Tag Archives: TARP

Bank of America – A Unique Display of Corporate Greed

by Mitch Seaman, California Labor Federation

Forbes magazine as gutsy consumer advocate? Well, not really, but even the favored rag of corporate shills everywhere seemed stunned by Bank of America’s $5 debit fee announcement on Friday, accusing the banking behemoth of committing

a common mistake large corporations make: taking the customer for granted, holding the belief that whatever products or services they offer are unique and indispensible, so their customers will always be there.

While we agree that Bank of America’s incompetence runs rampant throughout the banking industry, by several measures of greed and arrogance, this troubled corporation stands alone. Allow us to present Bank of America with the following uniquely dubious titles:

Greediest TARP recipient: Bank of America took tens of billions of taxpayer dollars from the Troubled Asset Relief Program (TARP) in 2008. This bailout was supposed to help shore up the entire US financial system—as banks can be too big to fail but never too big to take free taxpayer money. Anyway, the terms of these loans required recipient banks to individually maintain sufficient cash to ward off a broader Wall Street meltdown. However, as last week’s Special Investigator General (SIGTARP) report confirms, Bank of America lobbied heavily to escape the program before they’d achieved the required financial reserves. Why? According to the report, Bank of America cited “…concerns including market perception and restrictions established by the Special Master for TARP Executive Compensation.” In other words, a shaky Bank of America weaseled out early to polish its image and pay executives more—jeopardizing the fiscal health of their company and the stability of our country.

Downsizer of the year: This one wasn’t even close. On September 12th, Bank of America CEO Brian Moynihan announced 30,000 layoffs—that’s more than twice the number of layoffs (13,000) declared by 2011’s second-place downsizer, pharmaceutical titan Merck & Co. Bank of America’s bombshell dropped just one month after Moynihan informed investors that “our capital levels are among the highest they’ve ever been in this institution’s history.” Maybe he’s confusing “our” capital levels with his capital levels: last year, Moynihan collected $2 million of his $10 million 2010 total compensation package. Other executives, in some cases, collected even more. Thomas Montag, head of investment banking and capital markets, will rake in $16 million for his work in 2010. Not bad for tanking one of the biggest banks the world has ever seen, though we have to wonder, how many jobs could be saved by firing these two alone?

#1 Tax Cheat: If you paid any federal income taxes at all last year, you paid more than Bank of America. In fact, unless you got a refund check bigger than $1 billion, you paid more taxes than Bank of America. It gets worse: these freeloaders paid no taxes last year and likely won’t for a long time. Chew on that next time pro-banker legislators demand we balance the budget through Social Security and Medicare cuts from middle class families.

First in Fees: All of which leads up to the latest Bank of America gaffe: the unprecedented $5 monthly debit fee slapped on any customer guilty of using his or her debit card for its intended purpose of buying things. This charge comes courtesy of a bank that for years encouraged frequent use of and zealous devotion to debit cards—mainly to help the bank rack up sky-high “interchange” fees from merchants on every card swipe. The company changed their tune, however, following federal legislation requiring that fees be “reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” Apparently, despite final federal rulemaking that more than doubled the fee limit set by Congress, reasonable and proportional profits just aren’t enough for this champion profiteer—hence the shocking new fee.

While we applaud the furor over the monthly debit charge, be sure to consider this fee just the latest of many anti-consumer and anti-worker moves from the king of both. We’ll go to another surprising Forbes magazine masterpiece for the final word: “Banks aren’t our friends.” From one friend to another, we couldn’t agree more.

Wall Street Banks Need To Stop Using Funny Math

(Say Hi to Asm. Lieu. NPR’s Planet Money podcast did a good report on this subject as well. – promoted by Brian Leubitz)

Two weeks ago, Bank of America surprised Wall Street by posting an alleged ‘strong’ profit of $4.2 billion the first quarter of this year. Now we know how they arrived at those numbers:  funny math. Today we learned that Bank of America actually needs another $34 billion injection of capital in order to survive. 

Bank of America is not the only firm using funny numbers.  Goldman Sachs posted an alleged profit of $1.8 billion for the first quarter of 2009.  The company had previously followed a calendar quarter that ran from December to February.  However, Goldman Sachs conveniently and suddenly decided to change its accounting to a calendar year schedule, and changed their fiscal year to start in January, effectively eliminating December’s results.  The company had suffered large losses in December.  So the ‘profit’ Goldman Sachs posted doesn’t account for the entire missing month of December.


Funny numbers, lack of transparency, and the obscuring of risk were some of the prime causes of Wall Street’s economic collapse, a collapse that started our recession.  America’s recession will be prolonged if investors continue to stay on the sidelines because they are unable to ascertain the true value of banks and other companies.  

It is time for Wall Street firms to come clean and start telling Americans the truth.

Now With Obama, It’s Time To Fix The Foreclosure Crisis

Democratic legislative leaders are in Washington today arguing for increased stimulus money for California.  I’ve been arguing that this is required for some time, and hopefully it will be done in such a way that a) it can be applied to the General Fund deficit (so far Arnold has not asked for budget relief in that way) and b) it can be used without up-front money that will be matched, because the cash crisis limits our ability to do that.

However, there is something else that the Obama Administration can do right away to help the bottom line of the state and its citizens, and that is deal with the crisis in the housing market here.  It’s no secret that California is one of the hardest-hit states by foreclosures; in Stanislaus County, for example, 9 percent of all houses and condos in the county have been foreclosed upon, a staggering figure.  That’s almost $4 billion dollars worth of foreclosures in Stanislaus alone.  In larger counties like San Bernardino and Riverside, you can see how this foreclosure crisis affects new housing starts (there are a glut of cheaper foreclosed homes on the market) and thusly unemployment figures.

Only four years ago, Riverside and nearby San Bernardino, often called the Inland Empire, were California’s economic powerhouse, accounting for more than a fifth of the state’s new jobs. Today, unemployment reigns in the sprawling region east of Los Angeles. The 9.5 percent jobless rate in the two counties matches Detroit’s as the highest of any major metropolitan area in the U.S.

Although there was a surge in construction employment in the U.S., and about a 50% increase in California (as a percent of total employment), construction employment doubled (as a percent of total employment) in the Inland Empire […]

With the housing bust, the percent construction employment has declined sharply and the unemployment rate has risen to almost 10%. Is it any surprise that jobless rate in the Inland Empire matches Detroit’s as the highest of any major metropolitan area in the U.S.?

Nobody is calling on the federal government to prop up a sick housing market that will not see a broad recovery for a while.  But foreclosures have a disruptive effect on the greater economy.  They hurt property values, they hurt banks, and they hurt employment.  The crisis is only slated to grow if nothing is done, with homeowners of every income class affected.  And so foreclosure aid would be a major boost to California, and it can be done both quickly and effectively.  By pledging that $100 billion from the TARP program will go to limit foreclosures, Obama has already begun this effort.  Ted Lieu thinks that the Obama Administration understands the nature of the problem. (over)

Time is of the essence. I commend the incoming Obama Administration for pledging up to $100 billion from the Troubled Assets Relief Program (TARP) to help distressed homeowners stay in their homes. In California, which has the highest number of foreclosures in the nation, we experience one foreclosure filing every 30 seconds to 1 minute. The TARP funds, which the U.S. Senate recently released, should be immediately put to use to rescue homeowners from foreclosure. Our economic recovery will not begin until we slow down the astronomical rate of foreclosures and stabilize the housing market.

Strategic direction is of the essence. The haphazard strategy of the Bush Administration’s use of the initial $350 billion in TARP funds resulted in the following: more foreclosures, less market confidence, and zero benefits for the ordinary citizen. How does giving yet another $20 billion to Bank of America so it can complete its purchase of Merrill Lynch’s brokerage arm help anyone on Main Street? Answer: it doesn’t. The only people this TARP money under the Bush Administration has been helping have been Wall Street firms. It is time for change and January 20th cannot come soon enough.

State efforts are of the essence. Helping our economy recover will require the combined efforts of both state and federal resources. In California, I introduced the California Foreclosure Prevention Act to provide immediate foreclosure relief. This Act imposes a foreclosure moratorium, but allows lenders to avoid the moratorium if they have a comprehensive loan modification program designed to keep people in their homes. Swift passage of this Act will complement and enhance proposed federal efforts. We need action and we need it now.”

However, more needs to be done.  Earlier this month, Democratic Senators got Citigroup on board for what is known as “cramdown” legislation, which would allow bankruptcy judges to restructure mortgages that would give homeowners the ability to pay them.  The lenders take a haircut but it’s a better situation for them than foreclosure, and those who get to keep their homes can continue to contribute to the economy.  It’s a great idea and a major step toward reforming the hideous 2005 bankruptcy bill.  Yet despite supporting it, Obama’s team doesn’t want to include this reform in the economic recovery package, which I think is a mistake.

President-elect Obama and his advisers are resisting attempts to include a provision in the economic stimulus bill backed by congressional Democrats that would allow bankruptcy judges to shrink mortgages.

In a hastily convened Democratic Caucus meeting last week, Obama economics adviser Jason Furman made it clear to lawmakers that Obama thinks the so-called “cramdown” provision would cost GOP votes and endanger bipartisan support in the Senate.

He committed to dealing with the issue after the bill passes, as did House Speaker Nancy Pelosi (D-Calif.).

Lead supporters of the cramdown provision say the time to deal with the issue is now. Rep. Jerrold Nadler (D-N.Y.) said it’s worth losing some Republican support to help homeowners.

“I would take that risk,” Nadler said. “I don’t think you’re going to get a lot of Republican votes anyway.”

This is absolutely correct by Nadler, and risking a few votes on the margins is no reason not to limit foreclosures now.  There is an urgency here, because each foreclosure hurts the housing market more and makes it less liable to recover quickly.  We cannot wait a few months for the sake of political expediency.  Cramdown needs to happen fast, particularly for us in California.