Please ensure Javascript is enabled for purposes of website accessibility

Man Pulls $1 Million from Bank of America But Completely Misses The Point

By Jay Jenkins – Feb 16, 2014 at 12:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What do checking accounts at Citigroup, JPMorgan Chase, Bank of America, and Wells Fargo have in common? They're all backed by FDIC insurance and are completely safe.

A former Harvard professor has been making headlines after announcing he was pulling over $1 million from his accounts at Bank of America (BAC 0.24%)

The professor cited the Federal Reserve's zero interest rate policy as the primary reason why. He blames the policy for the economic problems in the emerging markets and sees a major pull back for U.S. equities. 

And then the professor stops making sense. He then jumps, preposterously in my view, from emerging market volatility to a full scale run on the major global banks. He's putting his money where his mouth is at least.

Breaking down his logic goes something like this:

  1. Emerging markets are having a hard time because of the Fed's policies
  2. Global banks have exposure to emerging markets
  3. Global  banks are heavily affected by monetary policy, more so than other industries
  4. We should reduce our exposure to emerging markets and global banks

But Bank of America, and certainly Wells Fargo (WFC 0.23%), have little to no exposure to the emerging markets -- so why pull money from there? Citigroup (C 0.10%) perhaps, as international markets are a cornerstone of the bank's long term strategy. JPMorgan Chase (JPM 0.19%) is also fairly committed to doing business globally.

But how would weakness overseas or even a bear market at home put a checking account at risk? There is the whole "too big to fail" thing, and lest we we forget, the FDIC exists to backstop exactly the run on deposits he predicts. Even though the FDIC backstops only $250,000, the professor could simply divide this money among 4 institutions and be completely secure. 

Watch the video below to find out the full story-exactly what the professor said and exactly why it doesn't make sense. Investors, perhaps, should take note -- but depositors have nothing to fear.

For more trending business and investing news, click LIKE here!!

Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Citigroup Stock Quote
$48.29 (0.10%) $0.05
Bank of America Stock Quote
Bank of America
$37.70 (0.24%) $0.09
JPMorgan Chase Stock Quote
JPMorgan Chase
$136.74 (0.19%) $0.26
Wells Fargo Stock Quote
Wells Fargo
$47.44 (0.23%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.