Oxymoron - Bank of America

Let me declare up front that I have no love lost for Bank of America and find their name a true oxymoron, as they do very little to act in America's best interest.  The opinion expressed is that of the author and may not reflect the thoughts and opinions of Examiner.com.  Today SEIU (Service Employees International Union ) released a report that exposes Bank of America's practices.  I look forward to the day when the economy turns around and B of A is begging for our business, so I can tell them to get lost.  The full report may be read here.

WASHINGTON -- A new report released today by the Service Employees International Union shows that Bank of America has cut small business loans made through the Small Business Administration (SBA) 7(a) program - despite taking billions in taxpayer-funded bailouts meant to stimulate the economy.

At a time when the failure rate of small businesses has been on the rise, Bank of America has - and continues - to reduce the amount it lends in SBA loans while increasing higher-interest credit card lending to small businesses. The result is less capital to support struggling small businesses and boost the economy.

Here's a quick look at the facts about small business loans at the Bank of America. All the information was provided by the Service Employees International Union.

FACT: Bank of America Cut Lending to Small Businesses After Taking Billions in Bailout Money to Stimulate the Economy - Latest Cuts Came on Top of Years of Decreased Lending

Not only did Bank of America cut small business lending after taking billions in bailout funds, but the bank lent out significantly less money to small businesses than many of its top competitors under the SBA 7(a) program the Small Business Administration's main loan program, the union charged. The average loan amount was comparatively small. In FY 2008, the average loan amount for all SBA 7(a) lenders was $182,492. At Bank of America, the average loan amount was only $31,032.

FACT: Bank of America Cut SBA 7(a) Loans by 90 percent -- Twice the National Average

Over the past two years, Bank of America's small business lending has decreased from more than 10,000 SBA 7(a) loans to fewer than 500. The greatest decline occurred after the bank received bailout funds last October -- money intended to jump start lending, according to SEIU officials. In the first seven months of FY 2009 (October-April), the bank made only 241 loans through the SBA 7(a) program, worth a total of $10 million. In the same time period last year, the bank made 3,053 SBA 7(a) loans, worth $92 million.

FACT: Bank of America Cut Small Business Lending in States

In FY 2007, Bank of America lent more than $335 million to small businesses in 44 states through the SBA 7(a) program. In the first seven months of FY 2009, the bank cut SBA 7(a) lending completely in 14 states, said SEIU. Cuts were most severe in states like Arkansas, where the bank made 49 SBA 7(a) loans worth $1.4 million in FY 2007, and made zero in the first seven months of FY 2009, and in three New England states (Maine, New Hampshire, and Rhode Island), where the bank went from making 109 loans worth $2.8 million in FY 2007 to zero to date in FY 2009.

FACT: Bank of America Pulled a Bait and Switch, Shifting Small Business Portfolio from Traditional Loans to Higher-Interest Credits Cards

Instead of lending money to small businesses through SBA loans (with typical interest rates of 7-9 percent), Bank of America appears to be moving its small business clients to higher-interest credit card loans, according to SEIU. (Credit cards typically charge small businesses 16-23 percent.)

In 2007 (the most recent year for which this data is currently available), more than 75 percent of Bank of America's small business loans were made through FIA Card Services, its credit card division. Bank of America acquired FIA (previously called MBNA) in January 2006. FIA's small business loan volume increased nearly 400 percent between 2006 and 2007. The $6.3 billion increase in the bank's total small business lending between 2006 and 2007 came almost entirely from the bank's credit card division.

FACT: Bank of America Hurt Small Businesses and Shareholders with Risky Lending Practices

Bank of America shifted its loan portfolio - favoring "Express Loans" with lower underwriting standards - despite the fact that these loans are guaranteed by the SBA at a lower rate and have been found more likely to default, said SEIU. From FY 2006 through FY 2008, more than 95 percent of Bank of America's SBA 7(a) lending was through the SBA Express program, saddling shareholders and communities with unnecessary risk, the union claims.

Reminiscent of the mortgage crisis, small business defaults have risen. In fall 2008, Bank of America announced that its small business default rate had doubled to match the national rate and possibly exceed it, going from 6 percent in 2007 to 12 percent (annualized) in 2008. Bank of America's Chief Financial Officer Joe Price described the bank's small business lending as performing more like consumer debt than commercial lending. CEO Ken Lewis more bluntly called Bank of America's SBA loan portfolio "a damn disaster," reported SEIU officials. 

Bank of America's lending practices have hurt the RV industry at almost all levels.  The dealers ability to weather this economic storm has been adversely affected by the lack of lending from Bank of America. Consumers which include the RV community have also been hurt by B of A practices as noted when B of A employees came forward with horror stories; details may be read here.   Should Bank of America wish to respond (which I seriously doubt) we will be pleased to publish their response.
 

Happy Camping

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