100 billion in potential losses that the bank may suffer.
Although they admired his moxie, several federal officials and fellow industry cohorts voiced concern about CEO Ken Lewis’ decision to absorb Merrill Lynch so soon after pulling Countrywide into the fold. Lewis brushed-off his detractors, saying the merger with the former giant of Wall Street made good business sense.
Apparently, Lewis’s appetite for the acquisition was bigger than his stomach for losses.
If Lewis had shown a little willpower, his bank would be sitting pretty. Prior to making these two acquisitions, B of A, with the perhaps the exception of Wells Fargo, had the best balance sheet in the banking industry.
Lewis, however, in making the buys, correctly read the tea leaves. His strategy, like his competitors Citigroup and J.P. Morgan, was to make his bank so large that it would be unthinkable to let it fail, no matter how ill-advised had been its actions.
The strategy worked for AIG. Now it’s working for B of A.
Difference in Obama Strategy
After putting a full court press on Capitol Hill, President-elect Obama has secured the Senate’s agreement to release the remaining $350 billion in financial bailout monies.
There has been widespread discontent in Congress that the first $350 billion requested by outgoing Republican President George W. Bush to help fix the country's economic ills did not combat foreclosures and was squandered by pumping money into distressed automakers and banks that still are not lending.
To win approval, Obama and his team made extensive promises to Democrats and Republicans that the funds would be used to better address the deepening mortgage foreclosure crisis and that tighter accounting standards would be enforced.
With the federal government committing more money to Bank of America, and the likelihood that other big banks, like Citigroup and J.P. Morgan, will be looking for similar relief, the new President’s promises to Congress may be short-lived.
John Cohn is a senior partner in the Globe West Financial Group[ based in West Los Angeles. He may be contacted at www.globewestfinancial.com
