BofA's race to avoid public shaming underscores perils of crisis
For 93 uncomfortable minutes, Bank of America Corp. rushed to escape infamy this week, before it was saved by the grace of James Corden, the affable talk show host known for crooning in cars with stars.
The drama began when California Governor Gavin Newsom called out the bank for not offering 90-day grace periods to mortgage borrowers affected by the coronavirus, despite such pledges by rivals including JPMorgan Chase & Co. and Wells Fargo & Co. A journalist tweeted the lashing, and then Corden reposted it to his 10.7 million followers. The bank raced to correct what it called the governor's mistake.
Just over an hour later, the firm promised Corden it would defer payments on home loans for as long as the crisis requires. He relented, putting the internet's fury to rest:
Across the nation, bankers are on edge. Publicly, they're emphasizing that unlike the last downturn in 2008 they aren't the cause of this collapse and they intend to help America get through it. Privately, they worry they're destined to get cast as villains.
Once the
government enacts its $2 trillion rescue package, banks are going to be the last resort for millions of consumers and businesses needing additional support to weather months of hardship. The nation's eight banking titans have enough excess capital to ramp up lending by $1.6 trillion, but even that probably isn't enough to meet everyone's needs.
That means bankers will often decide which borrowers get relief from existing loans or access to more credit-make-or-break moments for people and businesses trying to avoid default and insolvency.
One of
the
industry's most senior leaders put it this way: The country's banks are strong and ready to support the economy-but they can't afford to lend irresponsibly to clients who can't repay. That limits the ability of banks to lend to others.
"The best credits are made in the worst of times," said Julie Solar, a senior analyst who tracks North American financial institutions at Fitch Ratings. As the virus's toll on the economy worsens, lenders will eventually be forced to pick winners and losers, she said. "Those borrowers who are higher investment grade are going to fare better."