Nevadans, still looking at 53,238 foreclosed properties, with an average $120, 529 foreclosure sales price, (realtytrac) and 7,942 new actions, which means about 1 out of every 183 housing units is in trouble — may at least be pleased to note that Bank of America has had its “NetFlix Moment” and will renege on its promise to gouge more fees from its account holders. [USAT]
Real outrage — as opposed to the manufactured variety — really works. “We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” said David Darnell, co-chief operating officer. “Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.” [USAT]
The banking industry just might be getting the message that they are about as popular with the American public as Fire Ants at a “Clothing Optional Resort.” Their apologists are still attempting to divine the meaning of public dissatisfaction, most often falling back on the Green Monster Theory: “They don’t like us because we’re rich.”
Perhaps of few more months of tent pitching in public spaces will get the message across that it’s NOT the Green Monster driving the movement, but a general disaffection with a political and economic system in which financialism is threatening both our economy and our government. Matt Taibbi replies:
“When you take into consideration all the theft and fraud and market manipulation and other evil shit Wall Street bankers have been guilty of in the last ten-fifteen years, you have to have balls like church bells to trot out a propaganda line that says the protesters are just jealous of their hard-earned money.”
Taibbi’s article outlines the ways in which Wall Street (banking sector) has been winning at the expense of the American public. However, there’s a glitch in the logic. Most of the items on Wall Street’s “cheat sheet” are legal. Self-serving, self-promoting, self-rewarding, but legal. Then, he complains that Zero financial sector CEO’s are currently sitting in jail. And, there is the core of the problem. Actions that probably ought to be illegal aren’t. We need to be careful about not confusing two categories of accountability.
Individuals may be held accountable for their actions in (1) the courts, or (2) in the court of public opinion; and, these are not necessarily the same thing. Bank of America, faced with protesters at the front doors and outraged customers leaving out the back, took notice that at least one of its policies was adding fuel to the fires of discontent; in other words, it was losing in the court of public opinion. However, many of the financial sector manipulations which have accrued displeasure don’t have the immediacy of a debit card fee increase, and therefore aren’t easily addressed, much less resolved, in public discourse.
The abuses in the mortgage markets, which have created such economic agony in Nevada (and other ‘sand states’) were awful, but lawful.
Financial institutions took full advantage of the “free money” from the Federal Reserve, borrowing at essentially zero percent and crafting mortgage products which were fodder for the secondary market even as they were toxic in terms of the bank’s liquidity and for the economy as a whole.
Yessir! Step right up and get your Sub-Prime, Alt-A, Option ARMS, and Pick-A-Payment mortgages right here from your friendly national too big to fail bank, supported by an easy money policy from the FED. (1) Better still (for the bankers) selling those mortgages into the secondary market to be securitized into unfathomable financial “products” was even more lucrative.
In the Great Age of Deregulation there was nothing to put the brakes to the enthusiasm of bankers, who convinced by the Quants that the Housing Bubble was profitable territory (2), jammed as much of their resources as possible into the fray, thus earning high profits and inflated bonuses. There was, and is, nothing illegal about selling highly questionable mortgage products. There was nothing illegal about tranching those products into synthetic CDOs. There was nothing illegal — at the time — about shopping these financial products among the ratings agencies to see which would give the banker the coveted AAA rating. For the most part, the activity was awful, but lawful.
High Impact Plastic Helmets for Bankers?
What appears to gall the 99% at the moment is that while we are generally amenable to changing the rules of American football to secure a ‘level playing field’ for opponents and to address the safety of the participants, we are being told that any attempt to rein in that “irrational exuberance” of the bankers playing in our financial system is “A Government Take Over Of The Banks.”
Let’s digress a moment to recall that helmets weren’t required in American football until 1939 and the NFL didn’t adopt a rule requiring that a helmet be worn in competition until 1943. A single bar face mask was added in 1955, and the energy absorbing helmet was introduced in 1971. In 1976 the four point chin strap was made a requirement for keeping the helmets on the heads. We regulate head gear because it is crucial to the safety of the players. An individual player may find the helmet uncomfortable and confining, but we’ve decided that reducing concussions is more important than any single individual’s “freedom” to play unencumbered.
The American public, at least 99.5% of it, would be safer if bankers were required to put on their “helmets” to insure the safety of the financial game. Bankers are lobbying long and hard to return to the Bad Old Days of bare-headed brawling. (3)
The American public, at least 99.5% of it, would be better served by a financial sector which:
(A) Regulated the banking industry such that the unprofitable proprietary actions taken by bankers would not require public bail-outs to reconstitute our financial system. In short, no more “privatized profits and socialized losses.”
(B) Regulated the derivatives markets such that trading did not imperil the safety of the American economy.
(C) Regulated the mortgage industry such that consumers could understand, and appreciate the implications of, the mortgage products being sold.
(D) Regulated investment banking such that we might return to the days when the function of that sector was to channel capital from areas of shortage to areas of surplus — from investor to industry instead of from investors to other investors.
(E) Regulated speculation such that transactions in which one party is unaware of the other party’s “bet” or interest against the same transaction were criminalized.
The American public, or at least 99.5% of it, would benefit from policy changes which:
(A) Reverse the trend reducing the tax burden upon those in the upper income echelons and increasing it on the middle class.
(B) Reverse the trend in which we reward speculation more than long term capital investment.
(C) Reverse the trend toward economic de-regulation. — Helmets should really be required when playing the “American Economy Game.” When the awful becomes unlawful we’ll have made a start.
(1) Dr. HousingBubble “Truth about Option ARMS…” 2009. “Defective Product Liability Lawsuit Filed Against the Mortgage Industry as a Group. Mortgage Product Recall?, PR WEB, 3/14/11.
(2) See “Recipe for Disaster: The Formula That Killed Wall Street,” Felix Salmon, Wired, 2/23/09. “Who Played a Role in the Housing Bubble,” Michael Panzer, Daily Markets, 6/6/08. James Case, “What Role Did Mathematical Models Play in the Financial Crisis,” SIAM, 9/29/09.
(3) Gary Rivlin, “The Billion Dollar Bank Heist: How the financial industry is buying off Washington and Killing Reform,” The Daily Beast, 7/11/11. Edward Wyatt, “Dodd Frank Under Fire A Year Later,” NYT, 7/18/11. Nathaniel Popper, “Dodd Frank Hasn’t Curtailed Banks Profits,” LA Times, 7/20/11. Ira Teinowitz, “Volker Rule Draft Gets Little Respect,” Deal Pipeline, 10/10/11. AFR, ” Attempts to Undermine Dodd Frank Mount, 5/12/11. (pdf)