By Hugh Son
NEW YORK - Brian Moynihan was impatient. It was August 2011, and the Bank of America Corp. chief executive officer was reviewing plans to impose a $5 monthly fee on debit- card users.
Joe Price, the company’s retail head at the time, wanted to test the charge in small markets, as competitors JPMorgan Chase & Co. and Wells Fargo & Co. were doing. Moynihan, who had been in the job about 18 months, teased Price about his caution, according to four people with knowledge of the meeting at the bank’s headquarters in Charlotte, N.C.
Then the CEO ordered his subordinate to roll out the fee coast to coast, say the people, who asked not to be identified because they weren’t authorized to speak publicly about the matter, Bloomberg Markets will report in its April issue.
The decision, announced that September, was met with protests at branches from Los Angeles to Boston. Gerri Willis, a Fox Business Network anchor, shredded her Bank of America debit card on air. Thousands of customers closed accounts. Even President Barack Obama jumped in, blasting the efforts of banks to recoup some of an estimated $8 billion in revenue lost after the 2010 Dodd-Frank law capped fees on debit-card purchases, saying they “don’t have some inherent right just to get a certain amount of profit.”
Five weeks later, the bank -- the second largest in the U.S., with $1.1 trillion in deposits, 53 million customers and 5,500 branches -- reversed course. David Darnell, the new head of retail, took responsibility for the mistake.
The incident capped a difficult year for Moynihan, 53, one in which he careened from crisis to crisis. In January 2011, he told investors that refunds on defective home loans sold to Fannie Mae were a thing of the past, a prediction that proved wrong within the first quarter as unresolved claims from U.S.- owned mortgage firms surged 90 percent to $5.4 billion. In March, he raised expectations of a dividend increase, only to have them dashed by regulators when the bank failed a stress test. Shares plunged 58 percent in 2011 as investors speculated about who might replace Moynihan.
“He has lost a lot of credibility,” Paul Miller, an FBR Capital Markets Corp. analyst, said in August 2011. “If we continue to see the stock crater, at some point, people are going to rise up and say, maybe we need to break this bank up, and Brian is probably not the guy to lead that.”
Stung by the debit-card backlash, Moynihan was advised by strategy and marketing chief Anne Finucane to scale back on public and corporate appearances, according to people with knowledge of the conversation.
An Ohio-born lawyer who rose through the ranks at FleetBoston Financial Corp. before its 2004 acquisition by Bank of America, the ruddy-faced CEO sometimes befuddles listeners, tripping over a flood of thoughts as they leave his mouth. He would be better off focusing on what he could control, Finucane told him. Moynihan, Finucane and other top executives at the bank declined to be interviewed. Larry DiRita, a company spokesman, declined to comment.
The advice paid off. Last year, Moynihan made strides shrinking the company, erasing expensive debt from its balance sheet and whittling away at the pile of toxic mortgages inherited from predecessor Kenneth Lewis’s purchase of Countrywide Financial Corp.