Nickeled and Dimed By Both Wall Street and Main Street

bank_feeNew Orleans   In the wake of the Great Recession and general financial meltdown we all like to think we’ve got our eyes peeled to all of the slick shenanigans devised by Wall Street wheeler-dealers.  With billion dollar bank settlements still regularly reported in the daily papers and with a new governmental body, the Consumer Financial Protection Bureau, in place that has our backs, we can finally relax.  Not!  I’m increasingly convinced that it’s not the big heist that will get most of us, but the fact that we’re now nickeled and dimed every day and in almost unimaginable ways once we relax even the tightest grip from our hard earned money.   The answer in banking to new regulations and restraints and lower interest rates seems to be rather than the big score, just to suck us dry, bit by bit, day by day.

When we worry about the unbanked, we keep looking for ways to achieve citizen wealth or income security with more safety and less cost.  Generally, most of us would believe that it’s better to put your money in a bank than to wad it up and hide it under your mattress or in a crack in the wall.  I’m just not sure that’s true anymore.

Minimum service fees are so expensive that their main purpose seems to be to suck the money out of your accounts in exchange for nothing.  In the wave of support for credit unions a couple of years ago, some of us opened accounts in the local credit union in our neighborhood, called ASI, because they seemed committed to the area.  The whole point of a credit union used to be savings.  You put some money in, and they get to invest it, but you were able to build a relationship for the future.  Boy, is that old school, gramps!  Once you discover there are minimum balance fees ever month and quarter, a couple of hundred necessary to open the account, becomes not an inducement to savings and security, but a bank donation, because when you’re not watching, it’s gone in a couple of years.

And, not just credit union accounts either.   For years Local 100 had a petty cash account with JP Morgan Chase in Little Rock.  We had forgotten we had it, until a visit to the office several years ago stumbled on a statement.  They were sucking out $20 or more a month to maintain an account with hardly $300 bucks in it.  Over a two year period we wrote, called, and cajoled Chase to close the account and transfer the money out to Capital One where we had our main account.  They delayed.  They promised.  They assured us.  We never saw a dime before it was gone.  For a couple of hundred here or there, the small fry and the big boys know you won’t sue, so they make what’s called a “business decision” to simply steal your money figuring they can get away with it.

It’s not just bank accounts either.  They treat anyone small, even their shareholders the same way.  This week I got a weird letter from Citi, as in Citibank, Citicorp, etc.  They wanted to know how I was going to pay $45 bucks and change for some kind of investment account they had me in.  It’s a long boring story, but 30 odd years ago on an office bet among other things I bought 10 shares of Citi for less than $100 with no brokerage fee.  It goes up and down as they get caught doing good or evil, and now it’s worth $700 or so, many decades later.   This is not Warren Buffet look out time, if you know what I mean, but what was a $45 annual charge all about?  They had an 800 number for questions, so I called.  What a hustle!  So, it seems after having signed us little fish up on one of their accounts, she told me they had started attaching a fee a year or two ago, unbeknownst to me.  So, I said, take me out of this now.  Not so easy, cowboy, she said.  I would still have to pay $45 for last year and $45 for this year out of my small holdings.  Well, all you’re doing is holding my certificates.  Send them to me, I’ll hold them myself.  Oh, no, dude, she claimed they would cost something on the order of $500 apiece, which surely is a big fib!  She claimed they could transfer my shares electronically to a depository of some kind, but that would also cost about one-hundred-and-a-half and when I asked what that outfit would charge annually, she would neither give me the name nor the cost for 5 minutes or more.  Oh, and to transfer out, I would have to sign a form and get it notarized by my bank, which she would supposedly mail to me.  Come on, man!  My Citi shares are hardly worth anything with miniscule dividends, but as a small fish to a Wall Street shark the message was clear, I was either going to have to agree to let them blood suck me for fifty or more every year or they were going to try and take a third or more of the little I had with Citi so that they could bleed me out now.

Modern finance, whether Wall Street or Main Street, is about billions and billions of dollars in transaction costs ripped from the hands of all of us small fry, not shrewd deals gaining value and building the nation’s economy.   We’re the grease on their wheels.  While the government and others try to watch them at the front door, they are stealing us blind and with impunity out of the backdoor in every nook, cranny, and alleyway they can find.


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.


Is it Right to Divert Settlement Money Intended for Citizens?

diverting moneyNew Orleans   Every once in a while we stumble on some real “ah-ha” moments, where the obvious finally is so unavoidable we almost trip over it.

            For me this has been happening recently while reading about the JP Morgan Chase $13 billion dollar settlements as the money is distributed to the states and the states put the money towards foreclosure remediation.  The money starts as too little too late for millions of foreclosure families victimized by the banks’ fast, loose, and, frankly, fraudulent practices.  The state Attorney Generals got in the game and righteously sued Chase and the rest of the banks along with federal government in order to provide relief for homeowners.

            Then after the story moves off the front pages, and then later off of the business pages as well, to the nitty-gritty where it can finally do some good, what happens?  I had never fully grasped how little, if any, might actually get to the victims themselves.  The story of the dispute between New York State Attorney General Eric Schneiderman and Governor Andrew Cuomo brings all of this to the forefront.  New York gets more than $600 million of the settlement with about $165 million in the first year.  It seems the Attorney General wanted to use the money to actually go to housing programs and foreclosure remediation.  It seems that the Governor wanted the whole sum initially to go into the general fund of the State of New York, ostensibly to pay for pre-K education.  Hey, universal pre-K is a great thing, but why would Chase foreclosure money not actually be used to fund foreclosure abatement and remediation for the thousands of victims in New York State?  That’s why New York’s share was $613 million after all.    So, they made a deal for the 1st year only that gave half or $80 something million for housing programs and the other half to the general fund. 

This doesn’t seem quite right does it?  Yet, it may be the normal “bait-and-switch” being performed in state after state.

Take the giant tobacco settlement money that those companies are still paying to the states as another big fat example.  As the years have gone by, it is shocking to see how underfunded tobacco prevention programs are by the state.  It’s hard to compare one to one with the foreclosure money because too many of the reports mix apples and oranges between a state’s share of the settlement billions and their even greater share of tobacco taxes they collect, but regardless the Center for Disease Control reports that prevention programs are only being funded at about 19% of what is needed. 

Said more pointedly, 15 years after the huge tobacco victory in 1998, of the more than $25 billion the states receive in settlement money and tax revenue annually, less than a half-a-billion is spent protecting citizens from the smoking companies.  The CDC honor roll of states even spending half of what is needed is short:  Delaware, North Dakota, Wyoming, Oklahoma, and Alaska.  On the other hand those spending less than 10% of what’s needed number 23 states throughout every region of the country. 

Exactly how are state governors and legislatures able in good faith to resolve the fact that they are collecting money as stewards of their citizens for their housing and health and then diverting the money to whatever and wherever, rather than actually using it to address the abuse or save lives?

And, why in the world are we letting them get away with this? 


JP Morgan Chase Gaming on Big Settlement

Chase_Bank_Athens_OH_USALittle Rock  Ok, you remember that we were skeptical when news of the $13 billion record breaking settlement between JP Morgan Chase and the Justice Department was announced until the details became clearer.  I just wasn’t sure the leopard could change its spots by buying a new paint job no matter what the price.  Now, the settlement seems to be in danger of unraveling as the details become clearer and the chicanery of the Chase lawyers and accountants in trying to weasel out of really paying the penalty as opposed to having their public relations department put out press releases about direct negotiations between CEO Jamie Dimon and Attorney General Eric Holder.

            First, Chase jumped the gun on Justice and cut a separate deal with the Federal Housing Finance Agency (FHFA) for $5.1 billion which got Justice hopping because they are insisting that only $4 billion of their $13 billion resolves those claims.   It gets sketchy when it becomes clear that Chase was trying to fudge $1.1 billion of an earlier settlement where it agreed to repurchase bad loans it had bundled and sold to Fannie Mae and Freddie Mac back when they and others were getting away with everything before the housing bubble burst.  Essentially they wanted two dollars of credit on this deal for a dollar really paid.

Holder to his credit is reportedly balking at anything that would allow Chase to try to shift the cost of the settlement unto the FDIC, the federal deposit insurer, not wanting one federal settlement to be paid by another federal agency.  Meanwhile according to insiders talking to the Wall Street Journal, Chase would take all $5.1 billion of the FHFA settlement as a tax deduction, reducing the bite, and at its effective tax rate, clawing back a savings of $1.5 billion in taxes, essentially transferring part of the penalty to the US taxpayers for its own giddy, avarice and community destruction.   Oh, and of course, Chase thinks that there may be some other big chunks they can take as tax deductions as well and they are looking hard for them.  Now, these kinds of maneuvers sound more like the Chase we all know and rarely love.

Justice since the first news of a deal surfaced was quick to say that none of the settlement had to do with Chase’s purchase of Washington Mutual and other assets after the meltdown, partly as a response to an intemperate, whack editorial in the Journal that tired to argue that Dimon was actually Joan of Arc and was being punished now for having done the government a favor back when.  Justice the day after the editorial released some more information about the deal saying nada had to do with Chase’s acquisition of failing institutions.

I suspect that is all part of why this deal has now unraveled a bit.  It turns out that Chase is also trying to “cost out” another part of this settlement by disagreeing with the FDIC about responsibilities for some of Washington Mutual’s bad loans and bonds and seeing if they can tap an FDIC $4 billion reserve fund for what Chase is saying is $5 billion or more in liabilities they don’t want to own up to.   Talk about doing a hustle!

My bet is that they have gone too far and pushed Dimon out on the limb publicly as having reached out to Washington and virtually singlehandedly worked out a deal with Holder for them to be able to let this whole house of cards collapse, so a deal of some sort will come back together.  They may have just found that bargaining in bad faith doesn’t work with Holder.  He seems to know his cards well and be unwilling to fold them or kiss the Wall Street rings. 

Regardless when it comes to these bums, if he’s not our hero, he’s definitely about our only hope.


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.



How Much Puff versus Pay in Proposed JP Morgan Chase Settlement?

JPMorgan-Trading_Loss-0ca37-1705New Orleans   My goodness, hysteria has broken out among the financial chattering class with the news of a $13 billion proposed settlement between JP Morgan Chase and the Justice Department and Federal Housing Finance Agency over the bank’s handling of the mortgage crisis.  The lead editorial in the Wall Street Journal claimed variously that parts of the settlement might let “the feds pass out the money to consumers or their favorite advocacy group…” making “the fact that this is a political shakedown and wealth distribution scheme even clearer.  Perhaps the Administration will have the checks arrive in swing Congressional districts right before the 2014 election.”   Further this rabid, foaming at the mouth editorialist draws the lesson that this “is how government has used the crisis to exert political control over even the most powerful private financial companies. The real lords of American finance are Attorney General Eric Holder, Treasury chief Jack Lew and their boss in the White House.”

            Wow!  All, I can really say to all of that is:   I wish!

            The truth is that no one has much of any idea how this settlement will be paid, and unfortunately in the wake of recent settlements, I have to wonder how much of this will be real money paid versus credit for fixing the bank’s own balance sheet that should have been done years ago. 

            All any of us really know is that $4 billion is to settle charges with FHFA for the bank’s bundling of garbage loans sold to Freddie Mac and Fannie Mae, $4 billion is for homeowner relief ostensibly, and $5 billion is fines for misconduct.  We already know from the recent monitor’s report that Justice there settled for credits for the bank’s cashing out 2nd mortgages, refinancing underwater loans, and short sales, all of which I would argue were paybacks to the bank itself rather than efforts to keep people in their homes.   Contrary to the crazy folks in the editorial department of the Journal, is there any real reason to believe that Justice has cut a better deal this time than last? 

            Sadly, when the real details are out, 8 of the 13 billion may end up in a form of financial shaming for sure, but basically a fancy recycling program of the banks’ billions back into the their own bank accounts.  

            Cheers to the fact that Attorney General Holder would not give them a “get out of jail” card or whisk away the criminal investigations for their activity in California, but seriously does anyone really think that this late in the game that level of accountability is coming?   I doubt it seriously, and Chase is saying it is confident that that won’t happen.  

            In short, this is “about time” good news, and let’s hope it does scare Wall Street a bit, but this is likely no watershed for homeowners nor any real distribution of justice for the millions who have lost their homes.