Banking on Green Energy
June 28, 2012
Bank of America (BOA) has exhibited all of the recent signs of a bank that is in trouble. It has attempted to implement shakedown policies only to backtrack due to customer outrage. Further, it is finding itself increasingly isolated in lending markets due to its apparent inability to make good on its financial commitments, says Matt Patterson, the Warren T. Brookes fellow at the Competitive Enterprise Institute.
- Bank of America received $45 billion in bailout money from the federal government at the height of the financial crisis.
- This payment was supplemented by further government support to shore up losses from the bank's takeover of Lehman Brothers.
- Then, last year, Bank of America suddenly announced it would charge customers a $5 fee for using their debit cards -- a fee that the bank eventually gave up on implementing.
- Despite this embarrassment, the Wall Street Journal reported in March that the bank was still considering requiring "many users of basic checking accounts to pay a monthly fee unless they agree to bank online, buy more products, or maintain certain balances."
- As if that weren't bad enough, earlier this year, mortgage giant Fannie Mae announced it was cutting off Bank of America from selling loans because the bank was failing to honor repurchase requests in a "timely" fashion.
Given this uneven history, it seems shocking that the apparently struggling banking giant would voluntarily take on another large liability. Nevertheless, BOA Chief Executive Brian T. Moynihan explained the company's new green energy initiative, which will include promoting renewable-energy platforms such as wind and solar, as a benefit to BOA customers.
- The bank is projecting that it will spend up to $50 billion on the initiative over the next 10 years.
- This is on top of a previous 10 year, $20 billion commitment to the Great Green Cause, which the bank says it is on track to complete ahead of schedule.
- That previous effort included $5 billion for renewable energy projects and an additional $1 billion for consumer financing of hybrid vehicles.
One would not be remiss to speculate that this generous environmental support is involuntarily. The current financial outlook for solar and wind energy is far from rosy, and so one must wonder what, if anything, besides a government mandate could encourage the company to invest heavily in these uncompetitive fields.
Source: Matt Patterson, "Banking on Green Energy," Washington Times, June 20, 2012.
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