Tag Archives: Amanda Alix

Business, Finance, Occupation & Industry

How Bank of America Helped Send the Dow Higher

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By Dan Caplinger, The Motley Fool

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First-quarter earnings reports are finally here, but before the first release of the official earnings season came this afternoon, the Dow Jones Industrials managed to start things off on an optimistic note, rising 48 points even as many analysts fear that any slowdown in earnings could trigger a reversal in the stock market‘s impressive gains over the past four years. Broader market measures rose more substantially, with gains of more than half a percent for the S&P 500 and Nasdaq Composite.

The biggest percentage gainer in the Dow was Bank of America , which climbed 2%. Despite having acquired a terrible image from its needing bailout support and its attempts to raise income in the aftermath of the financial crisis, B of A has been reworking its image, and Fool contributor Amanda Alix points to “super-branches” with luxury accoutrements as well as more advanced ATM technology as evidence that the bank has learned from its past missteps.

Elsewhere in the financial sector, AIG climbed nearly 4% to a 52-week high as the company seeks to block a potential shareholder derivative lawsuit that former chairman and CEO Hank Greenberg wants to file against the U.S. government. Greenberg seeks to argue that the terms of the government‘s bailout of the insurance company were unfair to AIG, but AIG correctly anticipates a huge potential outcry from outraged taxpayers if such a suit were to go forward. Meanwhile, AIG also completed the sale of its American Fuji Fire and Marine subsidiary to White Mountains Insurance, with the deal that was announced last year having had to wait for regulatory approval before proceeding. AIG has done a good job of recovering from the financial crisis by concentrating on its core business, and investors who got in after the financial meltdown have reaped the benefits.

Finally, Weatherford International rose nearly 4% on the heels of General Electric‘s deal to buy Lufkin Industries announced this morning. As a fellow oil-services provider, Weatherford is rising on speculation that merger and acquisition activity in the space could rise as a result of the GE acquisition. Yet GE almost certainly wouldn’t be interested after having bought Lufkin, and with Weatherford’s market cap of nearly $10 billion, it would take a similarly big buyer to pull off a buyout of that size. It’s hard to see Weatherford as an acquisition candidate even after the Lufkin buyout.

Today’s gains add to the huge returns that investors have earned as Bank of America’s stock doubled in 2012. Are there more gains yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool’s premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, financials bureau chief, lift the veil on the bank’s operations, including detailing three reasons to buy and three reasons to sell. Click …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

The $32 Billion Bank Heist You're Paying For

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By Dan Caplinger, The Motley Fool

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Bank robberies conjure up images of famous criminals like Jesse James or Bonnie and Clyde. But nowadays, many consumer groups are accusing banks of having turned the tables on their customers, taking billions of dollars from their accounts every single year. As appalling as that sounds, it’s perfectly legal, and it all happens because so many customers voluntarily do something they could easily avoid: They overdraft their checking accounts.

Bank robbers Bonnie Parker and Clyde Barrow, also known as Bonnie and Clyde. Source: Library of Congress via Wikimedia Commons.

The appalling statistics on bank overdrafts
The amount of money involved in bank overdraft fees makes the worst bank heists in history seem like pocket change by comparison. According to a study by Moebs Services, bank customers paid $32 billion in 2012 on overdraft fees. That’s actually down from $37 billion in 2009, but it’s up slightly from 2011.

Millions of customers pay overdraft fees, with Moebs estimating that 38 million checking accounts — more than a quarter of the total number of such accounts in the nation — frequently incur overdraft fees. With a typical charge for overdrafts coming in at around $30 for banks and $27 for credit unions, incurring those fees multiple times can quickly add up to a huge burden on customers.

Payday lenders: the better alternative?
Perhaps the most surprising thing about the study is that payday lenders may actually be a lower-cost source for people short on cash than banks. As much as payday loan operators Cash America and Fast Cash Financial and pawn-shop giant EZCorp have been criticized for their high fees, the Moebs study found that typical fees at payday lenders were just $16 — well below the typical overdraft charge.

When will the fees end?
Last year, the Consumer Financial Protection Bureau took on high overdraft fees with an investigation into whether certain bank practices improperly increased the amount customers were charged. Among the areas the CFPB examined were transaction-reordering guidelines that often lead to multiple overdraft charges, as well as misleading marketing materials.

CFPB Director Richard Cordray. Source: CFPB.

If the CFPB is successful in limiting overdraft fees, the impact could be huge. Already, Bank of America , Citigroup , and other banks have ended the practice of resequencing transactions in a way that could increase fees. Yet as Fool contributor Amanda Alix noted at the time, further limits could cost banks 3% to 4% of their earnings, with B of A’s losses potentially amounting to $480 million. Until the CFPB plugs all the potential loopholes, high-cost overdrafts will continue to happen.

Protect yourself
In the end, as ridiculously simple as it sounds, the only way you can stop banks from taking your hard-earned money is to stop overdrafting your checking account. Given how common overdrafts are, though, millions of Americans don’t appear likely to …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

How Annaly Is Obfuscating Facts to the Detriment of Shareholders

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By John Maxfield, The Motley Fool

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The audacity of the executives at the high-yielding mortgage REIT Annaly Capital Management never ceases to amaze me. Among other transgressions — click here to see a full list — they pay themselves patently exorbitant salaries. They disregard majority shareholder votes related to the election of directors and executive compensation. And they use nepotism to fill the top positions at their publically traded subsidiary Chimera Investment Corporation — which, not coincidentally, remains entrenched in a massive accounting blunder.

But even I was surprised to read its most recent proxy statement filed earlier this week. As my colleague Amanda Alix noted yesterday, nuzzled amongst the usual assortment of proxy votes for the company’s upcoming shareholders’ meeting on May 23 is a seemingly innocuous proposal to change the company’s management structure, from one that’s internally managed by Annaly’s executives, to one that’s externally managed by a company owned by Annaly’s at-that-point former executives.

What’s the difference? While Annaly claims that it will save the company $210.9 million over the next five years and bring it into alignment with the likes of American Capital Agency , Invesco Mortgage Capital , and Two Harbors Investment Corp. , the true reason appears a little less noble. As an analyst explained to Bloomberg News, “the motivation for the change was probably that it means the pay of individual executives will no longer be disclosed.”

Remember what I said about exorbitant pay and shareholder votes? In 2011, its chief executive officer and chief operating officer made $35 million each. And while that figure declined to $25 million last year, it still dwarfed that of executives at the largest and most esteemed financial companies in the world, including JPMorgan Chase and Wells Fargo, which have balance sheets 18 times and 11 times larger than Annaly’s, respectively. In addition, when a majority of Annaly’s shareholders reacted to this last year by voting to hold say-on-pay votes on an annual basis — which, mind you, are nevertheless nonbinding — Annaly decided otherwise in direct contradiction of its shareholders’ expressed desires.

This is why I was particularly entertained by Annaly’s explanation of how the interests of its shareholders will be aligned with the interests of the executives running the company. If the proposal is approved, Annaly has promised to “institute a stock ownership requirement under which our five most senior executive officers, over the next three years, own an amount of our shares of common stock equal to at least 6 times their 2012 base salary which represents an aggregate ownership of $38.7 million.”

This is comical, if not verging on dishonest. At Annaly, as at many other financial companies, base salary is a relatively negligible portion of overall compensation. As the mortgage REIT itself acknowledges (emphasis mine): “[W]e pay for performance by structuring compensation so that the majority of cash compensation is comprised of discretionary bonuses linked directly to the value of our stockholders’ equity.”

So how …read more
Source: FULL ARTICLE at DailyFinance