Bank Robbery

I got an angry email yesterday from my friend Judith who needed some cash the other day while she was in New York City. She banks at a small regional bank that doesn't have branches in Manhattan. So when she went to a Chase ATM on Madison and 72nd Street, she was shocked to see the notice that if she did withdraw any funds, Chase would charge her $3. She decided against it.

When she got home, she received in the mail the notice required by the newly enacted Credit Card Accountability Responsibility and Disclosure Act of 2009, from her cozy, local East End bank. According to this notice, Judith's bank was now going to charge her $1 for any ATM withdrawals made from banks other than her own. So if she had withdrawn that cash from Chase, the total surcharge would have been $4. That's bank robbery!

Last week I received a notice from Bank of America where my family has had a credit card for years. OK, we have never paid a late fee; we have been fortunate enough to have been able to pay off the balance monthly. Job loss, emergencies, and medical bills haven't prevented us from using credit cards in exactly the way banks hate: we have access to thirteen months of money on twelve months of income. And it doesn't cost us a penny, because we only use no-annual fee cards.

Despite this impeccable credit, we were given notice that our monthly rate for any trailing balances would go up to 11.99%, with a rather complicated formula of adjustable rates that could go as high as 19.99%.

Let's remember that you and I own most of Bank of America now, because TARP, the Troubled Asset Relief Program, passed in a panic in the waning days of the Bush administration, with absolutely no oversight of then Treasury Secretary Henry Paulson, handed out so far, $180.9 billion to American banks. Bank of America has received the biggest handout: $52.2 billion, with Citigroup trailing slightly at $50 billion. Read ProPublica.org and cry.

For months it was a giant secret just who was getting the funding and how much. Now a privately funded site ProPublica.org is the best available source for this information, along with what we have given AIG, the car companies, and how much we have spent to buy up all of those toxic assets (bad mortgages where the banks made money anyway) so that the banks look like they are making money when they aren't. Ironically ProPublica.org was funded by JEHT Foundation, a victim of the Bernie Madoff scandal, and the Sandler Family, the originators of the "pick and pay" variable rate mortgage scheme that brought down Wachovia when it purchased World Savings (Golden West Financial) without doing due diligence.

So one would think that now that we own 611 banks in the US, including the two largest--Bank of American and Citigroup--the banks might be giving us taxpayers a break, a courtesy, a thank you. Despite the fact that we are suffering because we bailed them out, and no one is bailing us out, banks have increased interest rates and fees on credit cards, the only available credit for consumers currently. Try to go to your bank and borrow money, and see how generous those terms are going to be. I just tried to find out what the overdraft and monthly service fees are at Bank of America, and only found "sympathetic" videos. Finally after clicking and clicking, I found the lists of what the bank charges for these most common occurrences. With a twenty year old daughter, believe me, I need to know if these have changed!

And here is a tidbit to make you even angrier: As of today, the Federal Reserve is lending banks money at the rate of 0.50%!!!

Gambling With Our Retirements

On the day General Motors filed for bankruptcy, the New York Stock Market gained 200-odd points! Just weeks before the market climbed when Chrysler filed for chapter 11 bankruptcy protection.

One would believe with soaring unemployment figures, thousands of homes in foreclosure, retail sales declined, the second largest shopping mall developer in bankruptcy, car sales almost nil that the stock market would not be recovering.

Oh, yes, and another eight banks joined the growing list of financial institutions that are taking TARP funds. That brings the total to 616 banks across America.

And, did I forget? Oil is up above $60 a barrel!

Why is the stock market above 8,600?

How do people like us, ordinary folks, understand the stock market to assure that our 401(k) accounts can regain their losses and will be able to support our retirements so that we don't slip into poverty? When the market acts irrationally, how do we know what to do? Most of us already got burned with investment plans that invested across the board--small cap, mid cap, corporate bonds--those asset allocations didn't work because all of their parts lost value.

Yesterday Ben Bernanke, chief of the Federal Reserve, spoke before Congress and warned that our deficits are a larger percentage of gross national product than anytime since World War II.

That is unsustainable. What are we to do? As we Baby Boomers age, we won't be able to retire if we don't figure out what to do with our savings so that we can leave the workplace, making room for younger workers. I long for the time when I can spend my time volunteering, gardening, and reading, but right now that seems impossible despite all of my family's conservative investment strategies.

Under the mattress seems more reasonable than the irrational stock market.

Disaster Capitalism Across America

Naomi Klein, author of "The Shock Doctrine," was on the Rachel Maddow Show last night and brought her analysis to the TARP right front and center. Click here for the clip.

According to Klein, who also writes for The Nation, once again we are taking enormous amounts of public money to bail out private interests, i.e. the banks, the very richest, because they made a series of very bad private mistakes.

When comparing the amount of money spent on the banks with the amount of money being spent on helping individuals, and the reticence in helping individual homeowners adjust their onerous mortgages, we should be appalled. Add to that those governors who are refusing to take portions of the stimulus package to pay for additional unemployment insurance -- Rick Perry from Texas and Bobby Jindal from Louisiana, to name two -- and our heads should be spinning.

Who is claiming that Obama is really calling for socialism in his health care and jobs stimulus package? We already have redistribution of wealth, but from the public to the private sector, in the TARP. Think about it. Three trillion or more has actually gone to the banks from the Federal Reserve and TARP.

Goldman Sachs As Welfare Queen

My blood is boiling again, when I realize just how much money has been given to Goldman Sachs, and how connected the problem-solvers of this financial crisis--Henry Paulson, Tim Geithner, Neel Kashkari-- are to the venerable investment house.

Read this posting from Josh Marshall's talkingpointsmemo.com.

These are the figures we know about:

TARP funds: $10 billion plus
AIG securities lending unit: $4.6 billion
Maiden Lane III: $5.8 billion
AIG collateral: $2.5 billion

Total: $22.9 billion plus

So we need to ask the question again: why is Goldman pretending that it didn't have exposure to the derivatives market crash and wasn't a counterparty to the notorious credit default swaps?

"Just for good measure, it's also worth noting that Goldman is getting an additional several hundred million dollars per year in interest savings, according to Gross, thanks to an FDIC program that guarantees bonds issued by banks. Under the program, which is designed to make it easier for banks to raise capital, Goldman has sold $21 billion in bonds since November."

Getting Personal and Getting Really Mad

My husband and I were just audited by the IRS for the one recent year we made a decent amount of money because we sold a piece of real estate while my husband's business went down the tubes. He had a small metal fabrication shop, had a decent unionized work force from an array of nations, but like many small businesses, could not compete against the inexpensive, mass produced stuff that was coming in from China. He couldn't sell the business, just had to close it up, sell the equipment at auction (although he did sell some of it to his former employees), and walk away.

That was 2006.

We got a notice from the IRS that they wanted to see everything about his business that year.

For months now, my husband has been going back and forth between the storage locker where he kept all of the paperwork and his accountant, because we have enough reserves to know that we didn't want to deal directly with the IRS. Tempers would have flown. We hired the accountant who does our tax returns to defend his own work.

After weeks of document productions and meetings, yesterday we received a bill from the IRS for $584! That is the amount of tax and penalty we owe for taking off too much of my husband's car as a business expense.

That's five hundred and eighty four dollars! It will probably cost us close to $5,000 in accounting fees.

So, yes, I'm ranting, because today I read that 13 out of the top 23 banks that have been bailed out by TARP owe hundreds of millions of dollars in back taxes. Yes, that's hundreds of millions of dollars in back taxes. And they fraudulently signed statements before they received the billions of dollars in bailouts that they were current in their taxes. I'm not exaggerating. I'm not making this up. Read it here.

John Lewis's House Ways & Means oversight subcommittee made the following statement: The Subcommittee looked at the top 23 TARP recipients. We found that thirteen of them owed more than $220 million in unpaid Federal taxes. Two companies owe over $100 million each.

We have fraud, we have fraud, we have fraud. Where is there any accountability?

Where Has All The Money Gone?

The Troubled Asset Relief Program, TARP, signed into law in October 2008 at the urging of President Bush and with the help of Democrats who by then controlled the House of Representatives, had hardly any limits on how the money was to be used by banks once they obtained their share. The bailout of AIG had no limits on it either. As we now know, AIG has paid over $160 million in retention bonuses to employees, including the same employees who were responsible for the derivatives debacle that is bringing the company down, along with global banks.

Finally we can see where the TARP money is going. ProPublica.org has posted a list of recipients of TARP funds. As of March 11th, almost $302 billion has been invested in saving the financial institutions of the United States. AIG has gotten the most: $170 billion. Next comes Citibank and Bank of America, including Merrill Lynch, with $45 billion each.

AIG in turn paid out $50 billion of that taxpayer bailout money to US and European banks for their losses under credit default swaps, here, I've got the definition, where without regulation, reserves, or using the word "insurance," AIG secured these institutions against loss of principal and interest when they purchased all of these bundled mortgage securities.

The Wall Street Journal and Fortune's lists were slightly different. Fortune's is available on the web, although the WSJ is only available to subscribers. Notice the names: Bank of America, CitiBank, Wachovia. These are the same names of the banks receiving TARP funds although AIG also paid out taxpayer money to many European banks, too. No wonder CitiBank is claiming it's about to turn a profit again.

Is there double-dipping? And more importantly, since these bonuses paid to AIG employees were allegedly contracted for in 2007 and only paid in 2009, I have some questions to ask. Was this money intended to keep folks quiet about the soon to unravel financial debacle? Or was Edward Liddy, the CEO brought in to run AIG, serious when he said that they agreed to the bonuses because these employees were the only ones "who could understand the exotic financial instruments on AIG's books."

This morning I heard on NPR that some of the employees are no longer working for AIG and many are in the London office, which won't even help the US economy, if they want to use the bonus to buy a new Chevrolet or Cadillac!

Remember what Bethany McLean said: If it's too difficult to understand, it probably isn't making any money. McLean revealed the ENRON scandal. Maybe McLean will investigate and tell us what happened to our financial services industry. there will be no newspapers by then, and anyway, what good were newspapers or the media in informing us about these financial shenanigans.

I wish someone would pay me a bonus for screwing up the entire world.

Where Has All the Money Gone?

In the turmoil of the collapse of the world financial markets, the Bernard Madoff scandal, and the lesser Mark Dreier scheme, the question is obvious: where did all of the money go? Who knows how much money the banks have lost. What we do know is that TARP has already given the banks $350 billion out of a possible $700 billion bailout, not including the other $140 billion the Federal Reserve provided banks by a little noticed change in the tax code. Bernie Madoff claims to have lost $50 billion in his ponzi scheme and Mark Dreier, who remains in jail, stole $380 million. This doesn't include the loss of funds to the down trend on the world stock markets, the loss of 401 (k) assets, pensions, and savings.

In addition to the losses that have left college endowments depleted--Harvard, Wellesley, Yale, to name a few of the prestige schools have sent out letters to students and alumni about losses, there is Yeshiva University that lost $110 million to the Madoff ponzi scheme. Anthony Romero sent out an email alert to contributors to the American Civil Liberties Union claiming that it lost over $850 million in grants from two foundations for the uncoming year. One of those funding sources is no doubt the JEHT Foundation, known for its progressive funding of criminal and social justice programs--$26 million last year alone--which closed its doors after the Levy Church family lost its family fortune to Madoff.

This morning the New York Times ran a story about the Sandlers, Herbert and Marion, who started World Savings Bank, sold to Wachovia in 2005, and seen as one of the causes of Wachovia's near collapse.

World Savings Bank developed something called an option ARM — and named “Pick-A-Pay” by World Savings. Pick-A-Pay allowed homeowners to make monthly mortgage payments that were so small they did not cover their interest charges. That meant the total principal owed would actually grow over time, not shrink as is normally the case.

The Sandlers walked away from the sale of World Savings Bank with $2.3 billion in cash and stock in Wachovia. The ARM--Pick-A-Pay that made World Savings such a mortgage giant, although it didn't sell the mortgages like other lenders, is now under federal investigation. Far too late, since everything World Savings did was quite public for a very long time. (Also in this morning's Times, is a story about how few criminal prosecutions for stock fraud the Bush administration has initiated.)

Which places another progressive funding source in jeopardy: Sandler Family Foundation. After the sale of World Savings, the foundation received a gift of $1.3 billion in cash, the second largest charitable gift in 2006. However, according to Herbert Sandler, the foundation is fine, it's his personal fortune that has diminished because he and his wife retained ownership of stock in Wachovia, which has tumbled. That will diminish the size of the Foundation after the Sandlers die; they are both in their late 70s.

The Sandler Foundation is a primary source of funding for ProPublica.org, the investigative journalism website--up to $30 million over three years--, as well as the liberal think tank, Center for American Progress, started by John Podesta, who is now heading up Barack Obama's transition team.

Progressive funding is never easy to find. Organizations that try to change the power dynamic, want to examine and eliminate the causes of poverty, ill-education, despair, aren't easy sells to wealthy peoiple who often made their money exploiting these faults in the system. But with banks, corporations, and now private family foundations decimated, our philanthropic infrastructure is fragile and failing.

Barack Obama issued a Christmas statement this morning, in text and video, which speaks about working for common purpose at this time. It's really the only solution: for us to work together in our own communities and not wait around for government to reform itself and start working again.