Banks Reliving 2008, Bank Of America In The Pressure Cooker

Includes: BAC, GS, MS
by: Wall Street Strategies

By David Urani

It is looking more and more like 2008, and in a scary coincidence, the S&P 500 closed Monday at 1099.23, the exact price is closed at precisely three years ago on October 3, 2008. The sentiment reversed somewhat throughout the day, but the banks were on the hotseat. Mainly, it is Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) which are under the most scrutiny at the moment. There have been increasing call outs of Morgan Stanley's European exposure and now that the situation in Greece looks a little more hopeless, the chances are rising that it can fall victim to sovereign debt contagion (remember in 2008 when the catchphrase was subprime contagion?). With respect to Goldman Sachs, there have been estimates that the company will report its first quarterly loss in years, and that bonuses may be cut to nearly nothing; not to mention all the various legal battles it has been getting itself into. Credit Default Swap costs on MS and GS debt have spiked over the last few days, and are now at 2008 crisis levels.

And then there's poor old Bank of America (NYSE:BAC). The swirling sentiment that it is seriously struggling has been around for months now and it keeps exploring new low territory, despite the interjection from Warren Buffet in August. BAC stock is down 11% this week. One of the most worrying things for me about Bank of America is that its website has been down for three days. I'll admit, I'm a Bank of America customer, and it's certainly worrying that I can't check up on my account online (surely the phones are tied up too, I haven't even bothered to try). No doubt this has to do with the $5 fee they're putting on debit cards and a massive customer backlash (reminds me of Netflix).

For me, a backlash at Bank of America would be a great thing. Customers shouldn't stand for that kind of behavior from banks or any other companies. This freedom of choice is what makes free markets work, and more acknowledgement on our behalf of poor treatment by banks will do to the finance industry what the Dodd-Frank regulations are meant to do but will end up failing to accomplish. Perhaps all those Occupy Wall Street protesters are ambiguous on their message, but whether they realize it or not I see a lot of angry bank clients that are becoming cognizant of their own freedom of choice, doing what they never had the fortitude to do before as account holders or as mortgage borrowers until it was too late. Ultimately, only we have control over our own destiny, and the decisions we make on our own have more power than any rules and regulations.