Matt Taibbi: Bank of America is a "raging hurricane of
theft and fraud"
Matt Taibbi speaking at an Occupy Wall Street day of
action, February 29th, 2012. He wrote this article for
OWS, and passed it out to the crowd. It's an informative
and urgent call to action for Americans from all walks of
life. We are happy to be the first to publish it.
There are two things every American needs to know about
Bank of America.
The first is that it's corrupt. This bank has
systematically defrauded almost everyone with whom it has
a significant business relationship, cheating investors,
insurers, homeowners, shareholders, depositors, and the
state. It is a giant, raging hurricane of theft and fraud,
spinning its way through America and leaving a massive
trail of wiped-out retirees and foreclosed-upon families
in its wake.
The second is that all of us, as taxpayers, are keeping
that hurricane raging. Bank of America is not just a
private company that systematically steals from American
citizens: it's a de facto ward of the state that depends
heavily upon public support to stay in business. In fact,
without the continued generosity of us taxpayers, and the
extraordinary indulgence of our regulators and elected
officials, this company long ago would have been swallowed
up by scandal, mismanagement, prosecution and litigation,
and gone out of business. It would have been liquidated
and its component parts sold off, perhaps into a series of
smaller regional businesses that would have more respect
for the law, and be more responsive to their customers.
But Bank of America hasn't gone out of business, for the
simple reason that our government has decided to make it
the poster child for the "Too Big To Fail" concept.
Because it is considered a "systemically important
institution" whose collapse would have a major,
Lehman-Brothers-style impact on the economy, two
consecutive presidential administrations have taken
extraordinary measures to keep Bank of America in
business, despite a staggering recent legacy of corruption
schemes, many of which were simply overlooked by
This is why the question of whether or not Bank of America
should remain on public life support is so critical to all
Americans, and not just those millions who have the
misfortune to be customers of the bank, or own shares in
the firm, or hold mortgages serviced by the company. This
gigantic financial institution is the ultimate symbol of a
new kind of corruption at the highest levels of American
society: a tendency to marry the near-limitless power of
the federal government with increasingly concentrated,
increasingly unaccountable private financial interests.
The inevitable result of that new form of corruption is
this bank, whose continued, state-supported existence
should naturally outrage all Americans, be they
conservative or progressive.
Conservatives should be outraged by Bank of America
because it is perhaps the biggest welfare dependent in
American history, with the $45 billion in bailout money
and the $118 billion in state guarantees it's received
since 2008 representing just the crest of a veritable
mountain of federal bailout support, most of it doled out
by the Obama administration.
For instance, with its own credit rating hovering just
above junk status, Bank of America has been allowed to
borrow tens of billions of dollars against the
government's credit rating using little-known bailout
programs with names like the Temporary Liquidity Guarantee
Program. Since the crash of 2008, it's also borrowed
billions if not trillions in emergency, near-zero interest
rate loans from the Federal Reserve - it took out $91
million in rolling low-interest financing from the Fed on
just one day in January, 2009.
Conservatives believe that a commitment to free market
principles and limited government will lead us out of our
economic troubles, but Bank of America represents the
opposite dynamic: a company that is kept protected from
the judgments of the free market, and forces the state to
expand to take on its debts.
Last summer, for instance, the Bank - in order to satisfy
creditors who were nervous about the enormous quantity of
risky assets on its balance sheet - decided to move some
$73 trillion (that's trillion, with a T) in exotic
derivative bets from one end of the company into the
federally-insured, depository side of the bank.
This move, encouraged by the Obama administration, put the
American taxpayer on the hook for an entire generation of
irresponsible gambles made by another failed investment
firm that should have gone out of business, but was
instead acquired by Bank of America with $25 billion in
taxpayer help - Merrill Lynch.
When did we make it the job of the taxpayer to buy failed
companies, and rescue companies from their own bad
decisions? How is that conservative?
Meanwhile, if you're a progressive, Bank of America is the
ultimate symbol of modern predatory capitalism. This
company has knowingly sold hundreds of billions of
worthless securities to unions and pension funds (New York
state filed two different lawsuits against Bank of America
and its subsidiaries on behalf of its pension fund, one of
which was settled for $624 million) brazenly overcharged
its depositors (it was forced to pay customers $410
million in restitution for bogus overdraft charges), and
repeatedly lied to its shareholders (most notoriously, it
lied about billions in losses on Merrill Lynch's books
before asking shareholders to approve its merger with the
Moreover, Bank of America has ruthlessly preyed upon
millions of homeowners, throwing them out on the street on
the strength of doctored, "robosigned" paperwork created
through brazenly illegal practices they helped pioneer --
the firm sped struggling families to foreclosure court
using perjured affidavits produced in factory-like fashion
by the hundreds or thousands every day, with full
knowledge of management. Through the firm's improper use
of an unaccountable private electronic mortgage registry
system called MERS, it also systematically evaded millions
of dollars in local fees, forcing some communities to cut
services and raise property taxes.
Even when caught and punished for its crimes by the
authorities, Bank of America has repeatedly ignored court
orders. It was one of five companies identified in two
separate investigations earlier this year that were caught
continuing the practice of robosigning, even after
promising to stop in a legally binding consent decree.
Last summer, the state of Nevada sought to terminate a
settlement over mortgage abuses it had entered into with
Bank of America after it found the company was brazenly
violating the agreement, among other things raising
payments and interest rates on mortgage customers, despite
the fact that the settlement only allowed them to modify
Over and over again, we see that leveling fines and
punishments at this bank is not enough: it simply ignores
them. It is the very definition of an unaccountable
Companies like Bank of America are a direct threat to
national security, for many reasons. For one thing, they
drive smaller, more honest banks out of business: since
the market knows the federal government will never let
Bank of America fail, it charges less to lend the bank
money. That gives Bank of America, despite its near-junk
credit rating, a competitive advantage over a smaller,
regional bank that might have a better credit rating, but
doesn't have the implicit support of the federal
Worse still, stock market investor dollars that normally
would go to more customer-friendly, more creative, and
more commercially dependable firms will instead continue
to flow to Too-Big-To-Fail behemoths like Bank of America,
as buying stock in a company with implicit state support
will be considered almost a safe-haven investment, like
buying gold or Treasury bills.
This robs more deserving and ingenious entrepreneurs of
scarce capital, and also encourages existing companies to
pour resources not into better performance and increased
productivity, but into lobbying and government influence.
The result will be fewer Googles and Apples, more bad
banks, and more campaign contributions for politicians.
Moreover, we've seen throughout our history that when
criminal organizations are not punished, they tend to be
encouraged to commit more crimes. Five years from now, our
government's decision to avoid jailing Bank of America
executives for their roles in the vast robosigning program
may result in a situation where no court document of any
kind can be trusted, as companies will realize that it is
cheaper and easier to simply invent legal affidavits than
to draw them up properly and accurately.
What will your defense be against a future lawsuit for a
credit card debt or a foreclosure, when your bank walks
into court with a pile of invented documents? Will you
wish then that you'd fought harder for Bank of America to
be punished now?
And the state's decision to allow Bank of America to pay a
middling, $137 million fine for the rigging of bids for
five years of municipal bond issues - a very serious crime
that robbed taxpayers of millions in revenue, and
incidentally is exactly the sort of thing we used to put
mobsters in jail for, when the rigged contracts were for
cement instead of bonds - may mean that down the road, all
municipal bond issues will be rigged.
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.
We have to break that cycle, and we can. Even with the
enormous levels of state support, Bank of America has been
teetering on the edge of collapse for years now. In
December of 2011, its share price briefly dipped below $5,
a near-fatal event in the firm's history. The market has
reacted violently to bad news about the bank on multiple
occasions in the last year - after news of layoffs, after
hints that the government might not bail the bank out
completely in the event of a collapse, and after
significant new lawsuits were filed. Each of these
corrections nearly sent the company into a tailspin, but
it was always rescued in the end by the widespread belief
that Uncle Sam would bail it out in the event of a
We need to put a dent in that belief. We need to convince
politicians and investors alike to allow failure to fail.
- Matt Taibbi, February 29th, 2012, Occupy Wall Street
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