How can Billion Dollar Fines be Little More Than Water off a Duck’s Back?

indexNew Orleans   I hate to admit it, but to me a billion dollars still seems like a whole lot of money.  Unfortunately, I’m afraid saying so makes me hopelessly hide bound and old school.


            Because the government seems to be passing out billion dollar fines like candy to banks, utility companies, oil companies, automobile manufacturers, and others and it seems to have no discernible impact on their behavior whatsoever.  I’m sure you’ve noticed the same thing.  The government takes a victory lap, a couple of months or maybe a year goes by, and the same corporate culprit is doing the same perp walk to the ATM to pay out another billion dollar fine.  Billion dollar fines seem to have replaced the space on corporate balance sheets where they once wrote “goodwill,” and now it’s an item called “reserve” for a future expenditure for bad behavior.  Cheating consumers has simply become a mundane part of corporate culture.  Rapacious capitalism is no longer an insult, but a rally cry.

            How many gazillions has Bank of America now paid out for example due to the mortgage mess and their acquisition of Countrywide?  It hardly matters it seems as they get ready to pay another $800 million because they couldn’t keep themselves from selling non-existent products to their credit card holders.  One financial institution after another these days from HSBC to storied European banks are lining up to pay huge, billion plus fines for laundering money for Iran and other countries under sanctions by the international community.  JP Morgan Chase, only a few years ago was basking in arrogance with financial folks hanging on Jamie Dimon’s every word, but the number of fines it has paid for cheating and stealing from its customers makes him seem like the boss for a serial criminal mob.  Citicorp is running around in crisis having failed a “stress test,” not because they want to get a good grade on Wall Street it seems, but largely because they may be the only big bank fine payer not able to increase the dividend to their investors, and of course having somehow lost $400 million through their Mexican subsidiary they are claiming fraud, and the government is investigating, what else, but money laundering to drug cartels in that country.

            But speaking of a criminal enterprise, how about Wall Street itself?  I’m more than half-way through Michael Lewis’ new book called Flash Boys, where the real story is about the billions that some companies are making and that all of the big banks are abetting of front-running stock trades through high-frequency trading , which is of course totally illegal,.  And, yes, the FBI is now investigating, and the SEC is embarrassed, and the Attorney-General of New York State is letting subpoenas rain down like tickertape on Wall Street, but all that means is that the outcome of this latest scandal is likely to be, yes, you know, more fines!   An analysis of super-investor Warren Buffet’s portfolio over the last 5 years says he has even underperformed the Standard & Poor’s 500 stock index.  Friends, if he can’t beat the house on Wall Street in the biggest gambling casino in the world, you know on one else has a fair chance.

What’s the answer?  If it’s not fines, is it jail?  Hardly, since the big whales only offer up the small fry to do time. 

It’s time to clean house, but it looks like the walls are so rotten and the foundation is so shot, that it’s gut rehab time, but from top to bottom there doesn’t seem to be anyone willing and able to take on the job.

What a heckuva a mess!  Seems like if we have five dollars we might as well hide it in our shoe and take our chances on street crime, since no one seems able to stop Wall Street crime.


Banks Shirking Responsibility for Foreclosed Property Maintenance

bank-owned-foreclosures-12New Orleans  I woke up to headlines indicating that the National Fair Housing Alliance has accused Minneapolis-based U.S. Bank of effectively “red lining” blight into largely African-American and Latino neighborhoods in 35 different cities in 15 metropolitan areas.  Recently the alliance added New Orleans, Dallas, New Haven, and Hampton Roads, Virginia to an amended complaint charging that US Bank had not maintained foreclosed properties in minority neighborhoods compared to what it does in white areas.  Similar complaints have been filed against Bank of America and Wells Fargo, though reportedly Wells Fargo settled with the group.

            So, what says U.S. Bank?  Their defense is that they are simply the corporate trustee for a security pool of investors and claim that they have no legal right to maintain the properties.   Well, I’ve been there and heard that, so at best U.S. Bank and the rest of these banks are hiding behind half-truths.   They are the legal trustee for the properties though and it’s their name on the property titles.  In reality at best U.S. Bank is trying to have its cake and eat it too.  They get paid to be the holder of the investment pool and the named owner of the mortgage properties, but they are essentially trying to sing a verse with the old rock group, Dire Straits, and “get money for nothing and get their chicks for free.” 

ACORN struggled with this problem for years and interestingly in negotiating with Deutsche Bank, which at the time in 2007-2008 was a trustee for a huge number of mortgage security pools, we learned quite a bit about how it really works. The bottom line is that the banks know the owners, and in a wink-and-nod in those days, Deutsche agreed to give us the information on specific properties that were problems in our neighborhoods when they became issues.  My point in that U.S. Bank and the other bankers are in effect earning their money by allowing the real owners and their lack of maintenance to hide behind their corporate veil, so they deserve to go down.

And, their problem just gets bigger when the fair housing alliance and others do the ground work around the country and bust them for not lifting a finger to take care of properties that are foreclosed in black and brown neighborhoods, while in fact making sure that properties are maintained in white areas. 

Call it redlining or just flat out racial discrimination, U. S. Bank and the boys can keep whining about it, but they are just shucking and jiving for the real owners and it is past time for them to do right and stop ruining our neighborhoods with callous disregard, while they count their money for doing nothing.  They can either name out the real owners or take the weight and step up.


Debit and Credit Card Security

payroll-debitcardLittle Rock  There was an interesting piece in the paper about what one commentator jokingly referred to as a “hot bank on bank” story based on First American Bank of Chicago going public and shaming Bank of America and Mastercard for not shutting down and issuing warnings about taxicab machines that were perpetrating debit card thefts.  They had caught the problem one day when a couple of dozen of their customers were hit, and had issued almost 500 new cards to try to prevent the problems, but went public after 18 days when they couldn’t get any action or response from Bank of America and Mastercard who were handling the transactions.   These days it feels like all of us either have “been there, done that,” or are preparing for the worse to come someday soon because the card folks just aren’t doing right on protecting security.

             The card companies say, no problem, they have a “zero liability” policy, meaning that customer doesn’t absorb the burn, but the article correctly points out that this is little comfort for many, and that’s what I want to underline here.  Increasingly companies are moving to direct deposit or where lower income workers are “unbanked,” issuing debit cards that are loaded with their pay.  In negotiating one of these programs recently for a 400-worker unit represented by Local 100, the company had gone as far as they reasonably could to assure us that this would work better for our unit, and in fact we had a petition going around the worksites complaining about payroll snafus, so we were a ready audience.

            But, look at the problems even in the best of circumstances and with the best of intentions.  There was an offer for the workers to choose either Chase or Bank of America for their cards, but once we looked Bank of America in fact had shut down all of their ATMs in Baton Rouge and these workers were concentrated in that city as well as Lafayette and New Orleans, so clearly that was not going to work for 150 workers there, and if they mistakenly chose the wrong bank, there would be a charge on every other ATM they were using to access their money.   The cards were designed so that there were no charges if you took all of your pay in cash in one lump, but we all know that many ATMs, especially in our neighborhoods, limit the amount of withdrawals so that’s another problem.  You could use the debit cards to buy some things without charges, but there were hidden shoals sure to crash some of our members’ boats. 

            We’ll work it out as best we can, but there’s only so much the union and company can do, when the credit card outfits and their banks refuse to take security seriously.  When there is a problem these will be workers with no money and a deluge of bills and problems.  Recently we found a charge of almost $1000 on a corporate American Express card at Fair Grinds Coffeehouse.  The company says no problem, we’ll figure it out, but that was a couple of weeks ago, and this is the Chicago bank’s complaint.  They waited 18 days.  We’ve been waiting at least that, but lower waged workers are in no position to hang out with no money for 24 hours much less 24 days.

            I also can’t get the story out of my mind of the McDonald’s workers in New York City who were paid on debit cards as well, but the franchise operator was less careful than our company and the cards were loaded down with charges driving the workers’ wages below the minimum as they tried to access their money.  The settlement is on its way, but they’ve been waiting and without in the meantime.

            A business model that screws the customers because the companies don’t want to use cards with embedded chips or take other security measures seems destined to fail, but in the meantime the rough edge is dragging, particularly on lower waged workers and smaller businesses not in position to wait for the by and by.


More News of Banking as a Criminal Conspiracy with BofA and Chase

Bank of America Country BankNew Orleans    There are many small town papers that used to thrive by feeding their readers the daily police reports.  These days reading the financial pages is more than an adequate substitute, since every day we seem to get another perp walk in the criminal conspiracy now called modern banking.

I know it’s tedious to keep returning to our old nemesis, JP Morgan Chase, but let’s face it, under Jamie Dimon and their pursuit of being the biggest bank in the land; they seem to be unable to keep from also being the baddest bank in America.  This time they are trying to enter an agreement to prevent criminal charges for their role as the main Madoff bank enabling his massive Ponzi scheme for over 20 years.   Internal emails seem to abound about suspicious while the bank counted their millions and helped him along the way while doing so.  The arm so clearly understood what the hand was doing that Chase’s private bank refused to take Madoff as a client even as the main bank was his counting house.  Now, late in the game they seem willing to promise that they won’t let this happen again, but will report suspicious activity in the future, but most of us must realize that these big, bad boys will be breaking that agreement even while ink is drying on their signatures.

Meanwhile Bank of America went to a jury trial to try to prove that they didn’t defraud the government by selling packages of bad mortgages directed by the executive, Rebecca Mairone, who was running that part of the show for Countrywide, which is now part of their diminished empire.  Bad move, team!   Mairone ran something it turned out that they called the “hustle,” a nickname for HSSL or the “high-speed swim lane,” which seems to have been a steamed up boiler room operation that pitted bankers in a competition to see who could originate loans more quickly, credit be damned, so that they could bottle the slop up and sell it off on the government’s secondary market.

The jury was disgusted, so “guilty as charged.”   The government is asking for almost $900 million as a penalty to be paid by Bank of America, though the judge will decide of course.  There’s also every indication that there will be a line forming for stockholder and other class actions now given the guilty verdict.

The jury also found Rebecca Mairone guilty as the day is long.   Her lawyers say, it’s not over yet.   Luckily, she still has a job in banking.   You may wonder where she’s working now?   JP Morgan Chase of course where the biggest of the bad boys run wild and free.



Banks Creating Unbanked Millions

money-under-bedLittle Rock       I hate to say “I told you so,” but of course, I in fact did tell you so, when I recently warned that banks for any reason or no reason at all can refuse to continue to allow you to have a checking account or bounce you out of their customer line.  A recent article in the Times confirms that in fact the level of what used to be called the “unbanked” has risen by 10% since 2009 according to the Federal Deposit Insurance Commission (FDIC).

            And, yes, “unbanked” does sound like the “undead.”  You may be walking and talking, but you are also doing a lot more of it and paying a premium to pay your bills, transfer money, and handle daily affairs because banks won’t let you have an account.   This is actually a fairly new phenomenon.  Only a couple of years ago if we were meeting with bankers and said that we needed to continue to reduce the level of the unbanked among lower income Americans, all of the bankers at the table would reflectively nod in agreement.

            No more it seems.  Big data is dunning the poor.  Minor mistakes, like a one off overdraft can lead to people being blacklisted.   According to the Times:

The largest database, founded in the 1970s, is run by ChexSystems, a subsidiary of FIS, a financial services company in Jacksonville, Fla. Subscribers — Bank of America, JPMorgan Chase, Citibank and Wells Fargo among them — “regularly contribute information on mishandled checking and savings accounts,” ChexSystems says on its Web site. “A consumer may dispute any information in their file and ChexSystems will facilitate the resolution of the dispute on the consumer’s behalf,” the company said in a statement. A rival, Early Warning, which is owned by Bank of America, BB&T, Capital One, JPMorgan Chase and Wells Fargo, says roughly 80 percent of the 50 largest American banks pay a fee to subscribe to its deposit-check service.

The banks claim this all began as an attempt to stop fraud, but that’s not really true.   Bankers have been honest with us for years that the old school checking account part of their business was a money loser and in fact a loss leader.  Here comes big data that can collect every misstep by a poor Joe or Jane along the road, and wham, that’s all it takes to push them into all of the financial predators lying in wait for the poor. 

Good luck with resolving the disputes as well, that is if you know there is one.

The article claims that, “Banks are required to provide a reason for rejecting an applicant,” but I’ve read some of the documents that banks put out, and I’m not sure that is really true, and if true, it’s certainly not enforced.”

But all of these financial institutions are federally or state chartered.  The FDIC insures each account for a hundreds of thousands of dollars.  There is huge governmental leverage here that should be reminding banks that they are in the service business not just the get-rich-quick-business.   If they want to stop fraud, good on them, though they might spend more energy supervising some of their own practices, and trying to hard handle someone whose check clears faster than the bank gets around to recording their deposit.



Workplace Occupations

Revolt-On-Goose-Island-235x279Rock Creek   The Kindle needed some juice and it was too early in the morning to get the converter humming, so I grabbed a book for a couple of hours that had been gathering dust at home, Revolt on Goose Island:  The Chicago Factory Takeover, and What it Says About the Economic Crisis by Kari Lydersen.  The book details the prequel and some of the postscript to workers occupation of their factory as Republic Windows and Doors tried to close them down in 2008 right after Barack Obama was elected as President. 

Most will remember that for some reason this incident then attracted wide attention because it reflected so much of the climate of anger around the economy at the time, job loss with warning, and the original argument by the company’s owners that they had been squeezed by the failure of Bank of America and J.P. Morgan Chase, even as they were receiving tens of billions of dollars in bailout monies.   The book ends with the belief that workplace occupations might become a common tactic for workers something on the order of the factory takeovers in 2001 during the Argentina financial crisis.

            If newspapers once wrote the first draft of history, then this book did a solid job on the second draft.  I had not realized that the UE union representative who developed the tactical response for the workers had been Mark Meinster, a former ACORN organizer in Washington, D.C, so that was interesting in itself.  But, what really got me scratching my head is why in the aftermath of the Occupy Wall Street phenomena and the occupy this and occupy that, why in fact has the Republic Windows situation not been duplicated more by angry workers being displaced from their jobs, as Lydersen seemed to believe might be possible?

            Of course the obstacles are huge for such a tactic, starting with trespassing arrests on private property and in unionized situations, most times the pre-shutdown bargaining, when it happens, provide enough to blunt some of the outrage.  But, increasingly workplaces are not unionized, so workers in such predicaments are on their own.   So, when people get screwed and they’re mad as hell, why aren’t they sitting in at their workplaces until they get severance or the straight story or something that explains the years of their lives they put into a company that is tossing them to a curb, especially when at that point they have nothing much to lose and their self-respect to salvage? 

I’m left scratching my head.    Seems like to me “occupy work” would be boiling over from place to place everywhere by this time?  Perhaps this is one of those explosions happening with a long, slow burning fuse.