banking Archive

Tommy Tomlinson  wrote a commentary for the Charlotte Observer praising the $5 monthly fee BofA will impose for debit card use and furthering the lie that the Occupy Wall Street protestors are rebels without a cause. I’m sure it went over real big in Charlotte, the company town that is the home to Bank of America. McClatchy distributed it nationally. Here’s my response:

You deserve to get zinged for this one. It praises the uncomplicated nature of the $5 fee with not one word of background about why the fee is necessary. It certainly isn’t necessary to pay for the transactions themselves. They’re automated and cost the banks a fraction of what they’re charging merchants today. Their former charges were so inflated and usurious that the government cut them. The $5 fee is an end run to make up for a whole slate of charges that weren’t as confusing as they were unfair or rigged to soak the poor and small business.

Admitting that the press can’t cover [Occupy Wall Street] “because the protesters don’t have a specific agenda” says more about the press than the protest. Covering these demonstrations requires old fashioned journalism, not the new kind where the camera crew and reporter shows up at the site expecting a one-sheet press release and a “press information officer” that knows how to button up an interview after a series of soundbyte-styled answers.

A few hours of web research will reveal lots of sites where potential demands are being discussed and voted on. This protest, with its high number of college graduates whose issues revolve around unemployment and loan debt, is a rich vein of knowledge. Sure, we’ve got our doofuses with their “deadhead vibe” whose contribution ends at good pot. But we’ve got some very smart folks as well.

Let’s just start with one demand: that somebody in the executive offices of the banks of marble actually face criminal prosecution with the possibility of going to jail. You’ll find this demand in nearly every proposed list. All the homework has been done and is in the civil lawsuits that the FHFA (Fannie and Freddie’s overseers) have brought against the banks. The names of the vice-presidents who likely perjured themselves are in the defendants’ lists.

So all we need is an indictment. Maybe we’ll get one if we have a press that starts writing about these things, instead of bemoaning that it cannot figure out what the protestors actually want without taking the time or trouble to find out the old fashioned way.

There are subtle signs everywhere that many of the people who might be least likely to endorse the Occupy Wall Street movement are closet supporters. It’s not just the police whose rank-and-file seem to act differently than their white-shirted managers.

A few days ago a package showed up in my mailbox that I found most fascinating.

In 1905 the Wobblies, or Industrial Workers of the World, was founded in Chicago. IWW members were the most radical of the union organizers and their union remains the most violently suppressed through modern American history

The Wobblies were big on using media to spread their message, and in 1905 that meant singing protest songs. I’ve always wanted one of their little red songbooks, which they re-printed at their 100 years anniversary. I finally bought one on ebay.

But when it arrived and I carefully unwrapped it, I found it enclosed in a large manila envelope, folded such that you couldn’t see what the envelope really was.

It was an inter-office document carrier obviously from a large bank with a huge mortgage company and title plant, lifted by a worker for the job of bringing the protest book to me.

It was just one more example that you never can tell how well your message is resonating with people who are not in a position to publicly agree with you.

I’m sure some of these songs are being sung again on Wall Street today.

But the banks are made of marble
with a guard at every door
And the vaults are stuffed with silver
that the farmer sweated for.

–Banks of Marble ( page 9)
Words & Music by Les Rice,

The movement to encourage everyone to pull their money out of Bank of America has a compelling populist ring. Among the gang of thieves that wrecked our economy, BofA holds a special place. You see it in the defendant lists in the suits against bankers who lied to sell iffy mortgages as triple-A. If you count their subsidiaries, BofA is number one.

The angry people who #OccupyWallStreet are learning from each other. We all helped the collapse along by our lack of attention to detail and far more than the torches and pitchforks, the banks fear a population that cannot be placated by the half-truths and corporate doublespeak that they’ve become so good at spewing.

Photo courtesy Scott Lynch

Our financial predicament is complicated, and for #ows to really make a difference we need a movement quite unlike what we’ve seen before. We need a crowd that understands a nuanced answer well enough that each person in it can make a nuanced argument.

That’s why a successful movement that pulls all the money out of BofA is a bad idea. This financial crisis is more insurance fraud than knocking over a bank vault. When you steal money that others have pledged to replace, your crime affects far fewer people, and your ability to avoid prosecution for it grows large. That’s why no banksters are in jail today.

Because we don’t want bank failures, we told depositors that no matter what, we’ll cover most of their deposits regardless of what the bank does. So if BofA drives itself into the ditch, the taxpayer has to run in and pay off the debt, and the bankers have proven they don’t mind playing chicken with other people’s assets.

We need to remove money from BofA slowly. It may, in fact, be what they want: now that the government won’t let them soak the poor, they only want the rich as clients. So $5 fees and closing branches in poorer areas only helps them shed the folks that are no longer of any use to them.

That is why we need a nuanced approach: slowly reducing the size of the institution so that they don’t show up with a tin cup at the Fed’s door. It’s also why an audit of the Fed is a dangerous proposition. While we probably ought to know how bad things are, we always need to be mindful that there isn’t enough money to satisfy all the depositors should they show up at the same time.

When you’ve lied for so long, suddenly telling the truth can have some sudden and disastrous results. An understanding of nuance can help us embrace the truth without creating the panic that has driven the bailouts and the lies for so long.

A few years ago, I was asked to negotiate lower credit card interest rates for someone who had a run of bad luck. I’m not an attorney, and I’d never done anything like that. I was immediately surprised: it seemed the biggest credit card issuers were doing some colossally ignorant things and I wanted to find out why.

In a few cases, we were successful in getting lower interest rates and paying off the balances. But in most cases, the banks preferred writing off the balances in a way that made it nearly impossible for the unsecured loans to ever be collected. In credit card finance, just as we’re learning happened with mortgage finance, the real nature of the debt mattered little, as long as it looked good superficially.

McClatchy is doing a lot of good work on how the financial sector manipulated mortgages. Check out the interview with the risk analysts in the video piece at the top of this text story who complained to their superiors about risky loans only to be overridden and the loans granted.

I started writing to the credit card companies, making a direct case for why we’d all be better off with reasonable interest rates and productive accounts. The mail was often directed by the banks to departments I later learned lacked the ability to even respond. Often it was scanned but no one ever read it.

When I did get a response, it was a letter directing me to call, because the issue was “too complicated” to handle in writing. When I called, customer service reps had no access to the correspondence, so I read it to them as the start of the conversation. I quickly learned to call back the next day and ask a different rep to read the record of the previous day’s conversation.

What I discovered is that customer service reps made record entries that reflected the way their employer wished the calls had proceeded, not what was actually said. Sometimes, entries were  total fabrications; entries for dates and times that no phone conversations even occurred. Other times, important points from real calls were totally omitted.

A pattern emerged. If the bank couldn’t threaten, plead or cajole the cardholder into paying the exorbitant interest rates, plan B was to charge the account off as quickly as possible to sell it for a percentage to junk debt buyers who would pay immediately. It didn’t help the bottom line, but it sure helped cash-flow.

These junk debt buyers financed their purchases by creating CDOs (collateralized debt obligations) and derivatives much like the mortgage brokers were doing: sales made with little or no supporting documentation as a condition of the sale, so the buyers never knew the actual history of the account until actual collection attempts began.

The mortgage derivatives fiasco is just the tip of the iceberg. Many of the big credit card issuers (MBNA, Providian, etc) are gone, swallowed up by the new mega-banks too big to fail or jail. But their legacy lives on in law offices and junk debt consortiums everywhere, just waiting for the right investigator to turn over the right rock.

When my partner Ray got the pitch from Mitch Stewart of Organizing for America on Monday, he had other things to do with his discretionary money, but the first paragraph got him:

Every single day, special interests spend a staggering $1.4 million lobbying Congress to shut down the President’s agenda for health care reform.

Certainly he could afford the $5 the president was asking for. In fact, he gave $10. But the next morning, he found the account he uses for web purchases overdrawn. The DNC had not only authorized $10 twice, they had authorized $500.00 as well. For three days, despite scores of phone calls, the transaction had neither been reversed nor had anyone at the DNC or Blue State Digital acknowledged the error.

Blue State Digital, founded in 2004 by four former Dean staffers, at first denied any involvement or responsibility. But the emails and the donation page point to them, so they finally resorted to the claim that their involvement was none of our business.

The DNC at first claimed donor error, then flatly denied that no more than one transaction took place. The bank produced documents complete with Terminal IDs, sequence numbers and switch timestamps proving the DNC in fact made four transactions, but refuses to remove the hold unless the DNC advises it in writing to do so.

Its the ultimate Catch-22, with all the trappings of the kind of government bureaucracy the right tries to scare up as a bogeyman to keep health care private.  “Do you trust the government,” they ask, “to provide your medical care?”

Late this afternoon, the DNC did apologize, and tried a new story. It was an address mismatch that caused the transactions to fail. That never stopped Blue State during the campaign, and there were lots of donations with the same exact data.

Nor could they explain how an address issue turned $10 into five hundred but they attempted, without success, to reverse the charges; the charges that yesterday didn’t exist.  Because of their previous denial, Ray’s now canceled the card and faxed a flurry of dispute documents back and forth to the bank.  The DNC is still trying to decide whether or not it requested and received an auth code. Their spokespeople don’t seem to know.

Ray thinks the government needs to guarantee every American health care, and there should at least be a public option. He’s spent a lot of time in verbal gunplay on Facebook with our insurance industry friends, but his powder is no longer dry.

In frustration he finally wrote the White House (the BlueState-served webpages hide out behind a link to www.whitehouse.gov). Its not easy to argue that a group of people can tackle something as difficult as multi-billion dollar health care when they can’t figure out why a $500 charge attempt got made for a $10 donation, and claim its none of your damn business when you inquire about it.

In a nutshell today’s conservatism is one standard for me, and another for you. Here’s the world according to the typical teaparty conservative:

• When I complain its my right because its my free speech, but when you criticize back its a violation of my free speech
• The First Amendment applies to broadcasting because “congress shall make no law…abridging the freedom of speech…” If a liberal builds a transmitter and starts broadcasting on my favorite AM talk radio blowhard’s frequency then have them arrested, because congress can make such a law after all.
• Insure my investments through the FDIC, and increase the limits so my millions are safe, but don’t touch the banks that put them in jeopardy because that’s big government at work.
• Watch me hold my “No Socialism” sign high, at least until I have to put it down to get to my medicare-reimbursed doctor’s appointment
• And make sure the streetlights are on and the roads don’t have any potholes so that I can get to the tax protest without damaging my car.

It it starting to appear that, if the Senate can’t first head it off at the pass, President Obama will not allow Congress to vent its anger through the tax code and pick the pockets of the weasels at AIG who accepted huge bonuses from the company they helped destroy.

I don’t know this for sure, its just my take on his 60 Minutes interview aired tonight, coupled with the perception that cooler heads are prevailing, and that in the rear view mirror the last week is looking more like a collective hissy fit than responsible government or intelligent public policy.

In today’s NYT, Thomas Friedman likens our actions to a those of children home alone.  I don’t totally agree with his solutions, but he certainly gets props for bravery. Even the appearance of standing up for the AIG bandits paints a bullseye on your back.

The problem: this is a world crisis of confidence, and we are beholden to a lot of people who made this mess to help us get out of it. We knew or should have known they were greedy pigs when we let them build this house of cards, but nobody in power wanted to stop them because on paper the rich were getting richer.

Now all of a sudden we’re surprised that they’re greedy and we’re angry that they know where all the bodies are buried. Like Bernie Madoff and tens of thousands of other criminals who have information that will solve quandries, they have us beholden to them. At least for the short term.

When our country was attacked, we took great pride in a president who turned that into political capital, standing on the wreckage of our biggest financial edifice and vowing to exact a pound of flesh. But we now realize we  took our anger out on the wrong people, and in the end we only made things worse.

Now a new president is standing on a financial wreckage while politicians around him demagogue the American people into demanding a pound of flesh yet again. This time it appears we have a president smart enough to realize that immediate visceral reactions may feel good today, but in the end they just make things worse.

Dear Rush Limbaugh:

Thank you for writing your open letter to President Obama, published Friday as an op-ed in the Wall Street Journal. I know things have been tough for your syndicator and owned stations (Premiere/Clear Channel). First, the banks tried to renege on their deal to take your employer private, and you all had to take less. Then the bean-counters came in and you had that mass firing Inauguration day.  Then, the junk bonds keeping your company alive got even junkier.  Standard and Poor downgraded them from B to B-.

With so many things wrong in this country, it made no sense when there was suddenly so much hue and cry from the biggest right wing talk networks and station groups over the fairness doctrine. Mr. Obama’s never liked the fairness doctrine, your party is against it, and you can count those in my party who want it reinstated on your fingers and toes. You may not even need your toes.

Last Friday (the same day Clear Channel’s massive debt got downgraded), you dropped your pants in your WSJ op-ed and it suddenly all made sense. Its not about the fairness doctrine at all, is it?

Its about a handful of companies owning the vast majority of powerful radio stations across this country and putting on nearly every station the same imported schlock with no local staffs, minimal local content, and in some cases not even a living soul stationed at studio or transmitter.

Your precise question to President Obama:

Is it your intention to censor talk radio through a variety of contrivances, such as “local content,” “diversity of ownership,” and “public interest” rules — all of which are designed to appeal to populist sentiments but, as you know, are the death knell of talk radio and the AM band?

Requiring Clear Channel to provide local content in their communities of license is not censorship. Its like requiring an investment company to actually buy some stocks and bonds for their investors and truthfully advise those investors about their holdings. Requiring radio stations to serve their communities–regardless of the political leanings of the ultimate content–is only a death knell to weak and poorly managed companies: companies like yours; companies that you would ordinarily, as a free market conservative, demand be thrown under the bus.

Fact is, Mr. Limbaugh, what has happened in the radio business is the same thing that has happened in the banking, the mortgage, and even the automobile industries. We “let the market decide,” by deregulating everything in sight, and the charlatans took over: people who don’t give a rat’s ass about ethics or values or anything but this month’s profit. Your masters bought up every radio station and station group they could find using expensive debt. The interest payments siphoned off the money for local programming and public service.

The decimation of the radio business by firing legions of talented people at the local stations, replacing them with automatons voiced in sweatshops in “cluster facilities” hundreds of miles away is broadcasting’s version of a Ponzi scheme. Its like selling off the locomotive of a train claiming inertia would keep it moving. Now that its ground to a stop, you’re trying to blame President Obama because you’re afraid he’s going to force you to replace the engine.

Your answer is to do what Rove, Cheney, and Bush did to sell the Iraq war. First you teach that the fairness doctrine is a bad thing. You call it censorship. Then you use those terms in a sentence with all the things you want to sully. Fairness doctrine, public interest, diversity of ownership, local content. There’s no connection, but you hope your listeners aren’t sharp enough to catch it. Saddam Hussein, terrorist, 9/11, weapons of mass destruction, Iraq, axis of evil, mushroom cloud.

But this time, they might catch on. All those words strung together to get us into war were either bad or unfamiliar and foreign sounding. Local content, local ownership, local people behind local mikes discussing local issues—what we once called full-service radio—are things people understand and many of us even remember. It will not be easy to redefine them as a negative when a lot of people will see them as an old friend, and it would truly be karma to see the “populist sentiment” that you’ve played like a violin for 20 years be the thing that puts your stations back in the hands of people who care about serving their communities, and takes you off the air for good.

Wouldn’t it be ironic if your denouement came the very first time you got caught red-handed at the Shock Doctrine? Rush Limbaugh, Saddam Hussein, Sean Hannity, Clear Channel, Terrorist, 9/11, mushroom cloud.

Synergy. Whole greater than the sum of the parts. That’s when things are good.

Let's stop bowing to our behemoths

Too big to fail. National resource. That’s when things are bad.

Suddenly, we’re no longer bowing to the god of “size matters.” Today’s bailout of Citibank suggests that, and the coming crash in legacy broadcasting and satellite will be more proof.

Just today, in the [City Near You] Business Journal, Lew Dickey, Jr, CEO of Cumulus Media opines that in the next 36 months, half of the companies in the radio business will be gone.

Mike Elgan at Datamation is getting mass redistribution with his article that sticks a fork in XM/Sirius, and at Daily Kos, Jerome a Paris (who could spend a year just writing “I told you so” diaries) tells us what we should have been doing with banks which is extensible to broadcasters. There was a reason for ownership caps. Ronald Reagan forgot them somehow, but then as we discovered when he left office, Reagan forgot a lot.