How Big Banks Are Still Lying, Cheating and Ripping Us Off
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This whole thing, I think, was kind of dismissed by many in the mainstream media. It was all mere “paperwork issues,” never mind that it showed this remarkable sense of entitlement. They didn’t like the way we registered deeds so they decided they’re going to set up a corporation called MERS and they’ll just skip that -- screwing over country registrars all across the country and utterly confusing the chain of title on millions of mortgages, and nobody seems to be upset about this.
DD: Yeah. I’ve of course been following that story for upwards of two years now. It is hard to get traction on it. Certainly you look at the track record, and it seems that the LIBOR scandal will play out in the financial press, not on the front page, and it will only be a blip. You can sort of look at the difference between the furor in Britain over the Barclays portion of the LIBOR scandal, and what we saw here when Jamie Dimon was brought in to testify before the Senate and the House over what I call the “fail whale” trades -- these trades, also in London, that lost $9 billion -- and those hearings were a farce. To suggest that the US press and US policymakers are going to wake up and recognize the enormity of this scandal and take appropriate action is kind of wishful thinking.
JH: I struggle to figure out why that is. Part of me says that it’s because the political press likes to have a he-said/she-said kind of tension -- a partisan tension. What you’re seeing is that nobody is really calling for heads to roll in the financial sector. We heard very big talk from New York’s Attorney General Eric Schneiderman and his new commission that was going to study foreclosure fraud. They didn’t even get office space. They have no resources whatsoever. There’s just nobody, it seems, who's terribly concerned about any of this. I wonder if that leads to a kind of scandal fatigue?
DD: I think in a sense it does. When you see these things raised over and over again and there’s no appropriate accountability as a result, you tend to lose interest. Keep in mind the Justice Department settled with Barclays and forestalled any criminal investigation into the specific vendors. There are going to be civil lawsuits that play out -- I think there’s one with the city of Baltimore as one of the plaintiffs -- but the Justice Department said we got our $450 million and we’re done for the day. There’s still investigations underway. There are still other banks that are implicated in the scandal, but if you just look at the track record you cannot be optimistic in any way.
JH: I come to this from an ideological perspective. Let me ask you a question from a banker’s perspective. What is the potential harm from this massive loss of faith and trust in these institutions?
DD: There’s a serious reputational risk. If I’m an investor, I don’t know why I would ever come within 50 feet of an investment bank or anything of that nature, given how they have just abused me over the last several years. Whether it’s with mortgage-backed securities that they didn’t tell me were based on fictions and bad loans, or this particular scandal where all the interest rates were actually falsified. It’s very hard to have continued faith in these institutions.
But of course if you’re a major investor, there aren’t that many institutions that have the economy of scale to be able to handle you. As we know, after the financial crisis the too-big-to-fail banks just got bigger. There are less of them, and they hold more assets now. It’s kind of a catch-22.