New "Add It Up" Plan Doesn't Add Up
By Al Norman
The head of the embattled Bank of America told members of the Boston College Chief Executive Officers Club this week that his company is now making money.
"Bank of America should generate more than $100 billion in revenue this year," said CEO Ken Lewis, "and close to $50 billion in pre-tax, pre-provision earnings. That kind of cash flow can solve a lot of problems, given time and an improving U.S. economy." Lewis added that his company won't need more money from the U.S. taxpayers than the $45 billion it has already received from the Treasury's bank recapitalization program (a.k.a. Troubled Asset Relief Program). "While some banks may need more public support in the future," Lewis promised, "I don't believe we will."
Bank of America used around $20 billion of loan money to acquire Merrill Lynch. But the bank has made its first dividend payment on its TARP loan back to taxpayers. "Bank of America already made our first payment of $400 million on February 17," Lewis told the CEOs gathered at Boston College. "Our goal is to pay back the TARP funds as soon as we possibly can."
Indeed, the bank appears to be so confident in its future that it is giving some money back directly to its customers. Branch offices of the Bank of America are distributing fliers announcing the corporation's new "Add It Up" program, which gives cash back to customers who shop at select big box stores like Wal-Mart, Target and Home Depot. The giant bank is not only planning to pay back Uncle Sam as soon as possible, but it will also give cash back to people who buy Chinese imports at Wal-Mart. The Bank's stock may have been rolled back more than 80% over the past year, but customers can still make a deal if they shop at chain stores like Dick's, Sears, Staples and Sam's Club.
According to Bank of America, the Add It Up program "maximizes your purchasing power by giving you cash back awards when you make purchases at participating retailers using your registered Bank of America credit or check card." Once a customer signs up for the program, they receive an email notification to start shopping either online or in-store at over "250 leading retailers." You have to use your Bank of America card, of course, when you make the purchase, but if a $250 camera is being sold at a retailer's discount price of $200, and the retailer and the Bank have agreed to a 4% cash back---you get $8 back. Cash back earnings are then credited to your checking or credit card account.
You can only be linked to retailer sites through the Bank of America Add It Up website. Online purchases made at participating Retailers by going directly to the retailer's website, rather than going through the Add It Up website, will not earn any Add It Up cash. If you shop online at Walmart.com you earn 2% cash back per dollar spent. If you shop at Target's website, you earn 4% cash back per dollar spent. If a customer enrolls by July 12, 2009, Bank of America will match 100% of the cash back rebate for 45 days after the date of enrollment. The maximum total match that may be accrued during the double cash back rebate period is $250 per customer for all enrolled cards.
This somewhat clunky, bureaucratic Add It Up rebate program really adds up to little more than a promotion of Bank of America credit cards, and shopping at big box or national logo stores. It's not surprising that America's largest bank can only set up deals with America's largest merchants. The program includes Apple, Barnes & Noble, Best Buy, Bloomingdales, Borders, Dell, Gap, Home Depot, Kmart, Kohl's, Lord & Taylor, Macys, Office Depot, Staples, Target, Saks, Sam's Club, Sears, Wal-Mart, and other giant retail chains. The Add It Up program is just one more inducement for shoppers to skip over their local merchants, who are not big enough for Bank of America to bother with.
But this blackout of local businesses is exactly the reason why Add It Up does not compute on Main Street. After taxpayers gave Bank of America a gigantic stimulus payment, the corporation turned around and created a stimulus program for many of the companies who already have the advantage of scale over the smaller retailers. There are probably many logistical reasons why Bank of America is unable to interface with local merchants, or help out the independent business owner who feels forgotten by the Big Bank. But in the end, Add It Up ignores almost all of the businesses that make up the backbone of Small Town, U.S.A. Add It Up displays one of the weaknesses of the megabank---it's inability to participate in the life of grassroots America.
Wal-Mart does not need the help of Bank of America, but many of the small towns that host a Bank of America branch, do. Instead of helping big boxes get bigger, Bank of America should come up with a Main Street Program that provides low-cost capital or bridge loans to the little businesses or retail start ups--like the $20,000 loan Sam Walton used to buy his first Ben Franklin store in Newport, Arkansas.
Ken Lewis is right: Bank of America can solve lots of problems. But subsidizing Wal-Mart isn't one of them.
Al Norman is the founder of Sprawl-Busters, and has helped communities fight big box stores for the past 15 years. His website is http://www.sprawl-busters.com .