Sunday, November 3, 2013

Why leave Bank of America? It's insanely fraudulent!

Updated at the bottom.

Below is a lightly modified email I wrote to a friend, trying to explain how fraudulent Bank of America is and encouraging her not to do business with that bank. Note that other too-big-to-fail banks are just as fraudulent


Dear [Friend],

Here's a good set of links and descriptions about Bank of America criminal behavior. Let me know if I can clarify anything. It's not comprehensive, and it doesn't discuss how intertwined BoA is with the US gov't (this would make you even madder at how the US gov't supports this fraud), but it's pretty compelling as is.


Everything in this post seems too outrageous to be true, especially taken together. Remember though, fraud can pay grandly, especially big fraud. The first item explains how control fraud works, and then we get into specific examples for BoA. Control fraud is the worst kind of fraud - where leaders of a company abuse their position to defraud the company itself and all the people/businesses it deals with to maximize their own income at the expense of everything and everybody else. When the company is 'Too Big Too Fail', it's a national disaster... hence America in 2013 with several such companies.

If you have time, it's worth skimming everything (I know there's a lot... BoA is very naughty). Otherwise, at least read Matt Taibbi's piece at Rolling Stone (first Taibbi link below) and the last point in my email below. I've read through all this stuff myself and seen it from many sources. I'm happy to discuss any and all of it with you!
How does control fraud work?
This interview with Bill Black (a Federal regulator during the S&L fraud crisis of the 80s) discusses how fraud works at massive bank institutions (you can listen to the whole interview, or just read the key summary):
The key formula:
"...if you’re a lender there’s an easy recipe for maximizing fake accounting income. And it goes like this. You need four ingredients:
  1. grow like crazy
  2. by making really, really crappy loans but at a premium yield (yield just means 'interest rate')
  3. while employing extreme leverage, and
  4. while setting aside only the most trivial reserves or allowances for the inevitable losses this kind of behavior produces."
... this explains much of the fraud during the foreclosure period post-2008, including robo-signing: the banks deliberately made bad loans because it maximized short term income. They minimized the staff-size needed to deal with foreclosures, because properly staffing for that would have negated (or more than negated) any profit they hoped to make short-term.

So what are some examples of this fraud?:
An excellent summary of many wrongdoings by the excellent Matt Taibbi:

Another good summary of why hating on BoA is a good idea, in a speech Matt Taibbi gave to Occupy Wall St:

BoA moved $75 Trillion (T) of derivatives into a business unit that has FDIC insurance - if it loses on those investments, the FDIC deposit insurance would bail out those derivatives before your savings gets returned:
Same thing from BusinessWeek:

Lying to its shareholders about losses in the acquisition of Merrill Lynch:
Breaking the law on procedures for modifying home mortgages and foreclosing:

More lawbreaking on home mortgage modifications:
(there is a lot of extra material in this post; skip several paragraphs to get to the meat)
Overbilling customers in the wealth management unit for 8+ years, and getting fined less than the profit from the overbilling:
Bank of America engaged in massive amounts of 'robo-signing': when bank employees would sign legal documents submitted to courts related to mortgages (affidavits, etc), attesting that they knew all the information pertinent to a case, without having actually reviewed any material (definition:
Bank of America:
Bank of America violated the settlement with the gov't after being sued (for a small amount) over robo-signing:

The owner of "Naked Capitalism", Yves Smith, did personal interviews with low level people who engaged in a review of Bank of America's foreclosure practices. The review itself was a massive fraud, and Ms. Smith's series based on the interviews is quite telling about the culture of fraud at the bank.
A post which may have been inspiration for the series:

Series part 1:

Series part 2:
(there are several more parts, and they're easy to find online. Use a search engine and search for 'naked capitalism bank of america foreclosure reviews')

An article detailing whisteblowers’ claims that they were told and incentivized to lie and defraud mortgage borrowers:

And my family was directly victimized by Bank of America's frauds

Last but not least.... my family was defrauded by BoA. My grandfather had thousands of dollars in BoA stock for my sister's college fund. After all that fraud (and most of this email details with post-2008 collapse fraud, but sub-prime 'liar loans' were also very fraudulant pre 2008), the bank's stock price collapsed: (Yes, the stock price went from $50 to $3. It would have gone to $0 had the gov’t not saved BoA!)
... you can see how many years of growth were wiped out in 2008 (or alternatively, how much fraudulent growth BoA engaged in). As a BoA shareholder (through our grandfather), my sister's college savings took a big hit. This stuff is for real, and I refuse to be fleeced again.
Thanks for reading this far. I'm happy to discuss any/all of this!

Update: What do you know, the day after posting this, I see a similar list for RBS, the Royal Bank of Scotland
Update again: A similar list for JPMorgan.