
Bank of America: Too Crooked to Fail - soundsop
http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314
======
jasonkester
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
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.

~~~
mainguy
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.

~~~
dangrossman
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.

~~~
cpeterso
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.

------
pwg
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-too-crooked-
to-fail-20120314?print=true)

------
kimwim42
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

~~~
asmithmd1
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...](http://charleshughsmith.blogspot.com/2012/03/we-have-no-other-
choice.html)

He goes on to provide a common sense, 5 paragraph law that would provide some
actual reform to our banking system.

~~~
alecco
Who would buy the toxic parts?

~~~
jedberg
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.

~~~
cpeterso
Breaking the big banks by region sounds like the AT&T/Baby Bells break up,
which created powerful regional monopolies.

~~~
Drbble
Which then all merged into Verizon. The forces of justice win once every
generation, but the forces of evil advance every year.

------
mwsherman
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.

~~~
asmithmd1
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."

~~~
mwsherman
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.

~~~
Drbble
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.

------
there
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
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.)

------
tsotha
>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
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
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
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.

------
kunle
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
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
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.

------
Aloisius
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.

~~~
sehugg
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>)

~~~
Aloisius
Interesting. I was under the impression that in order to get the good stuff
through them, you had to be in the military.

~~~
Zephyr314
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.

------
literalusername
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.

~~~
jrockway
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
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...](http://www.bloomberg.com/news/2012-03-15/stress-tests-pass-fed-s-
flim-flam-standard-jonathan-weil.html)

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

~~~
Drbble
> 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

------
Apocryphon
How does U.S. Bank compare to BOA?

~~~
read_wharf
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.

------
shingen
Bank of America == US Government

