Bank of America "fessed up" and settled for a cool $8.5 billion in penalties for delivering a raft of fraudulent, bogus "securities," (what a misnomer), to investment customers. This is over four times the total first quarter profit of $1.7 billion, which was down a whopping 39% from the previous year. It is almost twice the total revenues the bank took in for its credit card division last quarter ($5.6 billion), also down 17.6% from the previous year. With headlines like this, one would think this bank was being managed by morons. So it's not surprising that the bank expects to post a loss in its next few quarterly reports until this untidy mortgage backed security business is behind it. Meanwhile, BofA announced new penalty rates for little folks who are late on their credit card payments, (29.99%), and upped their annual fee for about 5% of cardholders to $59.99. So they quickly passed the pain on down to the little guy. I guess the thought of NOT issuing faulty securities that result in massive $8.5 billion penalties never entered upper management's head.
Good lord, one has to wonder who was in charge of this bank while all the fraudulent paper was being hawked? Whoever they were, a select handful of a few thousands got very, very rich in this scheme. Yet to do so they derailed the entire mortgage business in the country, caused 24 million job losses and destroyed trillions in equity and other "wealth." Beyond that they have worked a radical shift in the mindset of people regarding debt, savings, and credit card usage. In effect, their malfeasance practically ruined most normal banking operations. BofA is still deemed solvent only because of accounting rules changes and massive Fed support. But please point to those who have been prosecuted and jailed for this stunning performance in the art of high finance. You will have a very hard time.
Now the game for banks is strictly one of borrow low from the Fed at a quarter of one percent interest, and buy Treasuries and other bonds that yield 2.5% or more, pocketing easy, pain free profits. Lending to get the economy moving? No thanks. Try getting seed money for a new small business. Try getting a mortgage these days without first handing over half of your children with the down payment. Face it. The mortgage business is wrecked. The middle class is now virtually locked out of the joy of "home ownership." No more "Flip That House." No more "Curb Appeal."
Good lord, one has to wonder who was in charge of this bank while all the fraudulent paper was being hawked? Whoever they were, a select handful of a few thousands got very, very rich in this scheme. Yet to do so they derailed the entire mortgage business in the country, caused 24 million job losses and destroyed trillions in equity and other "wealth." Beyond that they have worked a radical shift in the mindset of people regarding debt, savings, and credit card usage. In effect, their malfeasance practically ruined most normal banking operations. BofA is still deemed solvent only because of accounting rules changes and massive Fed support. But please point to those who have been prosecuted and jailed for this stunning performance in the art of high finance. You will have a very hard time.
Now the game for banks is strictly one of borrow low from the Fed at a quarter of one percent interest, and buy Treasuries and other bonds that yield 2.5% or more, pocketing easy, pain free profits. Lending to get the economy moving? No thanks. Try getting seed money for a new small business. Try getting a mortgage these days without first handing over half of your children with the down payment. Face it. The mortgage business is wrecked. The middle class is now virtually locked out of the joy of "home ownership." No more "Flip That House." No more "Curb Appeal."
Considering that BofA received $50 billion in TARP funds from the taxpayers, not to mention the uncounted billions it plays with at the Fed discount window, the penalty of $8.5 billion doesn't seem too severe. Yet this case is just one of a thousand others that could be further prosecuted if there was an ounce of political will and a sufficient number of hungry attorneys. Or how about some aggressive reporting on all this financial fraud? Nope, the only trial getting any media attention these days is the "Casey Anthony" trial. And I must confess that I have no idea who Casey Anthony is, what the trial is about, nor do I have any plans to find out. I could care less. But look at the attention this trial gets, while headlines like the $8.5 billion hit to BofA float blithely away into the ether of forgetfulness as we move on to more important matters.
The impending election year is likely to derail, or at least slow similar, prosecutions, as the big banks line up to throw money at Representatives, Senators and presidential candidates they hope to influence and place in office to continue to further their interests. What a sad system we have, run by "the mother's milk of politics," (said Jess Unruh), money. If I had a magic wand, one of the very first things I would do is make all corporate campaign contributions illegal. All candidates would have to receive equal allotments from the tax donation pool so campaigning would not be reserved for the wealthy class. But there I go wishing I had that magic wand again.
The $8.5 Billion hit BofA took is just the tip of the iceberg that wrecked our Titanic economy, where trillions in fraudulent securities schemes tore a hole through the decks and flooded one commercial segment after another. And the executives at all the big banks, rescued by the Fed and now paying out record bonuses and compensation, all got seats in the very first lifeboats.
Meanwhile the rest of us trapped down in steerage, dither our way toward the celebrations planned for the Fourth of July, oblivious. The riots and unrest in Greece may be a template for our own future, however, as Congress tries to figure out how to prevent the government from going broke as we drown in debt. The real news is that the government is already broke, and has been for decades. That's what "deficit spending" means--spending money you don't actually have. But Bernanke and the Fed have apparently decided they can create as much money as is needed to keep the international banking system working. So, after simply creating money to buy up Treasury bonds by the billions, I guess they thought they had better quiet the masses complaining about those gas prices. The rank and file get a break this summer, as the government opened the spigot on the strategic gasoline reserve to the tune of 2 million gallons per day to get that gas price down to the mid $3.50s. It's just the opening act in the grand deceptive game we call "elections" in this country.
