Is Bank Of America A Zombie?

Early on in the financial crisis, economists warned that the biggest danger of the bailouts was that we would end up with zombie banks - institutions kept alive by government bailouts, but essentially doomed to rot away. Recent news about Bank of America raises the question as to whether B of A has turned into a classic zombie. On Monday, Bank of America announced that it was planning on eliminating 30,000 positions in the next two and a half years. It is also expected to close as many as 750 branches. Does this make Bank of America a Zombie Bank?

If you want to know if it matters that Bank of America may or may not be a Zombie Bank, you need to talk to Steve Cook in Vassar, Michigan. Or at least I did. Cook owns the only car dealership in Vassar - American of course; GM. Last year, Bank of America closed its only branch in Vassar, Michigan. In fact it was the only branch the bank had in all of Tuscola County. Cook says the bank closing hasn't been a big immediate hit to the local economy. There's still a Chase branch in town, which is where he goes for his borrowing. What's more, a community bank has moved into the old Bank of America space, and Cook thinks most people are probably happier with a local bank. But community banks generally don't make small business loans, or at least not a lot of them. And Cook says businessmen like to see two big lenders in their home market - you get better pricing that way. (There is a Citizen bank in the town as well, but Cook says he hears troubles at that bank are significantly curtailing the number of loans it makes.) And so Cook sees the exit of Bank of America as another potential step down for his home town. Cook says when he first came to Vassar there was 20 or 30 local business owners who would buy his most expensive cars. Now it's down to a handful.

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