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It’s Bank of America’s turn to get chewed up and spit out by Rolling Stone’s Matt Taibbi.This month’s issue of Rolling Stone (to hit stands Friday) contains a piece called, ‘Bank of America: Too Crooked to Fail’. It’s Taibbi’s account of the bank’s most ruthless activities since its expansion in the late 1970s and 1980s.
In those bad old days, Hugh McColl Jr. and Ed Crutchfield, of North Carolina National Bank (which would take over BofA) and First Union (which turned into Wachovia), were fighting regulation that stopped banks from expanding beyond one state. They wanted onward and outward, and they got it.
What we got was Bank of America. Or as Taibbi put it:
“…some of the very biggest arseholes on Earth. They lie, cheat and steal as reflexively as addicts, they laugh at people who are suffering and don’t have money, they pay themselves huge salaries with money stolen from old people and taxpayers – and on top of it all, they completely suck at banking. And yet the state won’t let them go out of business, no matter how much they deserve it, and it won’t slap them in jail, no matter what crimes they commit. That makes them not bankers or capitalists, but a class of person that was never supposed to exist in America: royalty.”
So what have these royals done? Are they as menacing as the tentacles of a vampire squid? Taibbi details their many offenses in his characteristic colour — they’ve enlisted the government as accomplices in their scheme, they’ve forged documents and overstated the incomes of Americans by 10%-50% to commit mortgage fraud, they’ve paid no taxes, and they’ve even taken advantage of the disabled.
That’s not even half of what he describes, but we’ll only recount what stood out to us:
- “…the real bailouts of Bank of America didn’t even begin until well after TARP. In the years since the crash, the bank has issued more than $44 billion in FDIC-insured debt through a little-known Federal Reserve plan called the Temporary Liquidity Guarantee Program. The plan essentially allows companies whose credit ratings are f*cked to borrow against the government’s good name – and if the loans aren’t paid back, the government is on the hook for all of it. Bank of America has also stayed afloat by constantly borrowing billions in low-interest emergency loans from the Fed – part of $7.7 trillion in “secret” loans that were not disclosed by the central bank until last year. When the data was finally released, we found out that, on just one day in 2008, Bank of America owed the Fed a staggering $86 billion.”
- “Last year, the Federal Reserve allowed Bank of America to move a huge portfolio of dangerous bets into a side of the company that happens to be FDIC-insured, putting all of us on the hook for as much as $55 trillion in irresponsible gambles.”
- “We now know that Bank of America routinely conspired with other banks to make sure it paid low prices for the privilege of managing the moneys of various cities and towns. If the city of Baltimore or the University of Mississippi or the Guam Power Authority issued bonds to raise money, the bank would huddle up with the likes of Bear Stearns and Morgan Stanley and decide whose “turn” it was to win the bid.”
- “The three lenders also pioneered ways to sell their toxic pools of mortgages to suckers. Bank of America’s typical marketing pitch to a union or a state pension fund involved a double or even triple guarantee. First, it promised, in writing, that all its loans had passed due diligence tests and met its high internal standards. Next, it promised that if any of the loans in the mortgage pool turned out to be defective or in default, it would buy them back. And finally, it assured customers that if all else failed, the pools of mortgages were all insured, or “wrapped,” by bond insurers like AMBAC and MBIA.”
In Taibbi’s dark telling of it, there was no bailout, there was a cover up. And CEO Brian Moynihan didn’t rise through the ranks to replace a failing leader — on the contrary, he is “just as loathsome and tone-deaf as his previous bosses.”
The words are scathing, and the numbers are staggering — “But the only number that really matters is this one: $35 billion,” Taibbi writes. “That’s the total bonus and compensation pool this broke-arse, state-dependent, owing-everybody-in-sight bank paid out to its employees last year.”
As you can see, it’s a light read.
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