Bank of America: Too Crooked to Fail(rollingstone.com)
rollingstone.com
Bank of America: Too Crooked to Fail
http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314
11 comments
Maybe this is a dumb or too personal of a question then, but why not close the account and move to a more competent bank?
I don't understand why people continue to keep their money in an institution that they don't even seem to trust. There are far better choices out there.
I don't understand why people continue to keep their money in an institution that they don't even seem to trust. There are far better choices out there.
US bank accounts are hard to get if you don't live there (and don't have a several-month history of living there currently), but they're really handy to have. So until we can get a new account set up for my wife with a better bank, we're sorta stuck with them.
It's painful, but even if they didn't refund the annoying $20/month fees they keep tacking on, it'd still be worth it just to keep the toehold.
It's painful, but even if they didn't refund the annoying $20/month fees they keep tacking on, it'd still be worth it just to keep the toehold.
For me, the switching cost of changing my gas bill, electricity bill, mortgage, credit card, Home phone, Cell phone, dentist, AWS account, heroku, mysafari, spotify, napster, hulu, engine yard, ... I know I'm just hitting a few here... to a new bank/card is a big enough disincentive to have me locked in. I AM however looking at better alternatives because i'm tired of BOA.
It seems worse than it is. I've had to switch every recurring bill I have to different banks/cards multiple times, and it always ends up taking less than an hour, probably less than half. Just pull up one month's statement and you have a list of every business you pay on a monthly basis. Go to each website (or call) and fill in the new payment info.
Yes, switching is not as arduous as it seems, especially if you pay bills online.
I switched from Wells Fargo to a regional credit union last year. I recommend keeping your old bank account open for a few months just in case you forgot to switch some bills or have trouble with your new accounts. Better safe than sorry.
I switched from Wells Fargo to a regional credit union last year. I recommend keeping your old bank account open for a few months just in case you forgot to switch some bills or have trouble with your new accounts. Better safe than sorry.
We need an antitrust suit to lead to payment account number portability.
> why not close the account and move to a less desperate bank?
FTFY.
FTFY.
Single page link for those who don't want to read an article split up into 5 pages:
http://www.rollingstone.com/politics/news/bank-of-america-to...
http://www.rollingstone.com/politics/news/bank-of-america-to...
As a 10 year "veteran" of BofA who resigned when the shit started hitting the fan in 2008, there are a few things I feel I should clarify.
Bank of America used to be a reputable organization, and Taibbi did touch on this. I joined the company right as it was completing its "merger" (i.e. hostile takeover) with Nations Bank--a crummy, aggressive Southern bank with a penchant for fascist business models led by criminals Hugh McColl and his lackey Ken Lewis.
In the months that followed Nations Bank's acquisition of BofA, which, prior to the "merger," only had domestic coverage on the West Coast and some of the Southwest, most of the key San Francisco leadership were either forced to resign or resigned in protest against the inevitable wave of dirty business dealings coming in from the South--this, of course, was Nations Bank's plan.
So, the company changed drastically over a period of several years during the last decade--and so did the business ethic. It became more militaristic, and Sigma 6 "procedures" were adopted (a lot of good that did...), and much of the new management either came directly from the military or from executive positions at other major retail companies such as Pepsi Cola, Best Buy, Home Depot--basically ANY line of business OTHER than banking. These people had no experience in banking, and that was ok, because BANKING just became RETAIL. Money and debt became a commodity to be sold to clients instead of managed responsibly.
Nations Bank of America then continued on an extremely irresponsible course of acquiring HUGE numbers of smaller banks across the country--artificially increasing stock value for several years. I remember my stock options doubling TWICE in one year because the value was such that the stock had to split. I took a nice trip to Europe in 2003, as a result. Fortunately, (or unfortunately...) I was younger and much more naive then...
However, depite the Bank's many dastardly doings (resulting directly from Congress/the Bush Administration's continued push to deregulate the banks; beginning, as we all know, with the Clinton administration) the TRUE error that led to the bank's ultimate downfall was the acquisition of Countrywide and perhaps, to a lesser extent, Merrill Lynch.
I still remember that, even during this time, getting a loan done for a client at BofA was a relatively difficult process. BofA was really late to the game in offering clients sub-prime mortgages and the like. Quite frankly, if you couldn't afford the loan, chances were that you wouldn't be able to get it at BofA. Risk management slowly started relenting when they started seeing the profits of its major competitors--and they toyed with the idea of providing subprime loans--but it never really got off the ground before the Financial Crisis. Countrywide, on the other hand...
So, Mr. Lewis chose (and was, in someways, apparently "forced") to acquire Merril Lynch and Countrywide--creating an UNholy trinity that not only decimated the once tremendous value of the company, but has virtually thrown it into a terminal state. The "market" won't correct anything, because no one will touch the BofA toxic waste dump with a 10 foot pole. Also, what is one to do with all the hopeless people who STILL maintain their assets and debt--and, god forbid, INVESTMENTS--with this company? Its reputation amongst people in the know is tarnished beyond repair--and the only reason the government IS helping it, in my opinion, is that with SO MANY incredible obligations and worthless assets (due to it's many irresponsible acquisitions), the government probably knows that it would probably be MORE trouble for the GLOBAL market to let them fail than to slowly "bail" them out with conditions. One could compare this to letting somebody die slowly in hospice as opposed to using a "bomb" to end his/her misery in a hospital full of innocent people...
Whew, that was long...I guess I needed to get some of this off my chest.
EDIT: spelling
Bank of America used to be a reputable organization, and Taibbi did touch on this. I joined the company right as it was completing its "merger" (i.e. hostile takeover) with Nations Bank--a crummy, aggressive Southern bank with a penchant for fascist business models led by criminals Hugh McColl and his lackey Ken Lewis.
In the months that followed Nations Bank's acquisition of BofA, which, prior to the "merger," only had domestic coverage on the West Coast and some of the Southwest, most of the key San Francisco leadership were either forced to resign or resigned in protest against the inevitable wave of dirty business dealings coming in from the South--this, of course, was Nations Bank's plan.
So, the company changed drastically over a period of several years during the last decade--and so did the business ethic. It became more militaristic, and Sigma 6 "procedures" were adopted (a lot of good that did...), and much of the new management either came directly from the military or from executive positions at other major retail companies such as Pepsi Cola, Best Buy, Home Depot--basically ANY line of business OTHER than banking. These people had no experience in banking, and that was ok, because BANKING just became RETAIL. Money and debt became a commodity to be sold to clients instead of managed responsibly.
Nations Bank of America then continued on an extremely irresponsible course of acquiring HUGE numbers of smaller banks across the country--artificially increasing stock value for several years. I remember my stock options doubling TWICE in one year because the value was such that the stock had to split. I took a nice trip to Europe in 2003, as a result. Fortunately, (or unfortunately...) I was younger and much more naive then...
However, depite the Bank's many dastardly doings (resulting directly from Congress/the Bush Administration's continued push to deregulate the banks; beginning, as we all know, with the Clinton administration) the TRUE error that led to the bank's ultimate downfall was the acquisition of Countrywide and perhaps, to a lesser extent, Merrill Lynch.
I still remember that, even during this time, getting a loan done for a client at BofA was a relatively difficult process. BofA was really late to the game in offering clients sub-prime mortgages and the like. Quite frankly, if you couldn't afford the loan, chances were that you wouldn't be able to get it at BofA. Risk management slowly started relenting when they started seeing the profits of its major competitors--and they toyed with the idea of providing subprime loans--but it never really got off the ground before the Financial Crisis. Countrywide, on the other hand...
So, Mr. Lewis chose (and was, in someways, apparently "forced") to acquire Merril Lynch and Countrywide--creating an UNholy trinity that not only decimated the once tremendous value of the company, but has virtually thrown it into a terminal state. The "market" won't correct anything, because no one will touch the BofA toxic waste dump with a 10 foot pole. Also, what is one to do with all the hopeless people who STILL maintain their assets and debt--and, god forbid, INVESTMENTS--with this company? Its reputation amongst people in the know is tarnished beyond repair--and the only reason the government IS helping it, in my opinion, is that with SO MANY incredible obligations and worthless assets (due to it's many irresponsible acquisitions), the government probably knows that it would probably be MORE trouble for the GLOBAL market to let them fail than to slowly "bail" them out with conditions. One could compare this to letting somebody die slowly in hospice as opposed to using a "bomb" to end his/her misery in a hospital full of innocent people...
Whew, that was long...I guess I needed to get some of this off my chest.
EDIT: spelling
I quit a few months ago, and I agree with you pretty much 100%. Bank of America's current problems stem from two things: being forced to acquire Countrywide's bad loans (and worse PR), and hiring the world's dumbest people throughout the organization.
Bank of America has the worst PR organization I've ever encountered. When the thing about $5 debit card fees was leaked, the media had a field day with BofA, even though one of the big banks was already doing it, and the other big banks were already planning it. Because we had no damage control, we lost a ton of customers and mindshare... for something that we didn't even actually do! (Don't even get me started on all the stores about incorrectly foreclosing on people's houses that we didn't own. Guys, you have a problem there. You need to at least pretend to tell your side of the story!)
Also, I don't understand the hiring process at all: the CEO is some random dude from the legal department that knows nothing about leadership or banking, but somehow got promoted to CEO. (One time, we had a town hall meeting, and he checked that everyone going into the town hall meeting had two Bank of America accounts. What the fuck?)
The rest of the organization is exactly the same. I never had a manager that knew how to program. (My manager was pretty good at resolving political battles, though, which is a useful skill at BofA. The problem was that she had a lot of people that knew nothing about computers telling her what to do, and she couldn't filter out the obvious idiots that were wasting her time.) Most of upper management is people whose pet projects failed at other banks, and BofA was the only place that they could find a job. Nearly every system I had to maintain was written by a team that did the same project at job-1 and the entire team came here. Then the entire team got a better offer, and moved to job+1. You'd think that by the time they were desperate enough to work at BofA, the design and the code would be pretty good... but nope. That would require knowing how to program.
Anyway, what I'm trying to get at is: Bank of America is not evil. They just hire the dumbest, cheapest people they can possibly find, and the result is ... predictable.
(Also, I hope this doesn't sound bitter. I am not bitter about working there at all. It was just too average to strongly like or dislike.)
Bank of America has the worst PR organization I've ever encountered. When the thing about $5 debit card fees was leaked, the media had a field day with BofA, even though one of the big banks was already doing it, and the other big banks were already planning it. Because we had no damage control, we lost a ton of customers and mindshare... for something that we didn't even actually do! (Don't even get me started on all the stores about incorrectly foreclosing on people's houses that we didn't own. Guys, you have a problem there. You need to at least pretend to tell your side of the story!)
Also, I don't understand the hiring process at all: the CEO is some random dude from the legal department that knows nothing about leadership or banking, but somehow got promoted to CEO. (One time, we had a town hall meeting, and he checked that everyone going into the town hall meeting had two Bank of America accounts. What the fuck?)
The rest of the organization is exactly the same. I never had a manager that knew how to program. (My manager was pretty good at resolving political battles, though, which is a useful skill at BofA. The problem was that she had a lot of people that knew nothing about computers telling her what to do, and she couldn't filter out the obvious idiots that were wasting her time.) Most of upper management is people whose pet projects failed at other banks, and BofA was the only place that they could find a job. Nearly every system I had to maintain was written by a team that did the same project at job-1 and the entire team came here. Then the entire team got a better offer, and moved to job+1. You'd think that by the time they were desperate enough to work at BofA, the design and the code would be pretty good... but nope. That would require knowing how to program.
Anyway, what I'm trying to get at is: Bank of America is not evil. They just hire the dumbest, cheapest people they can possibly find, and the result is ... predictable.
(Also, I hope this doesn't sound bitter. I am not bitter about working there at all. It was just too average to strongly like or dislike.)
> Anyway, what I'm trying to get at is: Bank of America is not evil. They just hire the dumbest, cheapest people they can possibly find, and the result is ... predictable.
The result is ... getting payed $37 billion a year in bonuses. That's pretty damn smart if you ask me.
The result is ... getting payed $37 billion a year in bonuses. That's pretty damn smart if you ask me.
That's simply how people are paid in the finance industry. Let's say you make $300,000 a year. A bank will pay you $200,000 a year, and in a good year, give you a $200,000 bonus. But in a bad year, they'll "only" give you $75,000. So that $37 billion could easily be "everyone made less than their target salary" rather than "the executives gave themselves $37 billion".
Personally, I think the system is stupid: you have to pay me for my labor even if its misused and you make no money off it. But other people see the $$$ in good times, and the system continues. I now negotiate assuming my bonus will be 0, which is pretty much what I saw when I worked in finance anyway. (Bonuses were allocated based on a "has threatened to quit" basis; since I was always happy, I was never a problem that needed to be solved with money. When I did threaten to quit, they could no longer afford to match the counter offers. Or rather, chose not to.)
Personally, I think the system is stupid: you have to pay me for my labor even if its misused and you make no money off it. But other people see the $$$ in good times, and the system continues. I now negotiate assuming my bonus will be 0, which is pretty much what I saw when I worked in finance anyway. (Bonuses were allocated based on a "has threatened to quit" basis; since I was always happy, I was never a problem that needed to be solved with money. When I did threaten to quit, they could no longer afford to match the counter offers. Or rather, chose not to.)
[deleted]
evil people ⊂ dumb people
If that is supposed to say Evil people are a subset of dumb people, then I have to disagree. There are brilliant people who are also evil, like a good portion of the Nazi leaders, or Rupert Murdoch, or emperor palpatine.
Depends what you define as brilliant and dumb. But I can argue that in the long term, all evil peoples' actions are dumb.
There is a difference between being dumb, and doing something dumb.
About once every 2 months I forget how to operate a door. I put my hand on the door handle, push, and walk right into the door, because I forgot to twist the handle. That's a monumentally stupid thing to do, but I don't think it necessarily means that I'm monumentally stupid (at least I hope it doesn't :).
I'd be interested to hear why you think every evil person's actions are dumb when evaluated in the long term.
About once every 2 months I forget how to operate a door. I put my hand on the door handle, push, and walk right into the door, because I forgot to twist the handle. That's a monumentally stupid thing to do, but I don't think it necessarily means that I'm monumentally stupid (at least I hope it doesn't :).
I'd be interested to hear why you think every evil person's actions are dumb when evaluated in the long term.
Now that the 2008 financial crises is past (deferred?) why is no one talking about breaking up these "too big to fail" institutions into companies that are small enough to fail?
I am regular reader of Charles Hugh Smith's "Of Two Minds" blog:
http://charleshughsmith.blogspot.com/
He has a recent post where he compares the Dodd-Frank supposed reform bill (over 2300 pages!) to the Glass Steagall act (37 pages)
http://charleshughsmith.blogspot.com/2012/03/we-have-no-othe...
He goes on to provide a common sense, 5 paragraph law that would provide some actual reform to our banking system.
I am regular reader of Charles Hugh Smith's "Of Two Minds" blog:
http://charleshughsmith.blogspot.com/
He has a recent post where he compares the Dodd-Frank supposed reform bill (over 2300 pages!) to the Glass Steagall act (37 pages)
http://charleshughsmith.blogspot.com/2012/03/we-have-no-othe...
He goes on to provide a common sense, 5 paragraph law that would provide some actual reform to our banking system.
Rumor in the commercial banking industry is that, yes, the government eventually wants to break up the banks. This is what I hear when I occasionally get to talk to people who interface with regulators at a high level.
But any internet blogger can make it sound so easy, as if the government can just say, "Ok banks, time to break up," especially in the current political climate. My uninformed guess is that the government has other worries, and wants to see how the Volcker rule pans out.
But any internet blogger can make it sound so easy, as if the government can just say, "Ok banks, time to break up," especially in the current political climate. My uninformed guess is that the government has other worries, and wants to see how the Volcker rule pans out.
The problem is lack of leadership. Who do you mean by "the government"? There are only people in government service and none of them are beating the drum that too big to fail is too big to exist.
By 'the government' I mean Congress and all the relevant regulators such as the SEC and the Fed...
...and please don't imagine to the temptation that the world is not the way you want it because of the lack of a leader, or something. This stuff is heavily politicized and very complicated, and part of that complication is because of the generations of regulators who said 'something must be done'.
...and please don't imagine to the temptation that the world is not the way you want it because of the lack of a leader, or something. This stuff is heavily politicized and very complicated, and part of that complication is because of the generations of regulators who said 'something must be done'.
But still, really?
All I see is Obama's top team being very cozy with the big banks, and the Republicans would let BofA institute gas chambers as long as it was "free market". Where's 'the government wanting to break them up' in that?
All I see is Obama's top team being very cozy with the big banks, and the Republicans would let BofA institute gas chambers as long as it was "free market". Where's 'the government wanting to break them up' in that?
Assuming you're not going on common Internet Wisdom and have some knowledge of this, I'd be interested to know in what ways Obama's top team is cozy with banks. I'm not being facetious--well, maybe a little--but I find this stuff fascinating.
"Evil" is a silly term. Robert Rubin (citi), Henry Paulson (goldman), Tim Geithner (ny fed), these names aren't ringing a bell?
The impression I've gotten is that the financial world is convinced that Obama is out to get them, so of course it's "common knowledge" that he has a plan to break up the banks. But what's he actually done? The settlement with the big banks a couple months ago was a slap on the wrist at best, and removed a huge liability.
The impression I've gotten is that the financial world is convinced that Obama is out to get them, so of course it's "common knowledge" that he has a plan to break up the banks. But what's he actually done? The settlement with the big banks a couple months ago was a slap on the wrist at best, and removed a huge liability.
> "Evil" is a silly term. Robert Rubin (citi), Henry Paulson (goldman), Tim Geithner (ny fed), these names aren't ringing a bell?
My brain parses that as: people whose roles will require experience and insight in dealing with huge sums of money and complex economic effects at the national level TURN OUT to also be the kind of people you'd want to hire for other roles that benefit from applying experience and insight in dealing with huge sums of money and complex economic effects at the national level.
Now, if they're corrupt, that would be a bad thing. But having prior relevant experience? A good thing.
My brain parses that as: people whose roles will require experience and insight in dealing with huge sums of money and complex economic effects at the national level TURN OUT to also be the kind of people you'd want to hire for other roles that benefit from applying experience and insight in dealing with huge sums of money and complex economic effects at the national level.
Now, if they're corrupt, that would be a bad thing. But having prior relevant experience? A good thing.
Hey, sorry, I edited my post after you responded, but I didn't say and never said that it's "common knowledge" that Obama wants to break up banks.
What I said is that the financial industry, as of recently, has had an antagonistic relationship with the government, and that this is common knowledge in the industry. That's how they see it, anyway. There's a lot of tiptoeing the government has to do, because they're still counting on commercial banks to clear the housing market, to have their back on distressed bank mergers, etc.
Anyway, I'd rather see top bankers in those positions than top politicians. Obama's a moderate and a technocrat; so your thesis isn't distinguishable from the null hypothesis.
What I said is that the financial industry, as of recently, has had an antagonistic relationship with the government, and that this is common knowledge in the industry. That's how they see it, anyway. There's a lot of tiptoeing the government has to do, because they're still counting on commercial banks to clear the housing market, to have their back on distressed bank mergers, etc.
Anyway, I'd rather see top bankers in those positions than top politicians. Obama's a moderate and a technocrat; so your thesis isn't distinguishable from the null hypothesis.
I understand that generations of regulators that wanted to maintain the status quo followed the logic:
Something must be done! This is something we can all agree on. This must be done!
I also think an insightful leader can propose actions that disrupt the status quo and leave the world a better place.
I posit that the internet would not have been able to take-off the way it did if the DOJ had not successfully broken up AT&T. Remember there used to be exactly one company who owned the phone lines running into your house and across the country. Since they owned the wires they decided what equipment you could hook onto their wires - which happened to be only equipment they sold and installed.
Something must be done! This is something we can all agree on. This must be done!
I also think an insightful leader can propose actions that disrupt the status quo and leave the world a better place.
I posit that the internet would not have been able to take-off the way it did if the DOJ had not successfully broken up AT&T. Remember there used to be exactly one company who owned the phone lines running into your house and across the country. Since they owned the wires they decided what equipment you could hook onto their wires - which happened to be only equipment they sold and installed.
minor point, but AT&T lost the legal right to control the equipment you plugged in at least a decade before they were broken up, iirc.
"why is no one talking about breaking up these "too big to fail" institutions into companies that are small enough to fail?"
Because they're too big not to lobby.
Because they're too big not to lobby.
According to Confidence Men Obama had ordered Geithner to come up with a plan to break up Citibank, but Geithner delayed coming up with one until after the window of opportunity had closed.
Who would buy the toxic parts?
That is exactly the problem. The US taxpayers already "own" the toxic parts. Taxpayers are on the hook for whatever bad bets BofA has made yet there is no visibility into those bets whatsoever.
You don't break it into toxic and non-toxic. You break it up by region, so you get small regional banks each with both toxic and non-toxic parts and the don't let them recombine.
ie. Make Bank of America a wet coast only bank again.
ie. Make Bank of America a wet coast only bank again.
Nobody would buy it without some government insurance, making it pointless. The best paths now are either letting it orderly fail (if that's possible) or forced nationalization at a symbolic price.
But if I had to bet, my money would be on some travesty against the US taxpayer like Bear Stearns good assets sold for close to nothing and taxpayers taking the junk mortgage assets.
http://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sa...
But current BofA management will keep complicating it as long as possible, maximizing their income. Also the legal pandora's box of imminent lawsuits makes thing very bleak.
But if I had to bet, my money would be on some travesty against the US taxpayer like Bear Stearns good assets sold for close to nothing and taxpayers taking the junk mortgage assets.
http://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sa...
But current BofA management will keep complicating it as long as possible, maximizing their income. Also the legal pandora's box of imminent lawsuits makes thing very bleak.
Are there other industries that are "too big to fail"? What if all companies had limits on their size (whether that's region, market cap, or whatever)? The number of companies that exist might grow as big companies spin off divisions or new companies try to serve demand unmet by a size-limited company. More companies would mean increased competition, limiting abusive monopolies and corporate lobbying.
This system might be an example of local inefficiencies that lead to a healthier whole. Big companies are supposed to benefit from "economies of scale", but are there any big companies that are not the wasteful, ineffective bureaucracies featured in Dilbert?
This system might be an example of local inefficiencies that lead to a healthier whole. Big companies are supposed to benefit from "economies of scale", but are there any big companies that are not the wasteful, ineffective bureaucracies featured in Dilbert?
> Are there other industries that are "too big to fail"?
What about governments?
If there are companies that are "too big to fail" and therefore should be broken up, surely the US govt should also be broken up. (CA's govt may qualify as well.)
What about governments?
If there are companies that are "too big to fail" and therefore should be broken up, surely the US govt should also be broken up. (CA's govt may qualify as well.)
Good point. I would support that. The US government was designed to be a federation of state governments, but power hunger interests have twisted the definition of "federal" government so as to consolidate power. :\
What you propose is called antitrust, and it is already law, but is mostly ignored or loopholed.
"much of the new management either came directly from the military or from executive positions at other major retail companies such as Pepsi Cola, Best Buy, Home Depot--basically ANY line of business OTHER than banking. These people had no experience in banking, and that was ok, because BANKING just became RETAIL. Money and debt became a commodity to be sold to clients instead of managed responsibly."
I use a bank whose initials are very close to WtF. When I listen to their managers and "bankers" (the employees who sit at desks rather than stand at counters), I hear them refer to their branch as a "store," e.g. "Hi this is Zachary at store number 1243 ..."
Stores don't manage money, stores sell things, and I am very weary of being upsold to buy car insurance, home insurance, or to be snagged into their bill pay service any time I go in to do something face to face.
Banks are not banks anymore, they're generic retail outfits whose management and executives can be swapped generically with 7/11 or Best Buy, and whose employees have similar functions and upsell responsibilities to those more explicitly retail businesses.
I use a bank whose initials are very close to WtF. When I listen to their managers and "bankers" (the employees who sit at desks rather than stand at counters), I hear them refer to their branch as a "store," e.g. "Hi this is Zachary at store number 1243 ..."
Stores don't manage money, stores sell things, and I am very weary of being upsold to buy car insurance, home insurance, or to be snagged into their bill pay service any time I go in to do something face to face.
Banks are not banks anymore, they're generic retail outfits whose management and executives can be swapped generically with 7/11 or Best Buy, and whose employees have similar functions and upsell responsibilities to those more explicitly retail businesses.
What's wrong with retail banking being retail? The office where you do the paperwork isn't where they keep the money, it is a customer service center for your benefit.
Nothing necessarily. There isn't even much wrong with them selling car insurance. But the strong emphasis on upsell gives me the impression that my banking is not only incidental to bringing me in and selling me insurance, but that the banking operations of a bank are not bringing in enough profits to satisfy shareholders. Maybe even not enough for survival.
If a bank can't be profitable (enough) being a bank, or needs to chase other retail markets to shore itself up, then that's a problem, given the role of banks in the economy.
Or maybe it's just change. But I think it's worth noticing.
If a bank can't be profitable (enough) being a bank, or needs to chase other retail markets to shore itself up, then that's a problem, given the role of banks in the economy.
Or maybe it's just change. But I think it's worth noticing.
[deleted]
I don't claim any expertise or insider knowledge, but I do recall during the crisis getting the distinct impression from publications like FT, WSJ, and NYT that BofA was strong-armed by The Fed and/or Treasury to acquire Countrywide and ML.
Based on the constant flood of ungrammatical spam they send me, BofA seems rather proud to be running Merrill Lynch. "Ready to start investing, again?"
I voted up this thread because of this comment. (Bit tired of Taibbi, but your inside history is very interesting.)
Am I the only one who finds this article unenlightening? I don’t disagree with its broad opinions, but it mostly seems a recounting of lawsuits in the public record.
Are there any factual breakthroughs, or is it mostly a rant? It seems very short on new information, and long on name-calling.
Again, it doesn’t mean it’s “wrong”, but rather it doesn’t rise to the level of being informative or corroborable. Trust me, I am inclined to agree with the tone but I don’t feel smarter for having read it.
Are there any factual breakthroughs, or is it mostly a rant? It seems very short on new information, and long on name-calling.
Again, it doesn’t mean it’s “wrong”, but rather it doesn’t rise to the level of being informative or corroborable. Trust me, I am inclined to agree with the tone but I don’t feel smarter for having read it.
Maybe if you are a close watcher of BofA you didn't learn anything; below are some of things about BofA I didn't know before reading this article:
"controls more than 12 percent of America's bank deposits (skirting a federal law designed to prohibit any firm from controlling more than 10 percent), as well as 17 percent of all American home mortgages."
"AMBAC, the second-largest bond insurer in America, went bankrupt in 2010 after paying out some $466 million in claims over 35,000 Countrywide home loans. After analyzing a dozen of the mortgage pools, AMBAC found that a staggering 97 percent of the loans didn't meet the stated underwriting standards."
"In the first half of last year, Bank of America paid $12.7 billion to settle claims brought by defrauded customers."
"Allstate claims it got stuck with $700 million in defective mortgages from Countrywide. The states of Iowa, Oregon and Maine, as well as the United Methodist Church, are suing Bank of America over fraudulent deals, claiming hundreds of billions in collective losses. And there are similar lawsuits for nonmortgage-related securities…Merrill Lynch brokers allegedly dumped $944 million in auction-rate securities … even though the brokers knew that the auction-rate market was already going bust. "
"for instance, intentionally ding depositors with bogus overdraft fees. (A class action suit accused Bank of America of heisting some $4.5 billion from its customers this way; the bank settled the suit for a mere 10 cents on the dollar.)"
"paid a $137 million fine for its sabotage of the government-contracting process"
"Last year, the bank was sued, alongside some of its competitors, for conspiring to rig the London Interbank Offered Rate."
"As part of an $8.4 billion settlement it entered into with multiple states over predatory lending practices, the bank agreed to provide homeowners with modified loans … the bank "materially and almost immediately violated" the terms, according to Nevada Attorney General"
"Just a few weeks ago, the government charged Bank of America with violating the Fair Housing Act"
"Last December, the bank settled with the Justice Department for $335 million over Countrywide's practice of dumping risky subprime loans on qualified black and Hispanic borrowers."
"In South Carolina, Bank of America won a contract to distribute unemployment benefits through prepaid debit cards – and then charged multiple fees to jobless folk who had the gall to withdraw their money from anywhere other than a Bank of America ATM. "
"they asked the bank to move a chunk of that mess from Merrill Lynch onto Bank of America's own balance sheet. Why? Because Bank of America is a federally insured depository institution. Which means that the FDIC, and by extension you and me, is now on the hook for as much as $55 trillion in potential losses. Black, the former regulator, calls the transfer an "obscenity. As a regulator, I would have never allowed it. Transferring risk to the insured institution crosses the reddest of red lines."
"controls more than 12 percent of America's bank deposits (skirting a federal law designed to prohibit any firm from controlling more than 10 percent), as well as 17 percent of all American home mortgages."
"AMBAC, the second-largest bond insurer in America, went bankrupt in 2010 after paying out some $466 million in claims over 35,000 Countrywide home loans. After analyzing a dozen of the mortgage pools, AMBAC found that a staggering 97 percent of the loans didn't meet the stated underwriting standards."
"In the first half of last year, Bank of America paid $12.7 billion to settle claims brought by defrauded customers."
"Allstate claims it got stuck with $700 million in defective mortgages from Countrywide. The states of Iowa, Oregon and Maine, as well as the United Methodist Church, are suing Bank of America over fraudulent deals, claiming hundreds of billions in collective losses. And there are similar lawsuits for nonmortgage-related securities…Merrill Lynch brokers allegedly dumped $944 million in auction-rate securities … even though the brokers knew that the auction-rate market was already going bust. "
"for instance, intentionally ding depositors with bogus overdraft fees. (A class action suit accused Bank of America of heisting some $4.5 billion from its customers this way; the bank settled the suit for a mere 10 cents on the dollar.)"
"paid a $137 million fine for its sabotage of the government-contracting process"
"Last year, the bank was sued, alongside some of its competitors, for conspiring to rig the London Interbank Offered Rate."
"As part of an $8.4 billion settlement it entered into with multiple states over predatory lending practices, the bank agreed to provide homeowners with modified loans … the bank "materially and almost immediately violated" the terms, according to Nevada Attorney General"
"Just a few weeks ago, the government charged Bank of America with violating the Fair Housing Act"
"Last December, the bank settled with the Justice Department for $335 million over Countrywide's practice of dumping risky subprime loans on qualified black and Hispanic borrowers."
"In South Carolina, Bank of America won a contract to distribute unemployment benefits through prepaid debit cards – and then charged multiple fees to jobless folk who had the gall to withdraw their money from anywhere other than a Bank of America ATM. "
"they asked the bank to move a chunk of that mess from Merrill Lynch onto Bank of America's own balance sheet. Why? Because Bank of America is a federally insured depository institution. Which means that the FDIC, and by extension you and me, is now on the hook for as much as $55 trillion in potential losses. Black, the former regulator, calls the transfer an "obscenity. As a regulator, I would have never allowed it. Transferring risk to the insured institution crosses the reddest of red lines."
Fair enough and no, I am not such an observer that I would know all those things. But many of those “facts” are loaded with motives and intentions, which are not factual. (“Not factual” doesn’t mean false, it just means non-objective and unproveable.)
I suppose what I am getting at is that critics need to play a better, more empirical game if they are to succeed. This article is emotionally manipulative, by design.
I suppose what I am getting at is that critics need to play a better, more empirical game if they are to succeed. This article is emotionally manipulative, by design.
Lawsuits, government charges, settlements, contracts -- these all seem factual to me. Only some emotional words of keep "gall" (which I agree are manipulative, the facts should stand on their own) add non-journalistic color.
That's Matt Taibbi for you.
I'm as unimpressed as you are, but some people seem to enjoy his two minute hate routine.
I'm as unimpressed as you are, but some people seem to enjoy his two minute hate routine.
There are many egregious wrongdoings there, but I find this one particularly pernicious:
> "Last year, the bank was sued, alongside some of its competitors, for conspiring to rig the London Interbank Offered Rate."
LIBOR + the US T-Bill rate (plus the Federal Funds rate?) is generally considered the risk-free rate of return, upon which all other interest rates in the economy are indexed. I'm sure there's nothing more heady and master-of-the-universe-feeling than manipulating the entire world that way, but it's pretty fucked nonetheless.
One problem with the increasing concentration of wealth and the financialization of the global (or at least Western) economies is that banks and ibanks are becoming more and more able to play games like this with markets. Beyond a certain threshold of capital and leverage, market manipulation becomes not only possible but a viable business strategy.
I know it's happening now, especially with HFT and algo systems accounting for over half the volume on major exchanges, just not the extent of it. The incentives are getting seriously out of whack.
> "Last year, the bank was sued, alongside some of its competitors, for conspiring to rig the London Interbank Offered Rate."
LIBOR + the US T-Bill rate (plus the Federal Funds rate?) is generally considered the risk-free rate of return, upon which all other interest rates in the economy are indexed. I'm sure there's nothing more heady and master-of-the-universe-feeling than manipulating the entire world that way, but it's pretty fucked nonetheless.
One problem with the increasing concentration of wealth and the financialization of the global (or at least Western) economies is that banks and ibanks are becoming more and more able to play games like this with markets. Beyond a certain threshold of capital and leverage, market manipulation becomes not only possible but a viable business strategy.
I know it's happening now, especially with HFT and algo systems accounting for over half the volume on major exchanges, just not the extent of it. The incentives are getting seriously out of whack.
As a non-US person, I found it a nice recap. I mean, I knew BofA was bad but jesus fucking christ... they make Goldman Sachs look vaguely respectable.
I agree. I read this guys book, and it was similar quality.
there will be no factual breakthroughs until someone in the know actually discusses what happened in a case.
for example, if a GS employee spoke out about what really happened with el paso and kinder morgan (they were advising el paso in a buyout while owning stake in KM), then we'd really see AGs and others go after the banks
for example, if a GS employee spoke out about what really happened with el paso and kinder morgan (they were advising el paso in a buyout while owning stake in KM), then we'd really see AGs and others go after the banks
US startups/small business owners: who are you using for your business checking account?
I had my business and personal accounts with Fifth Third for many years but had to switch to Bank of America when I moved to a state where 5/3 didn't have locations. Now that I'm back in Chicago, I'm looking to switch away from BoA due to their ridiculous fees and questionable business practices.
I have to make check deposits once or twice a week, so small credit unions are probably out of the question. The one good thing about BoA was that its ATMs accept check deposits by scanning them without filling out deposit slips and they have locations everywhere, so I've only had to deal with their tellers like twice in the past year and a half.
I had my business and personal accounts with Fifth Third for many years but had to switch to Bank of America when I moved to a state where 5/3 didn't have locations. Now that I'm back in Chicago, I'm looking to switch away from BoA due to their ridiculous fees and questionable business practices.
I have to make check deposits once or twice a week, so small credit unions are probably out of the question. The one good thing about BoA was that its ATMs accept check deposits by scanning them without filling out deposit slips and they have locations everywhere, so I've only had to deal with their tellers like twice in the past year and a half.
Silicon Valley Bank and Square1 are two banks that focus on startups/small business.
http://www.svb.com/
http://www.square1financial.com/bank/
(They're on my radar for when I get to that point, but haven't used either yet.)
http://www.svb.com/
http://www.square1financial.com/bank/
(They're on my radar for when I get to that point, but haven't used either yet.)
>At least Bank of America got its name right. The ultimate Too Big to Fail bank really is America, a hypergluttonous ward of the state whose limitless fraud and criminal conspiracies we'll all be paying for until the end of time.
And with that, I could stop reading. If I had noticed it was Taibbi I could have saved myself a few seconds.
And with that, I could stop reading. If I had noticed it was Taibbi I could have saved myself a few seconds.
I'm not the biggest fan of Taibbi. I find his writing style to be just too close to tabloid style sensationalism to be worthwhile reading. He pollutes his reporting with far too much personal judgement.
The facts pretty much speak for themselves without all the hyperbole.
The facts pretty much speak for themselves without all the hyperbole.
The facts may speak for themselves, but someone still has to put them into an article so that we will read them. If it requires inserting a few hyperbolic statements along the way, I'm willing to accept this.
There's better reporting out there on how we found ourselves in this situation.
Try "All The Devils Are Here" which is a much better accounting of the circumstances that led to the financial crisis. In short, there isn't one player, or even one industry, that's responsible. There is plenty of blame to go around and at least part of that blame lies with the public. There are also lots of innocent parties that have been caught up in this mess and are being blamed even though they had nothing to do with the crisis.
Taibbi's articles reflect the bias of his audience and he writes to that bias. Somewhere along that path, he obscures the facts (or omits important ones that dont jibe with his argument) in order to write his story. That actually hinders the transparency, which inhibits understanding, which lowers the chance we'll take the right corrective action.
Try "All The Devils Are Here" which is a much better accounting of the circumstances that led to the financial crisis. In short, there isn't one player, or even one industry, that's responsible. There is plenty of blame to go around and at least part of that blame lies with the public. There are also lots of innocent parties that have been caught up in this mess and are being blamed even though they had nothing to do with the crisis.
Taibbi's articles reflect the bias of his audience and he writes to that bias. Somewhere along that path, he obscures the facts (or omits important ones that dont jibe with his argument) in order to write his story. That actually hinders the transparency, which inhibits understanding, which lowers the chance we'll take the right corrective action.
I question BofA's business practices and relationship with the government as much as the next guy, but this:
"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. "
Fairly certain that $55 trillion approaches the overall GDP of the global economy. Its super easy to make compelling arguments about BofA without resorting to such exaggerations.
"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. "
Fairly certain that $55 trillion approaches the overall GDP of the global economy. Its super easy to make compelling arguments about BofA without resorting to such exaggerations.
That's possibly the notional value for all their derivative positions, but you're right in that BofA is unlikely to be in a position where they'd write a check for that amount. I think the author picked the biggest number he could find without understanding what it means.
addendum: The same mistake is repeated elsewhere: '"About $350 trillion worth of financial products globally reference LIBOR," says one antitrust lawyer familiar with the case.' Unless I'm mistaken, that too is notional value. A swap or whatever is usually worth a lot less than its notional value.
addendum: The same mistake is repeated elsewhere: '"About $350 trillion worth of financial products globally reference LIBOR," says one antitrust lawyer familiar with the case.' Unless I'm mistaken, that too is notional value. A swap or whatever is usually worth a lot less than its notional value.
That the total liabilities referred to are $55T is a fact. That the FDIC would be capable of paying out even a small fraction of that is an exaggeration, though.
There's no reason the FDIC would need to pay out $55T. They only need to cover insured deposits. Moving bad bets onto the books makes the insured deposits riskier, but it doesn't insure the bad bet as well.
The only reason I'm still with BofA is because of their ebill service that automatically pays my bills after receiving a statement electronically. I have maybe a a dozen services set up that don't offer automatic payment themselves.
I'd be gone in a heartbeat otherwise.
I'd be gone in a heartbeat otherwise.
You do realize that some other banks offer similar services too, right?
I say this as someone who is also with BoA, and have been considering leaving. I know it's not easy to leave (believe me) but other banks offer the same services.
I say this as someone who is also with BoA, and have been considering leaving. I know it's not easy to leave (believe me) but other banks offer the same services.
And of course, all of the other banks are nearly as corrupt as BofA.
A lot could change if we all switched to small credit unions; of course, small credit unions can't offer all the fancy featurs of a multinational (like automatic online bill pay or whatever).
As consumers, we have chosen megabanks, even if we realize they are the problem here.
A lot could change if we all switched to small credit unions; of course, small credit unions can't offer all the fancy featurs of a multinational (like automatic online bill pay or whatever).
As consumers, we have chosen megabanks, even if we realize they are the problem here.
> As consumers, we have chosen megabanks, even if we realize they are the problem here.
This almost seems to be a truism. Laziness wins out. But when BoA announced their plan to charge monthly debit card fees, a massive amount of people left for credit unions in a very short time, there is a limit to how much people will take. I was going to follow suit, there are a number of attractive credit unions in the Greater Seattle area, but out of laziness I decided to wait them out and see if they would actually do it. They backpedaled, and simultaneously fixed the other biggest issue I had with them. That was not showing pending transactions on my online statement. I'm still with them...
This almost seems to be a truism. Laziness wins out. But when BoA announced their plan to charge monthly debit card fees, a massive amount of people left for credit unions in a very short time, there is a limit to how much people will take. I was going to follow suit, there are a number of attractive credit unions in the Greater Seattle area, but out of laziness I decided to wait them out and see if they would actually do it. They backpedaled, and simultaneously fixed the other biggest issue I had with them. That was not showing pending transactions on my online statement. I'm still with them...
* small credit unions can't offer all the fancy featurs of a multinational (like automatic online bill pay or whatever).*
I'm with a credit union now and it offers bill pay (with lots of features). I don't know if it can be set to completely automatic since I like to check each bill prior to money leaving my account, but bills show up in my account for me to examine and I click pay. Takes about 30 seconds or so. Their service will also cut checks and mail them to people for things like rent or my current water utility that only accepts payments sent through the mail. This is included and has no additional charge. They also have great loan rates, and it's nice to deal with friendly local people.
I'm with a credit union now and it offers bill pay (with lots of features). I don't know if it can be set to completely automatic since I like to check each bill prior to money leaving my account, but bills show up in my account for me to examine and I click pay. Takes about 30 seconds or so. Their service will also cut checks and mail them to people for things like rent or my current water utility that only accepts payments sent through the mail. This is included and has no additional charge. They also have great loan rates, and it's nice to deal with friendly local people.
Small community banks still exist. Mine offers online bill pay, and just about every other "fancy features" that larger banks do.
So, yeah, there are options other than huge bank or crippled credit union.
So, yeah, there are options other than huge bank or crippled credit union.
> small credit unions can't offer all the fancy featurs of a multinational (like automatic online bill pay or whatever).
I've only banked with 2 credit unions, but both offered this feature. Maybe I was just lucky, but online bill pay seems like a solved space at this point.
If not, surely that's a solid start-up idea?
I've only banked with 2 credit unions, but both offered this feature. Maybe I was just lucky, but online bill pay seems like a solved space at this point.
If not, surely that's a solid start-up idea?
I've always wondered why Mint.com doesn't offer white-label services like this to financial institutions. They've got the UX down really well and they seem poised to offer a lot of cool features in this space if they could offer a tighter integration with banks.
You could try USAA. They have all the bells and whistles (auto bill pay, check cashing app) and have great customer service and conservative lending practices.
EDIT: They have a unique organizational structure more like a co-op (http://en.wikipedia.org/wiki/USAA#Legal_structure)
EDIT: They have a unique organizational structure more like a co-op (http://en.wikipedia.org/wiki/USAA#Legal_structure)
USAA limits passwords to 12 characters. That means they're doing something wrong for password storage.
Although they offer 2-factor auth, only the SMS option is any good. If you choose Symantec VIP, your login consists of the VIP token and your 4 digit pin, rather than the VIP token and your password. A 4 digit pin does not provide much more security than the VIP token alone. I don't understand why they buddied up with Symantec rather than implementing OATH.
I know they're a good bank, but I can't get past those technical issues.
Although they offer 2-factor auth, only the SMS option is any good. If you choose Symantec VIP, your login consists of the VIP token and your 4 digit pin, rather than the VIP token and your password. A 4 digit pin does not provide much more security than the VIP token alone. I don't understand why they buddied up with Symantec rather than implementing OATH.
I know they're a good bank, but I can't get past those technical issues.
That's not worse than BofA though, which has no two-factor auth.
BofA has SMS 2-factor. It's hidden.
- Customer Service tab.
- "Visit the Security Center" in the left column under Security Features
- "View your SafePass settings" under the Online Banking menu when you expand it.
- I assume at that point there's an "Add SafePassDevice" option. I already have my phone added. I remember when I added it there was a snafu and I had to call the BOA fraud hotline to get it added, but they did add it.
- Once you have a SafePass device (sms-capable mobile), under Current SafePass settings, "change these settings" and set it to require SafePass to log in to online banking.
Interesting. I was under the impression that in order to get the good stuff through them, you had to be in the military.
I think you need to be in the military (or be a direct descendant of someone who was) to use the insurance, but I think banking is open to the public. I highly recommend checking them out, amazing customer service.
[deleted]
My local credit union has auto bill pay and it only has around ~5k members total.
They also have CD rates 3x higher than any big bank that I've seen.
They also have CD rates 3x higher than any big bank that I've seen.
BAC is up 76.26% YTD. Pretty much everything the article says makes sense, and I'm happy I closed my BofA account years ago, but at $5 I had to snatch up some of that stock. I hardly regret the decision.
And BAC is also down -30.2% if you started at one full year from today, or -80% if you go back 5 full years. You can find a way to make almost any stock look attractive if you choose the right starting point.
I don't think his starting point is arbitrary - the article referred to BAC at around 5 in December. Since the beginning of December when it closed at 5.53 BAC has beaten the Vanguard financials ETF by over 59 points (and SPX by over 67).
I bought stock at $13.37, down from $60ish. I thought it was a good investment. Nope. BAC: the only company worth less than its cash assets.
There are worse banks. For example, Regions Financial quietly slid into positive tangible common equity with the $900M offering last week (for the past few years it was actually negative ...)
Bloomberg had a reasonably coherent discussion: http://www.bloomberg.com/news/2012-03-15/stress-tests-pass-f...
FTA:
Bloomberg had a reasonably coherent discussion: http://www.bloomberg.com/news/2012-03-15/stress-tests-pass-f...
FTA:
The footnotes to the company’s latest financial statements tell the story.
There, the Birmingham, Alabama-based lender disclosed that the loans on its books
were worth $8.1 billion less than what its balance sheet said, as of Dec. 31. By
comparison, the company’s tangible common equity, a bare-bones measure of net worth,
was $7.6 billion.
So if it weren’t for the inflated loan values, Regions’ tangible common equity would
have been less than zero, with liabilities exceeding hard assets.
> I wish that there was a way to indicate that a quoted block should be wrapped
Just use the conventional caret instead of the monospace blockquote
Just use the conventional caret instead of the monospace blockquote
How does U.S. Bank compare to BOA?
Enviously, I imagine.
They have the worst customer service of any bank that I've done business with. My friends all agree. Anecdote of a handful.
They have the worst customer service of any bank that I've done business with. My friends all agree. Anecdote of a handful.
Bank of America == US Government
My English wife has an account with them, and they have a habit of switching her account type without warning to whichever one has the highest monthly fees, thus draining the account from ~$1,000 to $32.50 by the time we find out about it. Then we spend a few hours in a branch, shouting at the manager. And it gets escalated up the line until somebody can do something about it. And we get a case opened to credit it all back and put us back onto the "Free, no fees, honest, we mean it this time" account.
Just did the 3rd round of this last week.
Their advice: "You should log on to your online banking on a regular basis to make sure your fee status hasn't changed." Because "our terms of service allow us to change fees without notice."
Sweet. My bad then. We'll be sure to check in every few days to make sure your bank hasn't confiscated all of our money. Thanks for the tip.