!0 Reasons To Hate Bank of America

(Originally Featured on Truthout)

There is no shortage of hatred for the biggest banks. Indeed, the Occupy Wall Street movement is leading a national revolution against these Byzantine, powerful Goliaths for the economic devastation they have caused. This makes it difficult to choose the worst of the bunch. That said, a strong case can be made that Bank of America deserves the title of the nation's most despised bank.

Here are ten reasons to take your money out of Bank of America - and park it at a credit union or community bank near you. (And yes, that may be near impossible if you have a mortgage with them, as refinancing away from any big bank nowadays is a nightmare.)

1. B of A rejects the right of customers to protest. When two Occupy Santa Cruz protesters in California marched into a local Bank of America to close their accounts, the response was, "You cannot be a protester and a customer at the same time," followed by a threat to call the police if the women didn't leave. (The attending officer  later reiterated the bank manager's message.) Meanwhile, the fact that Bank of America charges a fee for closing an account prompted Rep. Brad Miller (D-North Carolina), who resides in Bank of America's headquarters state, to introduce a bill to protect customers from such fees.

2. To recoup ongoing losses from its stupendously dumb acquisitions of Countrywide Financial and Merrill Lynch, B of A pillages its customers. Thus, despite massive public outrage, the $5 debit usage fee for customers with less than a $5,000 balance and no mortgage with the bank will begin in 2012. B of A was the first large bank to confirm it would charge this fee, which is the highest in current discourse among the banks.

On October 18, Consumers Union wrote a letter to B of A chief Brian Moynihan asking him to reconsider this fee, which impacts poorer clients disproportionately. The letter summed it up nicely: "Consumers should not be required to pay a costly fee that appears to be arbitrary and designed to generate income to make up for Bank of America's bad business decisions rather than covering the costs of providing debit card services." Banks collect 24 cents from retailers for each customer swipe, much more than the median 8 cents it costs a bank to process the purchase. Senator Dick Durbin's (D-Illinois) response was to urge customers: "Vote with your feet. Get the heck out of that bank." 

3. B of A's other fees are just as bad. According to its last annual report, the bank has 29.3 million active online subscribers who paid over $300 billion worth of bills in 2010.  In May, B of Araised its checking account fees, which included e-banking, to $12, in line with JP Morgan Chase's decision to do the same, up from $8.95 per month. In June, it started a $35 overdraft fee, even on overdrafts of one cent. Next year, it will incorporate basic checking with a new "essentials'' account structure that makes monthly fees unavoidable, that will not include free bill pay, and that has a mandatory $6 minimum fee.

Last Monday, Bank of America was charged (along with JP Morgan Chase and Wells Fargo) with colluding with the two major credit card companies, Visa and MasterCard, to keep ATM fees high; in other words, they were charged with "price-fixing," in direct opposition to antitrust laws. This is the third of three such suits filed recently, each seeking class action status.

4. Bank of America takes gross advantage of the military.

It is the official bank of the US military and has branches by or on many bases, which provides the firm with another locus of extortion. B of A can entice military personnel to take out loans at usurious rates. Personal loans made to soldiers for a few thousand dollars can actually keep them indebted for the rest of their lives.

Last May, Bank of America paid $22 million to settle charges of improperly foreclosing on active-duty troops. The firm spun these foreclosures as being Countrywide's fault for having started them before becoming part of B of A.

5. Bank of America is officially rated the biggest, scariest bank. Its stock price also fared the worst of the group of banks (which also included Citigroup and Wells Fargo) when Moody's Investors Service downgraded it on September 21. 

B of A's long-term holding company (parent bank) rating was chopped two notches to Baa1 from A2, and its retail bank rating was cut two notches from A2 to Aa3, placing B of A four notches below rival JP Morgan Chase and one below Citigroup, the third-largest US bank. Its bank holding company has the lowest rating among the top five banks with the largest derivatives positions.

This caused great fear for investors involved in derivatives trades with the Merrill Lynch division, prompting them to request trades be moved to the part of the bank with the better rating - the retail part with the insured (peoples') deposits. That way, B of A doesn't have to pony up as much collateral to back the trades, as it would in a subsidiary with a lower rating. The Fed was recklessly happy to approve, despite the Federal Deposit Insurance Corporation's (FDIC) misgiving about having to insure more risk, even if it can borrow from the US Treasury to do so. Meanwhile, Bank of America's stock price got so crushed that Warren Buffett scooped up a $5 billion preferred stock deal, effectively betting that the government won't let this big bank go bust.

6. B of A's derivatives position keeps rising. The total amount of derivatives in the FDIC-insured portion of B of A as of mid-year was $53.7 trillion, up 10 percent from $48.9 trillion the prior year, and up nearly 35 percent from its pre-fall crisis level of $40 trillion (the Merrill Lynch securities division holds $22 trillion in addition.) The bank has $5 trillion of credit derivatives, nearly double its $2.7 trillion pre-Merrill amount. In addition, because of its inherent zombie status and rating downgrades, the cost of insuring B of A against a possible default continues to rise in the credit derivatives market - a pattern that American International group (AIG) once followed.

7. Bank of America got the most AIG money of the big depositor banks. By virtue of having acquired Merrill Lynch's AIG-related portfolio, B of A got to keep approximately $12 billion worth of federal AIG backing, too. It also received more government subsidies than any other mega-bank except Citigroup. Its stimulus package included an initial Troubled Asset Relief Program (TARP) helping of  $15 billion for the bank and $10 billion for Merrill, plus a second helping of $20 billion in January 2009 after it became clear that Merrill's losses had spiked to $15 billion - in order to ensure the takeover from hell went through and Fed chairman Ben Bernanke, then-Treasury Secretary Hank Paulson, and then-Merrill Lynch executive John Thain could pat themselves on the back for saving the world. The government guaranteed $118 billion in assets, mostly Merrill's, in the new merged firm. With the benefit of the Fed's nearly 0 percent money policy, and a depositor base to plunder, B of A repaid that aid.

In terms of overall federal subsidies (including TARP), Bank of America was second only to Citigroup ($230 billion compared to $415 billion). None of that got in the way of former B of A CEO Ken Lewis' personal take, a $63 million retirement plan, in addition to the $63 million he scored during the three years before his departure.

8. Bank of America leads the big bank fraud lawsuit settlement tally. So far, it has racked up the largest settlement, $8.5 billion in June, to settle claims related to $100 billion worth of Countrywide-spun mortgage securities backed by faulty loans, with bigwig investors like Pimco, BlackRock, and the Federal Reserve Bank of New York.

B of A is also being sued by state and federal regulators for questionable foreclosure practices and a union benefits plan for hiding foreclosure problems that impacted its share price. It is one of 17 major US financial institutions being sued by the Federal Housing Finance Agency for billions of dollars of mortgage-securities-related losses that may require B of A to potentially repurchase $50 billion worth of allegedly fraudulent securities. Earlier this year, B of A settled for $3 billion regarding bad loans that they had repackaged by Fannie Mae and Freddie Mac, as well as agreed to a $624 million settlement in a securities fraud class-action suit filed by New York Sate and City pension fund regarding Countrywide stock losses. Then there's AIG's August lawsuit, in which AIG wants $10 billion in damages for mortgage-related securities it bought and against which it claims B of A committed securities fraud.

That's a lot of pain for a Federal Reserve-approved $4.1 billion acquisition. Meanwhile, since the settlement didn't lead to a financial restatement, under the supremely elastic (read: useless) Dodd-Frank Act, executives get to keep their related bonuses.

9. Even after lawsuits, B of A would still rather please investors than customers. Investors that won money in the $8.5 billion settlement were upset that B of A was continuing to service loans, instead of foreclosing on them more quickly. Now, B of A had a nasty incentive to kick people out of homes faster, rather than work with them to refinance or restructure mortgages. Two months later, their foreclosure process has, in fact, sped up.
Bank of America foreclosure notices are surging again following a slight robo-signing- related slowdown, meaning they are now sending out a greater increase in default notices (90-day overdue loans) than other banks. The bank has $30 billion in residential mortgage loans in default, which will become foreclosures for thousands of families.

10. Bank of America, despite having been buoyed up by the government, did not pay taxes, and, given its glorious ineptness, will be laying off 30,000 workers. Not only did the bank pay no federal taxes for 2010 (or 2009) by making use of its posted pre-tax loss of $5.4 billion, it actually cited a tax benefit of $1 billion. Meanwhile, it has announced plans to cut up to 30,000  jobs over the next few years as part of its plan to save $5 billion, ostensibly due to the settlements it's paying for engaging in upper-management-approved fraud.

Finally, consider the two reasons that any of this list is possible. One is the Glass-Steagall Act repeal, which enables banks to comingle straight costumer business with reckless securities creation and trading. The second reason is coddling by a Fed that finances and approves every bad move. B of A is the poster child for a Glass-Steagall repeal gone wrong. Lewis pulled in a slew of other banks under the B of A umbrella, making it - at one time - the country's largest bank, including the infamous Countrywide Financial and Merrill Lynch. Now it has $2.26 trillion in total assets and $1.8 trillion assets in insured subsidiaries, $1.2 trillion of customer deposits ($1.066 trillion in the United States) and about $804 billion in FDIC-insured deposits - all part of the giant, risk-laden mess that is B of A.

Without being broken up via a new, strong Glass-Steagall Act, when banks need to find ways to make money, they resort to extorting it from their sitting ducks, er - customers. Meanwhile, that's where credit unions, which are not-for-profits owned by their members and not by outside shareholders, come in. They generally don't engage in crazy derivatives trades, or charge unnecessary fees for holding your money or for letting you pay bills with it, or for online banking. In terms of personal attention, among other economic reasons, the credit and smaller community banks are a much better bet.

Special October 29th Black Tuesday anniversary e-book discount!

Special October 29th Black Tuesday anniversary e-book discount!

There’s been such a fantastic response to my novel, Black Tuesday in all its forms. In gratitude, and on behalf of Black Tuesday’s anniversary today, October 29th, there’ll be a special  Kindle/i-pad discounted price of $2.99!

Spread the love and the word!

Check out the video! Today & the period surrounding Black Tuesday, 1929 are not so different: the impact of Wall Street on our lives and those of generations past, as visceral.

Catch me talking about Black Tuesday on Tavis Smiley/NY-1 /Brian Lehrer/Fox/CSPAN-BookTV & other places!

We, in mind and soul, are both our past and future. To repeat without learning is to move backwards.

The historical novel, Black Tuesday sizzles with the drama, romance and desperation of the Great Crash of 1929, eerily echoing our present times, as we stand at the brink of Great Depression II for similar reasons to those of the Great Depression that spanned much of the 1930s.

From the beleaguered immigrant community of the Lower East Side to the feral pit of Wall Street to the alluring glitter of Park Avenue, Black Tuesday reveals a world of crime, greed, obsession, economic devastation, and heroism in the face of great odds.  Black Tuesday tells the story of Leila Kahn, a young immigrant woman standing at the crossroads of her destiny and the country's, caught in an epic battle between her heart and her head, to expose the truth behind a sinister Wall Street empire, and its most notorious villain, before everything she knows is destroyed.

Jamie Dimon’s Shameful Spouting about ‘anti-American’ Basel III regulations

There are few things more cringe-inducing than a government-subsidized bank CEO spouting self-serving, entitlement-laden idiocy to the world just because he and his bank might be subject to some extra constraints. That hasn’t stopped JPM Chase CEO Jamie Dimon from acting like a spoiled, sociopathic brat while characterizing proposed Basel III capital requirements and regulations as ‘anti-American’ at every opportunity.

They are not ‘anti-American’ but globally risk-mitigating in a time of widespread economic Depression, a point lost in the haze of Dimon’s megalomania.

Basel I and II enabled European banks and townships and pension funds to purchase AAA securities extensively. American banks went into manufacturing over-drive to oblige, creating 75% of the $14 trillion of mortgage-related assets between 2003-2008. Related risk and loss continue to proliferate the globe. Basel III goes further towards refining capital requirements to contain damage.

Dimon doesn’t want a capital surcharge for big banks, or higher capital requirements for US mortgage securities, because that might entail further examination of his bank holdings, not because the excess capital would be a hardship. Nearly $1.6 trillion of excess US bank capital is sitting on the Federal Reserve books right now, doing nothing productive or job-producing.

Here’s what’s really anti-American – big banks receiving extreme federal assistance while the rest of the country is crushed, loan refinancing and other foreclosure reducing negotiations are anemic, and both private and public sectors can’t finance enough job growth to alter our horrific unemployment or poverty situation.

JPM Chase had the government back its Bear Stearns purchase (we’re still on the hook for $29 billion related dollars) in March, 2008 and facilitate its acquisition of Washington Mutual that fall.  It took advantage of $40 billion of FDIC debt guarantees in early 2009, and received $25 billion in TARP money that was only repaid after its trading profit got a big enough boost.

The toxic asset and derivatives pyramid that emanated from Wall Street and spread to Europe continues to brutalize the global economy from the United States to Iceland, Norway, Greece, Italy, Spain, Portugal and Ireland.

American banks similarly catalyzed the 1930s Great Depression, forming shady trusts and fraudulent assets (the 1929 version of the CDO) to puff up values galore as the biggest banks cashed out leaving everyone else holding the bag.

The difference is that back then banks were slapped with more than additional capital requirements. The 1933 Glass-Steagall Act forced banks (including the Morgan Bank and Chase) to chose between commercial and investment banking focus, whereby commercial banks received FDIC backing for their customer deposits and access to Federal Reserves loans, but speculative, asset-creating firms were on their own. To be sure, there have been currency and debt crises since, but none reached today’s level, in the wake of Glass-Steagall repeal and government subsidy overload.

Sitting in his prime position as a Class A NY Federal Reserve director before, during and since the fall 2008 crisis period (he was re-elected in 2010, the same year he bagged a $17 million bonus), Dimon’s callous attitude toward global and domestic risk and the banks’ role in it, is particularly heinous.

This summer, JPM Chase settled (with no admission of guilt) fraud charges for its CDO practices for $153.6 million. There are a plethora of class-action suits in the pipeline. No matter. Old habits don’t die without being killed.

So far this year, JPM Chase is the world’s top creator of securities backed by commercial loans (or CMBS) with 19.5% of the market. Absent stricter regulations to the contrary, such as resurrecting the 1933 Glass-Steagall Act, it also happens to be the top loan contributor (or supplier of loans) for CMBS deals. Lending and packaging loans in the same bank is an obviously perilous mix. And if you think CMBS won’t be another subprime, guess again. CMBS delinquencies are at record highs. More dangerous, JPM Chase is second only to Goldman Sachs in credit derivatives exposure and runs a $73 trillion derivatives book.

In other words, Jamie Dimon should be worried about other things besides some extra capital requirements from Basel III. He should shut up and watch his mortgage and derivatives portfolio. And we should be glad there’s even the remotest opposition to his drivel. Basel III isn’t at all perfect. It’s not a new Glass-Steagall. It doesn’t alter the way banks do business and the structure in which they operate. It doesn’t stop the careless outpouring of money from central banks and entities into the hands of eager banks and their investors at the expense of the world’s citizenship and economic security. But, if anything makes Jamie Dimon this irate, you know it can’t be bad.

(Note: A shorter, gentler version of this comment appeared in the NYT Room for Debate section on Sept. 29)