June 19, 2013
How OWS Plans to Take Down Bank of America
Posted on Apr 12, 2012
By Sarah Jaffe, AlterNet
This piece originally appeared at AlterNet.
Bank of America: the very name is meant to conjure up comforting, red-white-and-blue fantasies of a bank of the people, by the people, and for the people.
But as Matt Taibbi pointed out in his latest feature for Rolling Stone, while there’s almost nothing the megabank does that is for the people, it sure as hell is paid for by the people. It got $45 billion just in bailout money, and trillions (with a T) in emergency loans from the Federal Reserve—and not only did it not pay taxes last year, it received a tax refund of $1 billion. And yet it’s still teetering on the edge of collapse.
Unless we do something soon, we might be heading for yet another people’s bailout of America’s bank.
Occupy Wall Street has decided to fight back. “This bank is not working, and the people should be deciding how to break up this bank, how it should be democratically run, before it gets either another bailout or is bought out by some other bank,” Nelini Stamp, an Occupy Wall Street participant and organizer, told AlterNet.
Bank of America just can’t seem to stay ahead of its public relations disasters. Just last week, the news hit that the bank paid its CEO, Brian Moynihan, $7.5 million last year—a year in which the company’s stock dropped 58 percent and when it lost claim to its place as the nation’s biggest bank (to JP Morgan Chase). That was a sixfold pay increase, in case you were wondering, from the year before. So: your company’s stock price plummets, you get sued left, right and center, and you get a giant raise?
But outrage over its CEO’s pay is the least of the zombie bank’s concerns. More pressing is an impending downgrade (another one) of its credit rating. Right now, Moody’s rates B of A as Baa1—but this May, along with other financial giants, it might drop that rating to Baa2—just two steps above junk.
What does that actually mean? Well, according to Susanne Craig and Peter Eavis at the New York Times, “The three banks that stand to be the most affected by a ratings downgrade have already said that they would have to put up billions of dollars more in collateral to back trading contracts.”
Then, of course, there’s the constant lawsuits, settlements, and battles with various state and federal government officials. Yves Smith reported this week that four pension funds may have stuck a wrench into the process of the $8.5 billion settlement over bad mortgages from Bank of America’s Countrywide mortgage subsidiary. A U.S. District Judge in Manhattan ruled that the suit against Bank of New York Mellon, in the case, could proceed, and Smith noted, “If other parties follow the lead of these four pension funds against Countrywide trusts, you could see enough holes shot in the settlement deal so as to render it useless to Bank of America (indeed, worse than useless: the deal provides for expanded indemnification for Bank of New York Mellon, so if angry investors saddle up to sue BoNY and BofA, it might find itself worse off, depending on the nature and level of damages awarded against BoNY).”
That’s just one settlement among many—as Taibbi wrote, last year, the bank settled for $335 million with the Justice Department after it pushed black and Latino borrowers, perfectly qualified for normal mortgages, into much riskier subprime loans. And it paid a $137 million fine for conspiring with other banks to rig the process by which cities and towns choose banks to manage their money. Taibbi explained, “in an attempt to avoid prosecution, it applied to the Justice Department’s corporate leniency program, essentially confessing its criminal status: As plaintiff attorneys noted, the application ‘means that Bank of America is an admitted felon.’”
Yet, after all this, the bank is still chugging along, hiking up fees on customers who can’t afford them, and sending collections agencies after people who don’t even have debt anymore. And it remains supremely confident that no matter how many lawsuits or downgrades, it will always have access to the next government bailout.
There’s no greater proof of this than the fact that not long ago, Bank of America was allowed, with the blessing of the Fed, to move a huge chunk of potentially toxic derivatives from its shaky investment banking arm, Merrill Lynch, to the publicly-insured Bank of America itself—guaranteeing an FDIC bailout if the debt goes bad.
“This, in essence, is the business model underlying Too Big to Fail: massive growth based on huge volumes of high-risk loans, coupled with lots of fraud and cutting corners, followed by huge payouts to executives,” Taibbi wrote.
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