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kalikshama -> Bank of America: Too Crooked to Fail (4/2/2012 3:59:29 PM)
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Really long article so just giving my favorite clip and bizjournals writeup:
The bank has defrauded everyone from investors and insurers to homeowners and the unemployed. So why does the government keep bailing it out?
by: Matt Taibbi
[image]http://assets.rollingstone.com/assets/images/story/bank-of-america-too-crooked-to-fail-20120314/306x306/main.jpg[/image]
At least Bank of America got its name right. The ultimate Too Big to Fail bank really is America, a hypergluttonous ward of the state whose limitless fraud and criminal conspiracies we'll all be paying for until the end of time. Did you hear about the plot to rig global interest rates? The $137 million fine for bilking needy schools and cities? The ingenious plan to suck multiple fees out of the unemployment checks of jobless workers? Take your eyes off them for 10 seconds and guaranteed, they'll be into some shit again:
This bank is like the world's worst-behaved teenager, taking your car and running over kittens and fire hydrants on the way to Vegas for the weekend, maxing out your credit cards in the three days you spend at your aunt's funeral.
They're out of control, yet they'll never do time or go out of business, because the government remains creepily committed to their survival, like overindulgent parents who refuse to believe their 40-year-old live-at-home son could possibly be responsible for those dead hookers in the backyard.
Full article: http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314?print=true
Writeup:
Rolling Stone's criticism of Bank of America raises heat on bankers
Rolling Stone's March 29th essay criticizing Bank of America signals growing public pressure on the nation’s bankers.
In the essay, titled "Bank of America: Too Crooked to Fail," author Matt Taibbi rattles off a laundry list of woes and litigation facing California's largest bank. Of course, this being Rolling Stone, the essay includes plenty of cussin’ and sexual references.
But the fact that Rolling Stone has provided its readers with almost 7,300 words on Bank of America’s trials and tribulations signals the public’s growing interest in the banking crisis.
The essay is additional evidence for my recent argument that Warren Buffett is wrong in telling Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) (NYSE: BRK) shareholders that banking is "back on its feet."
In many respects, the Rolling Stone essay reads like a summary of my Bank of America coverage over the last several years.
The nation's $26 billion mortgage settlement is high on Taibbi's hit list. That’s not surprising. The settlement, heavily supported by the White House, is likely to be a growing source of controversy ahead of the November presidential election.
That can’t be good news for bankers already feeling the heat.
And Taibbi doesn’t hold back. He calls former Bank of America CEO Hugh McColl "greed-sick." McColl eventually transformed Charlotte-based North Carolina National Bank, or NCNB, into BofA (NYSE: BAC) with the 1998 purchase of San Francisco-based BankAmerica, taking its name and headquarters back to Charlotte.
"Bank of America is now bigger and more dangerous than ever," Taibbi says.
"This bank is like the world’s worst-behaved teenager, taking your car and running over kittens and fire hydrants on the way to Vegas for the weekend, maxing out your credit cards in the three days you spend at your aunt’s funeral," Taibbi writes. "They're out of control, yet they'll never do time or go out of business, because the government remains creepily committed to their survival, like overindulgent parents who refuse to believe their 40-year-old live-at-home son could possibly be responsible for those dead hookers in the backyard."
Taibbi takes issue with BofA CEO Brian Moynihan being "incensed" over all the criticism his bank is now receiving. But he doesn't liken him to Marie Antoinette. And he touches on the Fannie Mae-BofA smackdown, but he doesn't liken the two mortgage-industry giants to children behaving badly.
Continue turning to the San Francisco Business Times for that perspective.
Taibbi also criticizes Bank of America for shifting $55 trillion in risky derivatives over to its banking unit at the request of clients.
That puts BofA insured deposits, and ultimately the nation’s taxpayers, on the hook to make good on those derivatives. It's hard to imagine how that maneuver ends happily, at least for the public purse.
Some of my readers have likened the mounting legal threats against BofA to the litigation that long-faced the tobacco industry. I take issue with that comparison because unlike the tobacco industry, the federal government can't stand by quietly while litigation over several years threatens BofA's perceived solvency and, more importantly, erodes public confidence in the nation's banking system. (And as I've always said, perception is nine-tenths of reality.)
The Rolling Stone essay underscores just how frequently the government has stepped in to prop BofA. Expect more of the same.
Perhaps investor expectations for continued government support is fueling BofA's share price run-up, making it the strongest performer in the Dow Jones industrial average this year. On Monday, BofA shares hit ten bucks for the first time since last summer, but then fell sharply.
After the market closed Monday, BofA denied it plans to raise capital by issuing stock.
“Contrary to market rumors, Bank of America has no intention of issuing additional equity in a secondary offering,” a spokesman told the Wall Street Journal.
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