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Bank of America: Too Crooked to Fail

243 points by soundsop 15y ago

pwg 15y ago
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-too-crooked-to-fail-20120314?print=true http://www.rollingstone.com/politics/news/bank-of-america-to...
kimwim42 15y ago
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
- Estragon 15y ago
  I voted up this thread because of this comment. (Bit tired of Taibbi, but your inside history is very interesting.)
- asmithmd1 15y ago
  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/ 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-other-choice.html 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.
  - alecco 15y ago
    Who would buy the toxic parts?
    - asmithmd1 15y ago
      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.
    - jedberg 15y ago
      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.
      - alecco 15y ago
        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_sale_to_JPMorgan_Chase 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.
Aloisius 15y ago
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.
- mgkimsal 15y ago
  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.
  - joejohnson 15y ago
    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.
    - fotbr 15y ago
      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.
    - Jach 15y ago
      > 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...
literalusername 15y ago
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.
- brown9-2 15y ago
  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.
  - JumpCrisscross 15y ago
    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).
- jrockway 15y ago
  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.
  - veyron 15y ago
    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-fed-s-flim-flam-standard-jonathan-weil.html 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. EDIT: fixed formatting -- I wish that there were a way to indicate that a quoted block should be wrapped
mwsherman 15y ago
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.
- veyron 15y ago
  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
- asmithmd1 15y ago
  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."
kunle 15y ago
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.
- anonymoushn 15y ago
  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.
  - tedunangst 15y ago
    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.
- tedunangst 15y ago
  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.
Apocryphon 15y ago
How does U.S. Bank compare to BOA?
- read_wharf 15y ago
  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.
tsotha 15y ago
>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.
- Nrsolis 15y ago
  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.
  - chunkybacon 15y ago
    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.
    - Nrsolis 15y ago
      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.
there 15y ago
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.
- SkyMarshal 15y ago
  Silicon Valley Bank and Square1 are two banks that focus on startups/small business. http://www.svb.com/ http://www.svb.com/ http://www.square1financial.com/bank/ http://www.square1financial.com/bank/ (They're on my radar for when I get to that point, but haven't used either yet.)
jasonkester 15y ago
Every time I visit the US, I reserve one of my few days there as "fix whatever BofA did to my account" day. 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.
- brown9-2 15y ago
  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.
  - jasonkester 15y ago
    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.
  - mainguy 15y ago
    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.
shingen 15y ago
Bank of America == US Government

243 points by soundsop 15y ago

pwg 15y ago

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-too-crooked-to-fail-20120314?print=true http://www.rollingstone.com/politics/news/bank-of-america-to...

kimwim42 15y ago

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

Estragon 15y ago
I voted up this thread because of this comment. (Bit tired of Taibbi, but your inside history is very interesting.)
asmithmd1 15y ago
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/ 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-other-choice.html 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.
- alecco 15y ago
  Who would buy the toxic parts?
  - asmithmd1 15y ago
    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.
  - jedberg 15y ago
    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.
    - alecco 15y ago
      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_sale_to_JPMorgan_Chase 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.

Aloisius 15y ago

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.

mgkimsal 15y ago
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.
- joejohnson 15y ago
  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.
  - fotbr 15y ago
    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.
  - Jach 15y ago
    > 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...

literalusername 15y ago

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.

brown9-2 15y ago
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.
- JumpCrisscross 15y ago
  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).
jrockway 15y ago
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.
- veyron 15y ago
  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-fed-s-flim-flam-standard-jonathan-weil.html 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. EDIT: fixed formatting -- I wish that there were a way to indicate that a quoted block should be wrapped

mwsherman 15y ago

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.

veyron 15y ago
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
asmithmd1 15y ago
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."

kunle 15y ago

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.

anonymoushn 15y ago
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.
- tedunangst 15y ago
  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.
tedunangst 15y ago
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.

Apocryphon 15y ago

How does U.S. Bank compare to BOA?

read_wharf 15y ago
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.

tsotha 15y ago

>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.

Nrsolis 15y ago
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.
- chunkybacon 15y ago
  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.
  - Nrsolis 15y ago
    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.

there 15y ago

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.

SkyMarshal 15y ago
Silicon Valley Bank and Square1 are two banks that focus on startups/small business. http://www.svb.com/ http://www.svb.com/ http://www.square1financial.com/bank/ http://www.square1financial.com/bank/ (They're on my radar for when I get to that point, but haven't used either yet.)

jasonkester 15y ago

Every time I visit the US, I reserve one of my few days there as "fix whatever BofA did to my account" day. 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.

brown9-2 15y ago
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.
- jasonkester 15y ago
  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.
- mainguy 15y ago
  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.

shingen 15y ago

Bank of America == US Government