Published in CommPRO.biz 2013.06.26

BofA Told to Lie

 

When an entire sector of our economy -a crucial sector- is handed “Get Out of Jail Free” cards by our federal government, we should not be surprised when they run off the rails. We are talking about the monster, too-big-to-fail banks. It is more than surprising, it’s a miracle that it isn’t any worse than it is. The Department of Justice (DOJ) and its head, Eric Holder, the highest ranking law enforcement officer in the USA, has decided in the case of these banks that he will not enforce the law. He has repeatedly given the monster banks a pass. His rationale is that jailing top banking officials will destabilize the banks and our economy. Shows you how precious little Holder knows about business.

We have the major banks running amuck, fixing interest rates, laundering money for drug cartels and dictators, playing fast and loose with mortgages, ripping off consumers right and left and anything else that comes to their evil little minds. The latest instance is playing out in a Federal Courtroom in Boston where former Bank of America (BofA) workers are lined up to blow the whistle on the warped sickies running this bank. A bank that owes its very existence to the nearly $50 billion we taxpayers handed them to literally keep them afloat following the economic collapse they helped trigger.

In sworn statements BofA expats detail the bank’s efforts to squeeze every dime out of homeowners struggling to hang on to their homes. Bonuses to meet their foreclosure quotas, gift cards, all kinds of incentives to lie and cover up misdeeds designed to line the bank’s pockets with fees and interest before crushing those they should have been helping. And why not? If you get caught and have to pay a fine, it’s peanuts in comparison to the bucks pouring into the bank’s coffers. Just another cost of doing business.

This is not going to stop until we start charging the top executives of these banks and they face jail - that’s what it’s going to take. Attorney General Holder may be a fine lawyer but he clearly doesn’t know squat about business. Executives who allow the kind of behavior that we’ve seen at BofA, HSBC, Chase and the other big banks are lousy business people and lousy leaders. There are lots of honest people waiting in the ranks of these banks, ready and able to lead and build on a proven ethical foundation to produce happy customers. And in case you haven’t noticed, happy customers produce higher profits.

We do need to remove the temptation that allows banks to speculate with their customers’ deposits instead of investing them in our economy. We need the so-called Volker Rule. And we need to break up the monster banks. Take them out of the too-big-to-fail league. All the stuff that the big bankers little helpers’ on “K” Street managed to lobby out of the laws that protected us against bad bankers for decades. However, the DOJ’s first order of business should be to level criminal charges against these arrogant, ignorant punks who have no place leading any business, let alone one in the financial heart of the world economy.

Rolling the Dice, Again

Let’s suppose a bunch of organized crime types –unbeknownst to you– put together a scheme to offer odds on whether or not you will pay your mortgage on time each month for the next year. And even though your mortgage is only a few hundred bucks a month, they found high rollers willing to put big money, hundreds of millions, on one side or the other of these bets.

While that’s a little oversimplified, that’s pretty much what happened leading up to the 2008 financial crash when the big banks had folks betting for and against packages of home mortgages. Of course organized crime types would be in big trouble if they did something like that; gambling laws in almost every state make that kind of activity a big no-no. Those laws, however, do not apply to banks, and others engaged in what can laughably be called investing. During recent decades the Federal Government adopted laws exempting this form of gambling.

You would think that after what happened so recently we would have changed those laws. You would be wrong. In fact the lobbyists have managed to block even modest reform. Dodd/Frank would have made some important changes, but it has been hamstrung by opponents who simply cut off funding to implement the reforms.  

And the gamblers have turned to the commodity market. Summer, normally a quiet time, has seen an all-time record trading month in July and it looks like August will surpass it. All the exchanges from commodities to stocks are racking up billions of trades every day; some are showing trading increases in the billion range doubling normal volume. From the high-frequency traders who are little more than pirates roaming the capital markets to panicky investors afraid to be skinned by the gamblers, the markets are crazy.  

It’s time to set some parameters that will bring the markets back to their purpose, to create capital to support our economy. Banks need to get back to banking and off the trading floor. The exchanges need to focus on their purpose, to serve as a marketplace for capital and business to meet and create growth in our economy. At this point they are too interested in the revenue created by billions of trades and not interested enough in the future of this nation.

We need to reward investors, those who buy and hold stocks. Those in the market for the long haul. They’re the ones who should get the tax breaks. Let’s make capital gains taxes gradually go away the longer you hold an investment. Let’s make the gains reaped by those who buy and sell stocks in a matter of days or hours or a few seconds subject to punishing taxes. This kind of “playing” the market generates no public benefit.

And let’s call those who bet for and against almost anything what they are, gamblers. Let’s take away their “Get out of jail free cards.” Let them suffer the same legal consequences as those running an illegal card game in their basement. It’s the right thing to do.