Rolling Stone’s Matt Taibbi is not shy when it comes to hitting back at Bank of America:
They’re in deep trouble, but they won’t die, because our current president, like the last one, apparently believes it’s better to project a false image of financial soundness than to allow one of our oligarchic banks to collapse under the weight of its own corruption. Last year, the Federal Reserve allowed Bank of America to move a huge portfolio of dangerous bets into a side of the company that happens to be FDIC-insured, putting all of us on the hook for as much as $55 trillion in irresponsible gambles. Then, in February, the Justice Department’s so-called foreclosure settlement, which will supposedly provide $26 billion in relief for ripped-off homeowners, actually rewarded the bank with a legal waiver that will allow it to escape untold billions in lawsuits. And this month the Fed will release the results of its annual stress test, in which the bank will once again be permitted to perpetuate its fiction of solvency by grossly overrating the mountains of toxic loans on its books. At this point, the rescue effort is so sweeping and elaborate that it goes far beyond simply gouging the tax dollars of millions of struggling families, many of whom have already been ripped off by the bank – it’s making the government, and by extension all of us, full-blown accomplices to the fraud.
I still hear people defending the bank CEO’s.
“It wasn’t the banks, it was them people buying $400,000 homes and working part time at McDonald’s!”
My answer: “There are long standing rules governing the loan approval process. One rule limits mortgage payments to a percentage of the buyer’s income. This has effectively prevented homebuyers from financing a home they could not afford. The megabanks, however encourage fraud in the loan origination process, as the intent was to distribute the high risk debt in ways that would defraud the FDIC.”
“Naw, It was the CRA, forcing the banks to loan money out to poor people!”
“Actually the Community Reinvestment Act encourage small local banks and credit unions to provide mortgages to people in their communities. All other restriction on the borrower still applied, but in some situations they could qualify for a lower down payment.”
I’ve also heard people defending the multi million dollar income of the bankers as the bankers being worth the money or that their pay was bound by their contract, but neither of those hold any water. Obviously, since they took the banks into the crapper, they aren’t worth that kind of pay, and I have no doubt that those with salary clauses in their contracts were hired based on the expectation they would lead the company to ruin.
There’s no defense for the bank CEOs, but they weren’t the only reason this happened. Notice that while banks are doing the right thing, tightening lending standards, the government is trying to re-inflate the housing bubble. Stupid, stupid, stupid. THe housing market has to find a bottom. The government’s been delaying that by browbeating the banks to lend and through programs to encourage homebuying. Plus all the old subsidies like the mortgage interest deduction.
European countries have mostly never felt the need to subsidize home ownership. We shouldn’t either.