Banks facing blowback over NY stadium deals

First look at the 2009 IFA class
Open Thread: A look at Runs For vs. Runs Against

It’s a tough time for banks looking to garner a little name recognition. In one corner, we have Congress criticizing Citibank and the Mets over the stadium naming rights deal. In the other corner, we have columnists questioning Bank of America’s plan to sponsor the Yanks.

With the scrutiny on TARP and the general state of the economy, it is of course unsurprisingly to hear so many voices slam the banks. I just wonder if it’s the smartest policy. Rick Rothacker, financial columnist for Bank of America’s hometown Charlotte Observer, wonders if the beleaguered bank and long-time MLB sponsor should keep up the sports visibility. He writes:

[Bank spokesman Joe] 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…

“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.

This raises some interesting sponsor-related questions, and as the Super Bowl ads are sure to be toned down this year, I wonder if that’s a good thing for our economy. Taxpayers are wont to complain if their money isn’t being spent wisely, but who is to say that investment in advertising and sponsorship isn’t a wise one?

Ideally, Bank of America and Citibank spend money on these deals because the returns pay off. Bank of American will draw in so many more customers and so many more investment dollars by plastering its name across the new Yankee Stadium just as Citibank will with the Mets.

As the economy attempts to straighten itself out, more and more of these stories will pop up, and the populist sentiment will be outrage. But it’s all part of the economy. Banks invest in sponsorships because it draws in customers while filling the coffers of other organizations. To pare down rational advertising just because the government is responsible for the bank portfolio is a knee-jerk reaction best left to closer analysis.

First look at the 2009 IFA class
Open Thread: A look at Runs For vs. Runs Against
  • Rebecca-Optimist Prime

    People will find a way to complain about anything.

  • Pablo Zevallos

    I think that the conditions must be placed. To spend taxpayer money to fund such ventures of the businesses that got us in this mess is sacrilege.

    • Ben K.

      Well, sure. But investing in naming rights and sponsorship deals isn’t what got them into this mess in the first place.

      • Pablo Zevallos

        Of course. But before I get too political, I think that businesses have to show that they actually need this money from TARP; naming rights are a luxury, not a necessity; if they’re allowed this luxury, then other luxuries, such as millions in CEO bonuses, are OK, which they aren’t right now.

        • Rebecca-Optimist Prime

          There’s a difference though between naming rights, which can benefit an entire corporation, and CEO bonouses, which only benefit a few people at the top.

          • Pablo Zevallos

            Yes. But only the most profitable companies have the money for naming rights, correct? Yet these companies are asking for government money, which means they’re neck-deep in water as opposed to watching safely it from the comforts of a ship.

            • Rebecca-Optimist Prime

              Oh, I agree completley. I’m just more pissed off about the CEO bonuses. Naming rights at least have the potential to benefit the company…

            • Whozat

              Just because an investment requires a lot of capital does not mean it is a luxury. Naming rights might actually provide great return; the point is that, in setting conditions for TARP money, the govt should rationally analyze whether an expenditure is actually frivolous before banning it. As opposed to banning things that just don’t sound good at first blush.

              • Pablo Zevallos

                I hate to bring up this analogy because it is also counter-response to my point in some ways, but if you’re a dude making $50K and have $8K in disposable income, you’re not going to invest $10K in a normal stock market because you may get it back later, right?

                • Pablo Zevallos

                  *a counter-response*

                • Ed

                  Bank of America already had deals in place with the Yankees for quite a while. As Ben pointed out, they’ve been issuing Yankees branded credit cards for years. The ATMs at the old stadium were all run by Bank of America.

                  It’s not like BoA entered into the new agreement just based off speculation. They’ve had years of dealing with the Yankees, so they should have a pretty solid idea of how much value they’re getting out of it.

  • Shane

    Let’s not forget that the Citi Field naming rights were awarded back in 2006, when we seemed to be in much better shape economically/financially. It didn’t seem like frivolous spending at the time considering the state of things. It’s not like Citi went and spent this money after they received TARP money. They entered into a long term contract a few years ago.

    While, admittedly, it would probably be a good PR move for Citi to attempt to dissolve the contract, it is possible that Citi considers the publicity/visibility of a stadium named after them to be in their best interests.

    • BJ

      The problem is, advertising is not intended to cause PR problems. You can argue that this is acceptable because it brings publicity, but I don’t think this is the publicity Citigroup needs, as it only brings attention to their weakness and alleged mismanagement. If the naming deal still seems like a sound advertising investment, I guess we should not have a problem with it just because tax dollars are involved.

      However, Pablo brings up a solid point in that these banks got a bailout not because they did not have assets, but because they had cashflow problems and were overextended. Further extending the banks might not be a worthwhile risk even assuming the naming rights would be a positive investment, especially with the bad PR it comes with.

      Also how much of the worth of the contract is in actual advertising value, and how much is in the “prestige” of having a stadium named after you. Advertising doesn’t bother me, even bonuses don’t bother me as long as they are only given to people who are MAKING the company money and are in relation to the individual’s contribution. However, “prestige value” seems like it is nothing but a waste. I can see an argument that states prestige is important to increase investor confidence, but that is a slippery slope to saying you need to maintain wastes such as private jets and luxurious retreats to show a strong face. The bottom line is that the status quo is not fine, and that toys like jets and perhaps naming rights do not inspire confidence in this marketplace; you have to run a business with efficiency and innovation to do that.

    • Pablo Zevallos

      Economists have been noting the housing bubble since 2005/6.

  • D.B.H.O.F. p.k.a Don Corleone

    Do these morons know the only reason Bank Of America took any of the Fed money (aka our money) was because they were encourged by the Federal Gov to buy the most toxic Mortgage company ever (that was going to go under and help crush our economy) and also one of the most toxic Investment Banks ever (our economy was on the verge of collapse when this one went down).

    I am not saying any bank even Bank Of America does everything right by the taxpayer in this ballout situation but they are the one major bank who has a CEO that gets it. The guy was the one who forced through the salary cuts for CEO’s of the companies who took bailout money.

    Most of these poloticians who are crying about the bailout money are grandstanding and were also helped create the problem we currently have and the need to bailout anything.

    The Yankees are just the poster boy for success and “greed” (yet I find their owners to be the least greedy of any sports franchise in the history of American sport) so you have to blame somebody.

    How bout we blame the Democrats for trying to force banks to lend money to anybody who wants to buy a home even if they have no way of paying for it. How bout we blame the Republicans for letting these mortgage companies and banks make up their own rules and skirt around basic good business principles and practices.

    How bout we blame John Doe American for buying a house with less than 20 percent down and no way to make the monthly payment if they miss one paycheck. How bout we blame the guy who instead of living within his means, he has to try to keep up with the Jones and put everything on a credit card.

    This is not the Yankees fault. I am getting really sick of these grandstanding frauds. Look in the mirror if you want the problem fixed, and get ready to do some hard work.

    • Vader

      Very well said!

      I love how everyone wants to blame someone for the problem that the country is in….when if they only looked in the mirror they would realize that everyone had a hand in making the problem this country is in today.

      My family was in manufacturing from the 70’s through the 90’s and when NAFTA and the subsequent global free-trade was enacted in the late 90’s a business that employed some 600 employees closed it’s doors in 2001.

      I knew then that this country was in world of hurting…due to the fact that if we as a nation do not produce/make products…and not farming/agriculture operations that do not need the man-power that manufacturing needs to create jobs, it was only a matter of time that this day would come.

      Sorry for the rant…I’m just feed up with no one wanting to take the blame when D.B.H.O.F. p.k.a Don Corleone said it best…a lot of people should just look in the mirror.

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