› Anonymous Hack Of Bank Of America | Business Insider
Many people became rightfully upset about bailouts given to big banks during the mortgage crisis. But it turns out that they are still going on, if more quietly, through the back door. The existence of one such secret deal, struck in July between the Federal Reserve Bank of New York and Bank of America, came to light just last week in court filings. That the New York Fed would shower favors on a big financial institution may not surprise. It has long shielded large banks from assertive regulation and increased capital requirements. Still, last week’s details of the undisclosed settlement between the New York Fed and Bank of America are remarkable. Not only do the filings show the New York Fed helping to thwart another institution’s fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.
Don’t Blink, or You’ll Miss Another Bank Bailout | Gretchen Morgenson
How Big Banks Are Making Jobless Americans Pay Millions To Access Their Benefits
from Think Progress by Pat Garofalo
According to a new report from the National Consumer Law Center, jobless Americans are being forced to pay millions of dollars in unnecessary fees to big banks in order to access their unemployment insurance benefits. Several states do not give beneficiaries the option of having their benefits deposited directly into their bank accounts, forcing them to instead use prepaid debt cards, which come along with a host of fees and surcharges.
As the Associated press noted, the nation’s biggest banks make a killing under this system:
Banks including JPMorgan Chase & Co., U.S. Bancorp and Bank of America Corp. seized on government payments as a business opportunity.They pitched card programs to states as a win-win: States would save millions in overhead costs because the cards would be issued for free. And people without bank accounts would avoid the big fees charged by storefront check cashers.
However, most of the people being hit with fees already have bank accounts.The bank-state partnerships effectively shifted the cost of distributing payments from governments to individuals. The money needed to cover those costs is deducted from people’s unemployment benefits in the form of fees.
Big banks have also racked up huge profits administering food stamp programs. As the NCLC noted, “Even well-designed prepaid cards impose costs on workers, though the price is likely lower than the cost of cashing paper checks. In California, which continues to have the best card in our survey, workers paid nearly $1.8 million in fees in the past year, not including ATM surcharges. Thus, offering workers the choice of direct deposit remains important even for prepaid cards with the fewest fees.”
Look, banks already have a monopoly on lending money at interest and creating adequate supplies of money through the fractional reserve system. Their entire business model is created by government mandate, and they shouldn’t be allowed to “dip their beaks” as the government disburses benefits. This is patently unfair and siphons off benefits that would otherwise flow into the real economy, helping to create jobs.
› A big bank's big lies | Jim Hightower
Following the 2007-2008 Wall Street collapse, not only did BOA get a $15 billion bailout, but it was also allowed to get bigger by snapping up the foundering investment giant, Merrill Lynch. To win shareholder approval of this merger, the bank’s top executives issued a rosy assessment of the takeover, promising golden profits within a year or so.
Court documents in a shareholder lawsuit, however, recently revealed that the honchos, including the CEO, knew at the time of the shareholder vote that the numbers were “materially false” and that swallowing Merrill would choke the owners with billions of dollars in losses. Moreover, the deal struck by the geniuses at the top was so bad that they knew they would have to get a second federal bailout of $20 billion to stave off total collapse. Shareholders, who were told none of this, unwittingly voted to okay the merger.
Even BOA’s top lawyer was kept in the dark. When he learned of the big lie two days after the shareholder vote, he tried to talk to top executives about the need to admit the ruse. Instead, the next day, the lawyer was summarily fired and escorted from the bank without even being allowed to collect his personal belongings.
Bank of America is, in fact, our bank—…it’s us who’ve paid for it, and…if it tanks again, we’re going to be the ones on the hook for bailing it out. To prevent that from happening, Occupy and an ever-growing number of organizations and experts are calling, ever louder, to break up the big bank before it breaks the economy—again.
Sarah Jaffe | How Occupy Wall Street Plans to Take Down Bank of America, and How You Can Help
› Bank of America Is a “Raging Hurricane of Theft and Fraud” | Matt Taibbi
In recent years, Too-Big-To-Fail banks like Bank of America and Chase and Wells Fargo have been caught rigging the bids for financial services in dozens of municipalities nationwide. Worse, these same banks have repeatedly been let off the hook by regulators, who rarely seek jail sentences for the offenders, and more often simply apply fractional fines to the companies caught. This behavior, if left unchecked, will ultimately mean that we will all have to pay more for our roads, our traffic lights, our sewers, in fact all public services, as the banker’s secret bonus will soon become an institutionalized part of the invoice. And it’ll be our fault, because we didn’t do anything about it now.
The only way to prevent this kind of slide to total lawlessness is to break this unhealthy relationship between bank and government. It would be a great sign of America’s return to healthier capitalism if we could allow one of the worst of public-private monsters, Bank of America, to sink or swim on its own, in the free market.
We don’t want Bank of America to fail. Our position is, it already is insolvent, and already has failed – and only our tax dollars, and our government’s continued protection, is keeping that failure from becoming more common knowledge. There are many opinions about the nature of modern American capitalism. Some think the system is no longer able to meet the needs of ordinary people and needs to be radically overhauled, while others like it just the way it is.
But one thing that everyone on this spectrum of beliefs can agree upon is that our system doesn’t work when corrupt companies, companies that should fail in the free market, are kept alive by the government. When we allow that, what we get is a system that is neither capitalism nor socialist, but somewhere more miserably in between – a bureaucratic state in which profit is not tied to performance, but political power. [++]
› Bank of America In Trouble? | Matt Taibbi
It looks like Bank of America might have started circling the drain before the Occupy movement even had a chance to launch its campaign against the company. For weeks now there have been ominous signs of trouble at the bank, and yesterday we heard yet another dark piece of news.
Last year, there was an uproar when Bank of America announced a plan to slap customers with a monthly $5 fee for debit card usage. The bank eventually backed off that plan when the public and some politicians cried foul.
Now it seems the company is going to try to put a new package on the same crappy idea and sell it again. This time, the plan is to add charges that range from $6 to $25 a month. From an MSNBC report:
Pilot programs in Arizona, Georgia and Massachusetts are experimenting with charging $6 to $9 a month for what’s called an “Essentials” account. Other account options being tested in those states carry monthly charges of $9, $12, $15 and $25, but give customers opportunities to avoid the payments by maintaining minimum balances, using a credit card or taking a mortgage with Bank of America, according to an internal memo cited by the [Wall Street] Journal.
It’s a very bad sign that a bank is in a desperate cash crunch when it tries repeatedly to gouge its customers. David Trainer, an analyst for Market Watch, a WSJ publication, wrote that the new fees are a sign of series trouble at BAC. He writes:
In my opinion, there are four actions taken by financial services that signal the company is headed to serious trouble.
1. Management shake-up and major layoffs - lots of layoffs over the past year
2. Exploiting accounting rules to boost earnings - SFAS 159
3. Drawing down reserves to boost earnings: to the tune of $13.3 billion in 2011 and 2012
4. Bilking customers with new fees: tried it before and trying it again
Bank of America has taken all four steps. Bilking customers with new fees is a desperate measure of last resort because it requires exploiting the one asset the bank has left, namely its customers.
› Another Weapon for OWS: Pull Your Money Out of B of A | Matt Taibbi
[… The] primary regulator of the banking industry [the Fed] is encouraging a functionally insolvent megabank to respond to a credit downgrade by pushing its most explosively risky holdings onto the laps of the taxpayer. This is lunacy…. Remember that story about the Chinese man who had a world-record 33-pound tumor removed from his face? This would be like treating that patient by removing the tumor and surgically attaching it to the face of a new patient, in this case the U.S. taxpayer.
A series of lawmakers on the Hill, including most notably Sherrod Brown, Carl Levin, and Bernie Sanders, are trying to figure out if there’s any way to stop this transaction, but of course there is not. Upstate NY congressman Maurice Hinchey put it best. “What Bank of America is doing is perfectly legal – and that’s the problem,” he said.
This is exactly why the Glass-Steagall Act needs to be reinstated: without a separation of Investment Banks and Commercial Banks, what we end up getting is taxpayer-guaranteed gambling. Instead of encouraging prudence and savings by insuring deposits in commercial banks, the FDIC is now being turned into a vehicle for socializing speculative losses.
So our government is not only no longer encouraging fiscal conservatism, it is doing exactly the opposite, i.e. encouraging speculation and risk-taking. That this is happening in the fever of the OWS movement, and at a time when top politicians from Barack Obama on down are paying lip service to public complaints against Wall Street, should tell you everything you need to know about whether or not we can expect this government to voluntarily enact real changes, and stop making the taxpayer eat Wall Street’s pain.
› Ten Reasons Not To Bank On (Or With) Bank Of America | Nomi Prins
In case you just woke up from a five year nap…
› Bank of America Deathwatch: Moves Risky Derivatives from Holding Company to Taxpayer-Backstopped Depository | Yves Smith
Yves Smith on the Fed and Bank of America’s attempted taxpayer-funded toxic asset dump:
This move reflects either criminal incompetence or abject corruption by the Fed. Even though I’ve expressed my doubts as to whether Dodd Frank resolutions will work, dumping derivatives into depositaries pretty much guarantees a Dodd Frank resolution will fail. Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral.
But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.
The FDIC is understandably ripshit.
› Not with a Bang, but a Whimper: Bank of America’s Death Rattle | William K. Black
A former regulator (and now professor of law and economics), William Black breaks down the latest Bank of America boondoggle.
Banking regulators have known for well over a century about the acute dangers of conflicts of interest. Two related conflicts have generated special rules designed to protect the bank and the insurance fund. One restricts transactions with senior insiders and the other restricts transactions with affiliates. The scam is always the same when it comes to abusive deals with affiliates – they transfer bad (or overpriced) assets or liabilities to the insured institution. […] The bank, because of federal deposit insurance, typically has a higher credit rating than its affiliate corporations.
BAC’s [Bank of America’s holding company] request to transfer the problem derivatives to B of A was a no brainer – unfortunately, it was apparently addressed to officials at the Fed who meet that description. Any competent regulator would have said: “No, Hell NO!” Indeed, any competent regulator would have developed two related, acute concerns immediately upon receiving the request. First, the holding company’s controlling managers are a severe problem because they are seeking to exploit the insured institution. Second, the senior managers of B of A acceded to the transfer, apparently without protest, even though the transfer poses a severe threat to B of A’s survival. Their failure to act to prevent the transfer contravenes both their fiduciary duties of loyalty and care and should lead to their resignations.
Now here’s the really bad news. First, this transfer is a superb “natural experiment” that tests one of the most important questions central to the health of our financial system. Does the Fed represent and vigorously protect the interests of the people or the systemically dangerous institutions (SDIs) – the largest 20 banks? We have run a real world test. The sad fact is that very few Americans will be surprised that the Fed represented the interests of the SDIs even though they were directly contrary to the interests of the nation. The Fed’s constant demands for (and celebration of) “independence” from democratic government, combined with slavish dependence on and service to the CEOs of the SDIs has gone beyond scandal to the point of farce. […]
Second, I would bet large amounts of money that I do not have that neither B of A’s CEO nor the Fed even thought about whether the transfer was consistent with the CEO’s fiduciary duties to B of A (v. BAC). […]
Third, reread the Bloomberg column and wrap your mind around the size of Merrill Lynch’s derivatives positions. Next, consider that Merrill is only one, shrinking player in derivatives. Finally, reread Yves’ column in Naked Capitalism where she explains (correctly) that many derivatives cannot be used safely. Add to that my point about how they can be used to create a “sure thing” of record fictional profits, record compensation, and catastrophic losses. This is particularly true about credit default swaps (CDS) because of the grotesque accounting treatment that typically involves no allowances for future losses. (FASB: you must fix this urgently or you will allow a “perfect crime.”). It is insane that we did not pass a one sentence law repealing the Commodities Futures Modernization Act of 2000. Between the SDIs, the massive, sometimes inherently unsafe and largely opaque financial derivatives, the appointment, retention, and promotion of failed anti-regulators, and the continuing ability of elite control frauds to loot with impunity we are inviting recurrent, intensifying crises.
› BofA Said to Split Regulators Over Moving Merrill Contracts | Businessweek
Bank of America is trying to pull some shenanigans again:
Bank of America Corp., hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.
The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.
Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.
“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”
Get your money out of Bank of America people.