Banking Has Become an Oligopoly Instead of a Competitive Business -- And That's Really Bad News for Us 99%

Continued from previous page

Again, the banking industry sails right past this free market logic.

We're all familiar with the term "Too Big To Fail," which sums up what happens nowadays to the biggest banks even when they commit fraud against consumers, poison them with toxic products, grossly neglect their duties to shareholders, and blow up the economy. They are rescued with public money. Yours and mine! That doesn't happen to Joe's Burger Joint. If Joe's restaurant had a management team that made stupid business decisions, picked customers' pockets, and sold burgers that made you throw up, then Joe would probably see a padlock on his door before too long.

But bad management at a bank seems to have no repercussions except enormous payouts. Just ask recently booted BofA execs Sallie Krawcheck and Joseph Price. The bank gave Krawcheck a severance package that includes a year's salary of $850,000 plus a payment of $5,150,000. Price got $850,000 and a payment of $4,150,000. BofA CEO Brian Moynihan took over from Ken Lewis, an exceptionally crappy bank manager who exited the door with $125 million in his pocket. Moynihan has been defending his bank's debit card decision and making a lot of noise about his loyalty to shareholders and customers and his bank's "right to make a profit." Former bank regulator Bill Black isn't feeling sympathetic, though, crisply observing that "it was Moynihan's incompetence and moral blindness that allowed BofA to commit tens of thousands of felonies in the course of foreclosing through perjury on those who were often the victims of Countrywide's underlying fraudulent mortgages."

Moynihan collects a $2 million annual salary. As a base.

The BofA chief also has the nerve to serve up whoppers about how Dodd-Frank regulation is responsible for his bank's losses, but Black isn't buying that burger. He calls Moynihan's claim " false and pathetic," noting that "endemic criminal conduct by BofA in the mortgage foreclosure process, combined with the massive accounting fraud inherent in Countrywide's operations combined to cause a loss of slightly over 60 percent to BofA shareholders."

Right. So given that the idea of a free market in the banking industry is bunk, what's a Bank of America customer to do? It's not like you can live normally without a bank. Unfortunately, as Black wrote me in an email, the choices are not pretty at this time. His advice:

First, anyone with BofA stock should sell it. Second, there is no good route for the depositor. Third, as a customer, i.e., for a mortgage loan or debit card, go elsewhere. Fourth, interest/fees on credit cards are far bigger for most consumers, so their focus should be on their credit cards. Pay off as much as possible of your high interest rate credit card debt as soon as possible and change to a credit card company with lower interest rates/fees (comparison shop on the web).

So there you have it. You do what you can. But with that said, it still seems reasonable to take your money out of the biggest banks that caused the financial crisis and are still harming the economy by not lending, doling out huge bonuses, and screwing customers. The alternative is to find a credit union or small bank, if for no other reason than to give your support to local businesses and to invest in Main Street. You might even end up with fewer fees. The Move Your Money campaign, the brainchild of Arianna Huffington, economist Rob Johnson and filmmaker Eugene Jarecki, offers guidance in picking an institution that's safe. 

How hard is this? Well, I'm about to find out, because I'll be taking my money out of HSBC and finding a smaller bank. I'll let you know how it goes.