On Monday, Bank of America announced two large settlements with different parts of the federal government. Settling items for Bank of America is nothing new. Counting the twin settlements, Bank of America has reached fourteen settlements with various entities since 2010. Over that time, Bank of America has paid to settle charges for loaning to people who couldn’t afford it, discriminating against minorities who could, charging excessive overdraft fees on checking customers, selling bonds that were riskier than expected, and improperly foreclosing on some loan customers. It is quite a list.
Source: Wall Street Journal
The settlements total is $43.52 billion, more than the GDP of Lithuania. That is also $43.52 billion not available to shareholders because of how Bank of America does business. Interestingly, many of the settlements come from acquired companies like Countrywide Credit.
In a spirit of solidarity, I propose we all join CEO Brian Moynihan and the rest of Bank of America in a commitment to do business right in 2013. This isn’t a lot to ask. As a registered investment advisor that owes its clients a fiduciary duty, we should already be doing this.
Bank of America’s challenges give us a good set of principles to follow in doing business right:
- Help people to invest in strategies that leave them better off
- Make sure investors understand the basics of what they are buying
- Follow the procedures that generate consistent outcomes for investors
- Treat all investors and partners fairly
- Give our best effort
A UNO colleague of mine who used to serve on the local power company board said the order of words matters a lot. If you are running a nuclear power plant, in the long run safe is cheap. Cheap is not safe. For financial services firms, in the long run principles are profitable. Profit (short-term) is not principled.