Out of the Woods

Love that bank!

Do you remember those posters of Barack Obama with the legend “HOPE” at the bottom?

Whoever made those posters made a mistake. The legend should have read “BANKS.”

We have known this for a long time: the current administration likes banks a whole lot. But in the last few days we have found out how much this administration loves banks. It turns out that starting in 2008 The Federal Reserve Bank lent large amounts of money to a variety of very large banks—on one day they lent out 1.3 trillion. They must have thought that this would not look good while ordinary Americans were suffering, because they fought really hard to keep the whole thing secret. The banks got loans at very low interest and then put it in accounts that paid higher interest. Result: the banks made $13 billion.

What are friends for?

Another interesting question: whose money was the Fed lending to the biggest banks?

The next day we heard that the SEC settled with Citibank for $285 millions in penalties for converting sub-prime mortgages into securities, selling those securities to investors without telling them that they were a very risky investment. Then, the banks made bets that these investors would lose their shirts. The investors did lose their shirt and Citibank made a tidy profit. That looks suspiciously like fraud. If you and I did stuff like that we would find ourselves in front of a judge. But not Citibank. Their friends at the SEC allowed them to pay a fine without admitting any wrongdoing. Unfortunately they ran into a judge who thought that this was a bit too much and she refused to accept the deal. But the SEC seemed fine with it. Other big banks have since then been allowed to pay fines without admitting wrongdoing for similar scuzzy maneuvers.

Today, the Attorney General of Massachusetts filed suit against Bank of America and four other BIG banks for foreclosing on loans that they did not own, for promising to modify some loans and then foreclosing anyway without modifying. They are also accused of having someone sign foreclosure papers without even looking at them or checking that they are accurate.

This is a state action. The banks' friends in the Federal Government are lying low.

They are probably too busy trying to think up other ways they can help the banks make more money.

Such generous and unselfish friendship is truly touching.