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TBTF Bank Fraud Continues…But the Decision to Put Profits First Is Nothing New

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Matt Taibbi, of Rolling Stone, published a lengthy article on Bank of America’s failure of ethics regarding credit cards accounts. His reporting cites robo-signing abuses, failure to document customer records, and outright fraud. Yet, BofA continues to be protected by our government as a Too Big to Fail bank.

Bank of AmericaHowever, BofA’s malfeasance…and arrogance towards its customers…is neither new nor only a decade long. BofA has a long history of a management that has made poor decisions and expected their regular customers to financially bail out the bank.

Bank of America’s problems began long before the company moved its headquarters from San Francisco to Charlotte, NC. In the early ‘80s, I went to work for one of BofA’s ad agencies – one of many spread around San Francisco. Not long after, BofA found itself in deep financial trouble as a result of overexposure in the California housing market which was undergoing a price decline and an even larger exposure to So. American loans that were failing. BofA was in a panic as their losses mounted, particularly on the So. American loans.

You’d think they would have had some humility about their losses, but instead management became even more arrogant. They began increasing fees on their regular banking customers while at the same time treating those customers with distain. Customers who complained about errors or unknown fees were regularly treated with derision. The attitude was “we’re better than you so go suck a lemon.”

At the same time, BofA decided it could make more money by catering to the wealthy. No longer did their marketing focus on regular banking customers who needed a checking account or a home mortgage or a credit card at reasonable interest rates or a savings account that gave a decent rate of interest return. Bleeding the poor suckers was fine with management if it shored up the bank’s huge losses.

Instead of maintaining Giannini’s record being a bank for average, hardworking families, BofA refocused their moneymaking strategy on Private Banking to attract wealthy customers. They offered wealthy customers a personal banker who was intimately familiar with the customer’s finances; a haute couture private lounge, complete with designer coffee and wine, so their wealthy customers never had to rub shoulders with the riff-raff; and a culture within the bank to make the wealthy feel superior.

Within a year, BofA saw a mass exodus of their regular banking customers. But don’t take my word for it, look up what Charles Schwab said about BofA’s attitudes towards its customers during this time period.

It didn’t take long – a year or so – for BofA to realize the mistake they made in driving off regular, middle income banking customers. Thousands, if not hundred of thousands, of ordinary middle income customers had deserted BofA. As a result, BofA began to court these customers with a vengeance because they realized the bank could not survive without them.

Within a few years, BofA, in its search for every higher profits, became one of the largest credit card offerers, from an insider’s marketer position, in the marketplace because credit cards became enormously profitable – and became the bank’s largest profit center, outstripping anything other product by huge margins.

After the merger which moved BofA’s headquarters to Charlotte, the arrogance of management did not recede. It became worse as management decided their customers were little more than cash cows which the bank could bleed to their hearts’ content…and they used every trick on the books to do so.

But BofA is not alone in this type of thinking or attitude. Each and every one of the TBTF banks is complicit in the same kind of behavior.

I’m sure A.G. Giannini, were he alive today, would mourn what became of his workers’ bank…and deeply ashamed of his bank’s modern day management that chose to put its’ profit over its customers well being.


John Boehner Exposed

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After reading Rolling Stone political writer Matt Taibbi‘s exposés on the Jefferson County, AL, municipal bond fraud, the Tea Party, and the foreclosure fraud, I’ve become a big fan of his reporting. He’s often rude, certainly irreverent, but blatantly honest in his criticism and his praise.

Now, he’s taken on Speaker of the House, John Boehner. Here’s a taste:

If you’re interesting in getting to know the real John Boehner, Taibbi offers an interesting insight into what makes this politician tick.

The Democrats have plenty of creatures like Boehner. But in the new Speaker of the House, the Republicans own the perfect archetype — the quintessential example of the kind of glad-handing, double-talking, K Street toady who has dominated the politics of both parties for decades. In sports, we talk about athletes who are the “total package,” and that term comes close to describing Boehner’s talent for perpetuating our corrupt and debt-addled status quo: He’s a five-tool insider who can lie, cheat, steal, play golf, change his mind on command and do anything else his lobbyist buddies and campaign contributors require of him to get the job done.

Taibbi doesn’t pull any punches when describing what Congressional aides on both sides of the aisle think of him. Or what a raucous mess the next two years are likely to be.

Written by Valerie Curl

January 20, 2011 at 6:26 PM

Why Do Americans Protect the Really Rich?

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Modern Day Robber Barons

Illustration by Victor Juhasz

For months, I’ve tried to figure out why Americans have such a schizophrenic relationship with the super rich.

On the one hand, American people hate elites who attend prestige private universities, live in private gated communities, and make more money that they can ever spend. One the other hand, Americans vote to protect low tax rates on the uber wealthy as well as the radical income disparity that threatens our nation’s stability and economic progress even while denying millions of hard working middle income Americans extended unemployment.

Some national surveys suggest that the reasons Americans simultaneously hold these split attitudes regarding the rich is because thy either see themselves as rich or they believe they will become rich on day. Yet, well publicized new U.S. data refutes both of those beliefs. Still, even when American voters are aware of this new data, they continue to ignore it favor of old beliefs systems.

So, today I had one of those epiphany moments when I read NY Times columnist Nicholas Kristof who has traveled the world to all of the poorest countries and seen the worst governments in action.

The top 1 percent of Americans owns 34 percent of America’s private net worth, according to figures compiled by the Economic Policy Institute in Washington. The bottom 90 percent owns just 29 percent.

That also means that the top 10 percent controls more than 70 percent of Americans’ total net worth.

Emmanuel Saez, an economist at the University of California at Berkeley who is one of the world’s leading experts on inequality, notes that for most of American history, income distribution was significantly more equal than today. And other capitalist countries do not suffer disparities as great as ours.

“There has been an increase in inequality in most industrialized countries, but not as extreme as in the U.S.,” Professor Saez said.

One of America’s greatest features has been its economic mobility, in contrast to Europe’s class system. This mobility may explain why many working-class Americans oppose inheritance taxes and high marginal tax rates. But researchers find that today this rags-to-riches intergenerational mobility is no more common in America than in Europe — and possibly less common.

I’m appalled by our growing wealth gaps because in my travels I see what happens in dysfunctional countries where the rich just don’t care about those below the decks. The result is nations without a social fabric or sense of national unity. Huge concentrations of wealth corrode the soul of any nation.

And then I see members of Congress in my own country who argue that it would be financially reckless to extend unemployment benefits during a terrible recession, yet they insist on granting $370,000 tax breaks to the richest Americans. I don’t know if that makes us a banana republic or a hedge fund republic, but it’s not healthy in any republic.

This seems inconceivable at a time when millions of American families risk losing their homes as a result of outright mortgage scams and the ability feed and clothe their children – poverty rates are at their highest since the early ’60s – and millions more have seen their savings and retirements accounts decimated by an unregulated derivatives market in which all the players had a hand in pushing these highly complicated products that no one understood onto unsophisticated buyers worldwide. Communities all across America have been fiscally destroyed by the havoc these products wreaked, leading to significant higher tax rates and/or far fewer services at the local and state level.

As Investigative Reporter Matt Taibbi of Rolling Stone reports:

[T]he state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This “rocket docket,” as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and laby­rinthine derivative deals of a type that didn’t even exist when most of them were active members of the bench. Their stated mission isn’t to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history — an epic mountain range of corporate fraud in which Wall Street megabanks conspired first to collect huge numbers of subprime mortgages, then to unload them on unsuspecting third parties like pensions, trade unions and insurance companies (and, ultimately, you and me, as taxpayers) in the guise of AAA-rated investments. Selling lead as gold, shit as Chanel No. 5, was the essence of the booming international fraud scheme that created most all of these now-failing home mortgages.


Birmingham [AL] became the poster child for a new kind of giant-scale financial fraud, one that would threaten the financial stability not only of cities and counties all across America, but even those of entire countries like Greece. While for many Americans the financial crisis remains an abstraction, a confusing mess of complex transactions that took place on a cloud high above Manhattan sometime in the mid-2000s, in Jefferson County you can actually see the rank criminality of the crisis economy with your own eyes; the monster sticks his head all the way out of the water. Here you can see a trail that leads directly from a billion-dollar predatory swap deal cooked up at the highest levels of America’s biggest banks, across a vast fruited plain of bribes and felonies — “the price of doing business,” as one JP Morgan banker says on tape — all the way down to Lisa Pack’s sewer bill and the mass layoffs in Birmingham.

The point Kristof makes in his recent columns on the growing income inequity is one I’ve tried to make, albeit perhaps less well, in previous blogs from my studies of world history. The point Kristof makes is that you cannot have a stable and growing economy as well as a stable political system when so few recognize the benefits at the expense of so many. The reason the French, the Russians, the Chinese, and so many others worldwide revolted was income disparity, wherein the populace began to see through the the rhetoric and propaganda of the rich to the result of their own miserable lives.

This country has never believed in class superiority so it’s hard to believe one is growing within its borders. Yet, it does exist now just as it did during the era of the Robber Barons. Americans once voted to break the back of the Robber Barons and can do so again if and only if the voters choose not to become yet another banana republic. But they haven’t, even as other countries once considered “banana republics” left that status behind.

As Kristof writes,

Earlier this month, I offended a number of readers with a column suggesting that if you want to see rapacious income inequality, you no longer need to visit a banana republic. You can just look around.

My point was that the wealthiest plutocrats now actually control a greater share of the pie in the United States than in historically unstable countries like Nicaragua, Venezuela and Guyana.

The question is Americans wake up to what these other countries decided?

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