Nomi Prins: 10 Reasons Bank of America Is the Most Hated Bank in America

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EDITOR’S NOTE: Nomi Prins is a former investment banker. Like me she sees the function of Wall Street as vital to a growing economy and better society. It’s not banks she dislikes, it is the people who run them and what they have done to the banks, the shareholders, the customers and its trading partners. Wall Street has become de-personalized in the sense that its institutions are mere vehicles for management to strip everyone — including the Banks they manage — of everything and put the results in their own personal pocket. Their “relationships” with members of congress and state legislators is the reason why we have a dysfunctional economy.

It isn’t working for most of us and there can be no doubt that as long as Banks regard the rest of us with disdain and contempt they will treat us accordingly. The disdain for the law, the rules, morality ethics and just common sense is a reflection not of the institution of banking and finance but of the people who have usurped Wall Street and turned it into a vehicle for a government coup. They control our lives in ever-increasing ways covering activities and needs that we don’t ordinarily associate with Banks. If insurance is involved, then the Banks are right there. If we lose social services like fire, police and even trash collection — see the banks for where the money went. But the Banks are not actually prospering. It is the management of the Banks that is prospering.

It doesn’t take a rocket scientist to see that the Occupy movement has attracted people across all class liens and political spectrums. We all know the system isn’t working and we are unwilling to see it continue down the drain. As long as BOA is allowed to maintain financial positions  ($53 Trillion) that exceed the world’s money supply ($50 Trillion), we will continue to have this problem because it gives them an out-sized appearance of threat to the system. In truth, I don’t think anyone would miss them.

10 Reasons Bank of America Is the Most Hated Bank in America

Here are ten reasons to take your money out of Bank of America – and park it at a credit union or community bank near you.
October 27, 2011  |

There is no shortage of hatred for the biggest banks. Indeed, the Occupy Wall Street movement is leading a national revolution against these byzantine, powerful Goliaths for the economic devastation they have caused. This makes it difficult to choose the worst of the bunch. That said, a strong case can be made that Bank of America deserves the title of the nation’s most despised bank.

Here are ten reasons to take your money out of Bank of America – and park it at a credit union or community bank near you. (And yes, that may be near impossible if you have a mortgage with them, as refinancing away from any big bank nowadays is a nightmare.)

1. B of A rejects the right of customers to protest. When two Occupy Santa Cruz protesters in California marched into a local Bank of America to close their accounts, the response was, “You cannot be a protester and a customer at the same time,” followed by a threat to call the police if the women didn’t leave. (The attending officer  later reiterated the bank manager’s message.) Meanwhile, the fact that Bank of America charges a fee for closing an account prompted Rep. Brad Miller (D-North Carolina), who resides in Bank of America’s headquarters state, to introduce a bill to protect customers from such fees.

2. To recoup ongoing losses from its stupendously dumb acquisitions of Countrywide Financial and Merrill Lynch, B of A pillages its customers. Thus, despite massive public outrage, the $5 debit usage fee for customers with less than a $5,000 balance and no mortgage with the bank will begin in 2012. B of A was the first large bank to confirm it would charge this fee, which is the highest in current discourse among the banks.

On October 18, Consumers Union wrote a letter to B of A chief Brian Moynihan asking him to reconsider this fee, which impacts poorer clients disproportionately. The letter summed it up nicely: “Consumers should not be required to pay a costly fee that appears to be arbitrary and designed to generate income to make up for Bank of America’s bad business decisions rather than covering the costs of providing debit card services.” Banks collect 24 cents from retailers for each customer swipe, much more than the median 8 cents it costs a bank to process the purchase. Senator Dick Durbin’s (D-Illinois) response was to urge customers: “Vote with your feet. Get the heck out of that bank.”

3. B of A’s other fees are just as bad. According to its last annual report, the bank has 29.3 million active online subscribers who paid over $300 billion worth of bills in 2010.  In May, B of Araised its checking account fees, which included e-banking, to $12, in line with JP Morgan Chase’s decision to do the same, up from $8.95 per month. In June, it started a $35 overdraft fee, even on overdrafts of one cent. Next year, it will incorporate basic checking with a new “essentials” account structure that makes monthly fees unavoidable, that will not include free bill pay, and that has a mandatory $6 minimum fee.

Last Monday, Bank of America was charged (along with JP Morgan Chase and Wells Fargo) with colluding with the two major credit card companies, Visa and MasterCard, to keep ATM fees high; in other words, they were charged with “price-fixing,” in direct opposition to antitrust laws. This is the third of three such suits filed recently, each seeking class action status.

4. Bank of America takes gross advantage of the military.

It is the official bank of the US military and has branches by or on many bases, which provides the firm with another locus of extortion. B of A can entice military personnel to take out loans at usurious rates. Personal loans made to soldiers for a few thousand dollars can actually keep them indebted for the rest of their lives.

Last May, Bank of America paid $22 million to settle charges of improperly foreclosing on active-duty troops. The firm spun these foreclosures as being Countrywide’s fault for having started them before becoming part of B of A.

5. Bank of America is officially rated the biggest, scariest bank. Its stock price also fared the worst of the group of banks (which also included Citigroup and Wells Fargo) when Moody’s Investors Service downgraded it on September 21.

B of A’s long-term holding company (parent bank) rating was chopped two notches to Baa1 from A2, and its retail bank rating was cut two notches from A2 to Aa3, placing B of A four notches below rival JP Morgan Chase and one below Citigroup, the third-largest US bank. Its bank holding company has the lowest rating among the top five banks with the largest derivatives positions.

This caused great fear for investors involved in derivatives trades with the Merrill Lynch division, prompting them to request trades be moved to the part of the bank with the better rating – the retail part with the insured (peoples’) deposits. That way, B of A doesn’t have to pony up as much collateral to back the trades, as it would in a subsidiary with a lower rating. The Fed was recklessly happy to approve, despite the Federal Deposit Insurance Corporation’s (FDIC) misgiving about having to insure more risk, even if it can borrow from the US Treasury to do so. Meanwhile, Bank of America’s stock price got so crushed that Warren Buffett scooped up a $5 billion preferred stock deal, effectively betting that the government won’t let this big bank go bust.

6. B of A’s derivatives position keeps rising. The total amount of derivatives in the FDIC-insured portion of B of A as of mid-year was $53.7 trillion, up 10 percent from $48.9 trillion the prior year, and up nearly 35 percent from its pre-fall crisis level of $40 trillion (the Merrill Lynch securities division holds $22 trillion in addition.) The bank has $5 trillion of credit derivatives, nearly double its $2.7 trillion pre-Merrill amount. In addition, because of its inherent zombie status and rating downgrades, the cost of insuring B of A against a possible default continues to rise in the credit derivatives market – a pattern that American International group (AIG) once followed.

7. Bank of America got the most AIG money of the big depositor banks. By virtue of having acquired Merrill Lynch’s AIG-related portfolio, B of A got to keep approximately $12 billion worth of federal AIG backing, too. It also received more government subsidies than any other mega-bank except Citigroup. Its stimulus package included an initial Troubled Asset Relief Program (TARP) helping of  $15 billion for the bank and $10 billion for Merrill, plus a second helping of $20 billion in January 2009 after it became clear that Merrill’s losses had spiked to $15 billion – in order to ensure the takeover from hell went through and Fed chairman Ben Bernanke, then-Treasury Secretary Hank Paulson, and then-Merrill Lynch executive John Thain could pat themselves on the back for saving the world. The government guaranteed $118 billion in assets, mostly Merrill’s, in the new merged firm. With the benefit of the Fed’s nearly 0 percent money policy, and a depositor base to plunder, B of A repaid that aid.

In terms of overall federal subsidies (including TARP), Bank of America was second only to Citigroup ($230 billion compared to $415 billion). None of that got in the way of former B of A CEO Ken Lewis’ personal take, a $63 million retirement plan, in addition to the $63 million he scored during the three years before his departure.

8. Bank of America leads the big bank fraud lawsuit settlement tally. So far, it has racked up the largest settlement, $8.5 billion in June, to settle claims related to $100 billion worth of Countrywide-spun mortgage securities backed by faulty loans, with bigwig investors like Pimco, BlackRock, and the Federal Reserve Bank of New York.

B of A is also being sued by state and federal regulators for questionable foreclosure practices and a union benefits plan for hiding foreclosure problems that impacted its share price. It is one of 17 major US financial institutions being sued by the Federal Housing Finance Agency for billions of dollars of mortgage-securities-related losses that may require B of A to potentially repurchase $50 billion worth of allegedly fraudulent securities. Earlier this year, B of A settled for $3 billion regarding bad loans that they had repackaged by Fannie Mae and Freddie Mac, as well as agreed to a $624 million settlement in a securities fraud class-action suit filed by New York Sate and City pension fund regarding Countrywide stock losses. Then there’s AIG’s August lawsuit, in which AIG wants $10 billion in damages for mortgage-related securities it bought and against which it claims B of A committed securities fraud.

That’s a lot of pain for a Federal Reserve-approved $4.1 billion acquisition. Meanwhile, since the settlement didn’t lead to a financial restatement, under the supremely elastic (read: useless) Dodd-Frank Act, executives get to keep their related bonuses.

9. Even after lawsuits, B of A would still rather please investors than customers. Investors that won money in the $8.5 billion settlement were upset that B of A was continuing to service loans, instead of foreclosing on them more quickly. Now, B of A had a nasty incentive to kick people out of homes faster, rather than work with them to refinance or restructure mortgages. Two months later, their foreclosure process has, in fact, sped up.

Bank of America foreclosure notices are surging again following a slight robo-signing- related slowdown, meaning they are now sending out a greater increase in default notices (90-day overdue loans) than other banks. The bank has $30 billion in residential mortgage loans in default, which will become foreclosures for thousands of families.

10. Bank of America, despite having been buoyed up by the government, did not pay taxes, and, given its glorious ineptness, will be laying off 30,000 workers. Not only did the bank pay no federal taxes for 2010 (or 2009) by making use of its posted pre-tax loss of $5.4 billion, it actually cited a tax benefit of $1 billion. Meanwhile, it has announced plans to cut up to 30,000  jobs over the next few years as part of its plan to save $5 billion, ostensibly due to the settlements it’s paying for engaging in upper-management-approved fraud.

Finally, consider the two reasons that any of this list is possible. One is the Glass-Steagall Act repeal, which enables banks to comingle straight costumer business with reckless securities creation and trading. The second reason is coddling by a Fed that finances and approves every bad move. B of A is the poster child for a Glass-Steagall repeal gone wrong. Lewis pulled in a slew of other banks under the B of A umbrella, making it – at one time – the country’s largest bank, including the infamous Countrywide Financial and Merrill Lynch. Now it has $2.26 trillion in total assets and $1.8 trillion assets in insured subsidiaries, $1.2 trillion of customer deposits ($1.066 trillion in the United States) and about $804 billion in FDIC-insured deposits – all part of the giant, risk-laden mess that is B of A.

Without being broken up via a new, strong Glass-Steagall Act, when banks need to find ways to make money, they resort to extorting it from their sitting ducks, er – customers. Meanwhile, that’s where credit unions, which are not-for-profits owned by their members and not by outside shareholders, come in. They generally don’t engage in crazy derivatives trades, or charge unnecessary fees for holding your money or for letting you pay bills with it, or for online banking. In terms of personal attention, among other economic reasons, the credit and smaller community banks are a much better bet.

Traveling on Empty for 35 Years, U.S. Government Traps Itself Into Teaser Rates Now Ready for Reset

NOW AVAILABLE ON KINDLE/AMAZON!

SEE calhoun_testimony LITANY of MORTGAGE LENDING ABUSES AND OTHER BANK ABUSES Admitted by Responsible Lending Association

Isn’t it interesting, frustrating, maddening that not only did Wall Street do it to 20 million homeowners in one form or another, they did it to the Federal Government too, which means they spread their pillage to all the taxpayers, not just the ones with mortgages.

By the way go get a copy of Nomi Prins, ex-director of Goldman Sachs, It Takes a Pillage. I saw her on C-Span “Afterwords” interviewed by Senator Bernie Sanders of Vermont (I). She’s brilliant and (2) knows the ins and outs not only of the structure of mortgage derivatives but the math too.

What annoys me and should annoy ALL taxpayers is that we have been tricked by Wall Street AND Government into accepting the losses of Wall Street’s wild ride. Teaser rates for the Federal Government on bailouts that should never have occurred, FED rates that charge banks nothing for loans so they can go out and speculate (since Glass Steagel) while the taxpayer is on the hook. At the same time the FED is paying the “banks” a little extra to make them healthier.

Why doesn’t anybody get the fact that now these monsters of financial chicanery have unfettered access to your bank deposits to go and play with it as they wish. And not only are your deposits at the “bank” being used in this way, you are also guaranteeing this behavior if ANY bank fails! Where do you think this is leading folks? Competition is in worse shape than it was over a year ago. There is MORE RISK IN THE FINANCIAL MARKETPLACE than there was over a year ago.

Economists are warning us in despondent tones that the worst is yet to come but absent from the scene is the outrage from the public which is needed to force change and break the claims and power of the incestuous relationship between Washington and Wall Street.

The following is the lead article in NY Times Today. Some snippets from it as follows:

“The government is on teaser rates,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

Americans now have to climb out of two deep holes: as debt-loaded consumers, whose personal wealth sank along with housing and stock prices; and as taxpayers, whose government debt has almost doubled in the last two years alone, just as costs tied to benefits for retiring baby boomers are set to explode.

Global investors are shifting money into riskier investments like stocks and corporate bonds, and they have been pouring money into fast-growing countries like Brazil and China.

November 23, 2009

Payback Time

Wave of Debt Payments Facing U.S. Government
By EDMUND L. ANDREWS

WASHINGTON — The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.

The potential for rapidly escalating interest payouts is just one of the wrenching challenges facing the United States after decades of living beyond its means.

The surge in borrowing over the last year or two is widely judged to have been a necessary response to the financial crisis and the deep recession, and there is still a raging debate over how aggressively to bring down deficits over the next few years. But there is little doubt that the United States’ long-term budget crisis is becoming too big to postpone.

Americans now have to climb out of two deep holes: as debt-loaded consumers, whose personal wealth sank along with housing and stock prices; and as taxpayers, whose government debt has almost doubled in the last two years alone, just as costs tied to benefits for retiring baby boomers are set to explode.

The competing demands could deepen political battles over the size and role of the government, the trade-offs between taxes and spending, the choices between helping older generations versus younger ones, and the bottom-line questions about who should ultimately shoulder the burden.

“The government is on teaser rates,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”

So far, the demand for Treasury securities from investors and other governments around the world has remained strong enough to hold down the interest rates that the United States must offer to sell them. Indeed, the government paid less interest on its debt this year than in 2008, even though it added almost $2 trillion in debt.

The government’s average interest rate on new borrowing last year fell below 1 percent. For short-term i.o.u.’s like one-month Treasury bills, its average rate was only sixteen-hundredths of a percent.

“All of the auction results have been solid,” said Matthew Rutherford, the Treasury’s deputy assistant secretary in charge of finance operations. “Investor demand has been very broad, and it’s been increasing in the last couple of years.”

The problem, many analysts say, is that record government deficits have arrived just as the long-feared explosion begins in spending on benefits under Medicare and Social Security. The nation’s oldest baby boomers are approaching 65, setting off what experts have warned for years will be a fiscal nightmare for the government.

“What a good country or a good squirrel should be doing is stashing away nuts for the winter,” said William H. Gross, managing director of the Pimco Group, the giant bond-management firm. “The United States is not only not saving nuts, it’s eating the ones left over from the last winter.”

The current low rates on the country’s debt were caused by temporary factors that are already beginning to fade. One factor was the economic crisis itself, which caused panicked investors around the world to plow their money into the comparative safety of Treasury bills and notes. Even though the United States was the epicenter of the global crisis, investors viewed Treasury securities as the least dangerous place to park their money.

On top of that, the Fed used almost every tool in its arsenal to push interest rates down even further. It cut the overnight federal funds rate, the rate at which banks lend reserves to one another, to almost zero. And to reduce longer-term rates, it bought more than $1.5 trillion worth of Treasury bonds and government-guaranteed securities linked to mortgages.

Those conditions are already beginning to change. Global investors are shifting money into riskier investments like stocks and corporate bonds, and they have been pouring money into fast-growing countries like Brazil and China.

The Fed, meanwhile, is already halting its efforts at tamping down long-term interest rates. Fed officials ended their $300 billion program to buy up Treasury bonds last month, and they have announced plans to stop buying mortgage-backed securities by the end of next March.

Eventually, though probably not until at least mid-2010, the Fed will also start raising its benchmark interest rate back to more historically normal levels.

The United States will not be the only government competing to refinance huge debt. Japan, Germany, Britain and other industrialized countries have even higher government debt loads, measured as a share of their gross domestic product, and they too borrowed heavily to combat the financial crisis and economic downturn. As the global economy recovers and businesses raise capital to finance their growth, all that new government debt is likely to put more upward pressure on interest rates.

Even a small increase in interest rates has a big impact. An increase of one percentage point in the Treasury’s average cost of borrowing would cost American taxpayers an extra $80 billion this year — about equal to the combined budgets of the Department of Energy and the Department of Education.

But that could seem like a relatively modest pinch. Alan Levenson, chief economist at T. Rowe Price, estimated that the Treasury’s tab for debt service this year would have been $221 billion higher if it had faced the same interest rates as it did last year.

The White House estimates that the government will have to borrow about $3.5 trillion more over the next three years. On top of that, the Treasury has to refinance, or roll over, a huge amount of short-term debt that was issued during the financial crisis. Treasury officials estimate that about 36 percent of the government’s marketable debt — about $1.6 trillion — is coming due in the months ahead.

To lock in low interest rates in the years ahead, Treasury officials are trying to replace one-month and three-month bills with 10-year and 30-year Treasury securities. That strategy will save taxpayers money in the long run. But it pushes up costs drastically in the short run, because interest rates are higher for long-term debt.

Adding to the pressure, the Fed is set to begin reversing some of the policies it has been using to prop up the economy. Wall Street firms advising the Treasury recently estimated that the Fed’s purchases of Treasury bonds and mortgage-backed securities pushed down long-term interest rates by about one-half of a percentage point. Removing that support could in itself add $40 billion to the government’s annual tab for debt service.

This month, the Treasury Department’s private-sector advisory committee on debt management warned of the risks ahead.

“Inflation, higher interest rate and rollover risk should be the primary concerns,” declared the Treasury Borrowing Advisory Committee, a group of market experts that provide guidance to the government, on Nov. 4.

“Clever debt management strategy,” the group said, “can’t completely substitute for prudent fiscal policy.”

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