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Yankees' Talks With BofA Add To Scrutiny; Bank Seeks To Sponsor Team While Receiving Billions In Government Assistance

Charlotte Observer (North Carolina), January 28, 2009

By Rick Rothacker, rrothacker@charlotteobserver.com

Charlotte-based Bank of America Corp. continues to negotiate a possible New York Yankees sponsorship amid increased scrutiny of spending by banks that have received government assistance.

Financial institutions that have received billions under the Troubled Asset Relief Program, or TARP, face new government monitoring of how they spend their money as well as public outcry over expenses seen as superfluous by taxpayers, lawmakers and watchdog groups.

New York-based Citigroup Inc., which has received $45 billion from the government, on Tuesday reversed an earlier decision to take delivery of a $50 million jet, reportedly after getting pressure from the Obama administration. The decision sparked applause during a congressional hearing when the news was announced.

Meanwhile, Wells Fargo & Co. is downsizing the jet fleet formerly owned by Charlotte's Wachovia Corp., closing down a subsidiary called Hawkaire and making plans to sell off five of the combined company's eight planes. A spokeswoman said the move is tied to the merger, not government scrutiny. Wells Fargo received $25 billion in funding in October.

Published reports in September said Bank of America was close to a deal to become the largest sponsor in the new Yankee Stadium, although the agreement wouldn't include naming rights. Bank of America already has a sponsorship with the baseball team that includes Yankees-themed credit cards and checking accounts.

Bank spokesman Joe Goode said discussions are ongoing with the Yankees but that the bank has nothing further to announce.

Goode said Bank of America treats sponsorships as a business proposition rather than a mere marketing exercise. "We partner with profitable sports franchises that yield significant revenue streams for the bank," he said. For example, the bank offers team-related products to consumers, makes loans to sports teams and offers wealth management services to players and owners. The Yankees debit and credit cards are among the bank's most popular "affinity products," he said.

Published reports had the Yankees sponsorship costing up to $20 million per year. But a source familiar with the situation said the bank was looking to spend significantly less.

Naming rights deals inked by troubled financial institutions such as Citi and AIG have already come under fire from watchdog groups. The prospect of a Yankee naming rights deal also addled critics on Tuesday.

"This is exactly the kind of thing taxpayers are fed up paying for," said Stephen Lerner, assistant to the president at the Service Employees International Union, a frequent critic of the bank.

Banks that have taken taxpayer money, particularly ones such as Bank of America that have "double-dipped," need to show they are being good stewards of taxpayer money, said Steve Ellis, vice president at Taxpayers for Common Sense, a nonpartisan government watchdog group. Bank of America received $20 billion this month to help shore up its Merrill Lynch & Co acquisition, adding to $25 billion it had received earlier.

Ellis said any bank making large spending decisions faces public outcry as well as the wrath of the Treasury Department, which is trying to justify the TARP program as needed to stabilize the banking system and boost the economy. "They do this at their own risk," he said of the bank's possible Yankees sponsorship.

William Chipps, of Chicago-based IEG Sponsorship Report, said the Yankees are a premier franchise with a huge fan base to tap, and Bank of America is known for carefully tracking its return on marketing investments. But in the current environment, he said, "the challenge is convincing consumers that it's not just a throwaway (of the bank's money)."

Bank of America spent between $120 million and $125 million in a wide variety of sponsorships in 2007, ranking it 14th among U.S. companies, according to IEG. The firm isn't disclosing numbers for 2008, but it's predicting 2.2 percent growth in sponsorship spending in 2009, its lowest projection in 24 years.

As part of receiving the government money, Bank of America and other banks pay dividends to the government and accept restrictions on executive pay. Bank of America's latest injection also comes with a provision that says the company must maintain a comprehensive corporate expense policy and submit any material changes to the Treasury. The policy is to cover expenses including the use of corporate aircraft, the acquisition of real estate, entertainment expenses and "the hosting, sponsorship or other payment for conferences and events."

Goode, the Bank of America spokesman, said as the bank understands it "there are no restrictions in TARP for sponsorships." The Treasury did not return a call seeking comment.

At Wells Fargo, the San Francisco-based bank plans to honor current sponsorship contracts made by Wachovia, spokeswoman Mary Eshet said.

As for the jet fleet, Wells Fargo is closing Wachovia's Charlotte-based aviation department because the company's headquarters is no longer here and because the company is keeping fewer planes, Eshet said. Wells Fargo, which covered less territory than Wachovia, had just one corporate jet, relying more on commercial airlines for travel.

The company is maintaining three planes to allow for "efficient and productive" business travel for senior executives, particularly considering the company's new coast-to-coast breadth, Eshet said. Wells is working to sell the five planes it's not keeping and to exit its facility at Charlotte-Douglas International Airport, she said.

Bank of America declined to comment on its corporate aircraft. Federal Aviation Administration filings show the bank has at least five planes.

Lawmakers' comments

McClatchy Washington bureau reporter Lisa Zagaroli on Tuesday talked with two members of the U.S. House Financial Services Committee about Bank of America's recent acceptance of more government funding. Here's what they had to say:

*Rep. Barney Frank, D-Mass., committee chairman:

"Bank of America is entirely different than (Citigroup). (Citigroup) is in serious trouble. Bank of America is getting more TARP money because the Bush administration desperately wanted them to buy Merrill Lynch. They needed a second infusion of TARP money because Merrill was in worse shape than they thought. Bank of America is not in the straits I believe that Citicorp is in; at least you can't infer that from the extra TARP money."

*Rep. Patrick McHenry, a Cherryville Republican:

"The main concern with TARP is, it lacks transparency and guidelines on how they're lending the money to institutions. So by being less than clear with the public, it's difficult for the average investor to determine the relative strength of an institution. If the government were clearer about why institutions receive money, we could understand the relative strength of BofA."