The news at a glance
Banks: BofA backtracks on debit card fee; Bankruptcy: Corzine’s firm collapses under EU debt; Wall Street: New insider trading charges; Euro debt: Draghi takes over European Central Bank; Economy: Fears of double-dip recession subside
Banks: BofA backtracks on debit card feeScore one for the consumer, said Scott Reckard in the Los Angeles Times. After a month-long public backlash, Bank of America has dropped its plan to impose a $5 monthly fee on customers who use debit cards. The country’s second-largest bank has been struggling with a “public relations disaster” since late September, when it announced that the extra charge was necessary because new financial regulations limiting what the bank could charge merchants would hurt the bank’s revenues. “We have listened to our customers very closely over the last few weeks,” David Darnell, BofA’s co–chief operating officer, said in a statement. “As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”
Bank of America’s about-face follows similar backtracking by its rivals, said Robin Sidel in The Wall Street Journal. Over the past several weeks, JPMorgan Chase, U.S. Bank, Citibank, SunTrust, Regions Financial, and Wells Fargo have all either canceled planned fees or said they would no longer consider imposing them after watching BofA’s public drubbing. That left BofA alone as the last major bank still considering the charge. “Consumers have clearly said this is a no-go,” said financial industry analyst Patricia Hewitt.
Bankruptcy: Corzine’s firm collapses under EU debtWe have just seen the “most prominent U.S. casualty yet from the eurozone crisis,” said Dan Wilchins and Jed Horowitz in Reuters.com. MF Global, a brokerage firm led by former Goldman Sachs chairman and ex–New Jersey Gov. Jon Corzine, filed for bankruptcy this week as a result of bad bets on European debt. The firm, which gambled $6.3 billion on government bonds from troubled countries like Italy and Spain, was reportedly under federal investigation after hundreds of millions of dollars appeared to be missing from customer accounts.
Wall Street: New insider trading chargesThe indictment of “one of America’s most-respected corporate directors” on insider trading charges stunned Wall Street last week, said Michael Rothfeld in The Wall Street Journal. Rajat Gupta, a former director at Goldman Sachs and Procter & Gamble, is the highest-profile person yet charged in connection with the probe that has brought down hedge-fund manager Raj Rajaratnam and more than two dozen others. Prosecutors allege that Gupta, who has pleaded not guilty to six counts of securities fraud and conspiracy, passed on illegal tips to Rajaratnam, who was sentenced last month to 11 years in prison.
Euro debt: Draghi takes over European Central BankMario Draghi, who became president of the European Central Bank this week, “goes to battle on Day 1” to restore global confidence in the euro, said Jeff Black and Simon Kennedy in Bloomberg.com. As the world’s second-most-powerful central banker, behind the Fed’s Ben Bernanke, Draghi has remained tight-lipped about how he intends to steer the ECB during the next phase of the eurozone crisis. He will face pressure to continue the ECB’s purchases of bonds from debt-laden countries, though he has called such measures “temporary by nature.”
Economy: Fears of double-dip recession subsideThe odds of the U.S. sinking back into recession diminished last week, said Shaila Dewan in The New York Times, as economic growth finally showed signs of picking up. The U.S. economy expanded at an annual rate of 2.5 percent in the third quarter, the Commerce Department said, up from 1.3 percent during the previous one. But the pace of recovery is still “not brisk enough” to drive down the 9 percent unemployment rate. “It ain’t brilliant,” said data analyst Ian Shepherdson, “but at least it’s heading in the right direction.”