Citi’s Fear

I wanted to return to a detail I mentioned in yesterday’s book salon. As I noted, in his book on the auto bailout, Steven Rattner described Citi as being worried during the Chrysler negotiations that retail customers would retaliate if Citi played hard ball.

Bankers for Goldman and Citi had advised [JP Morgan Chase VP and the Chrysler bondholder’s lead negotiator] Jimmy Lee to make the best of a bad situation. Privately they felt his brinksmanship was embarrassing and potentially costly. Citi especially wanted to avoid a liquidation. Its analysis showed it would recover no more than 20 cents on the dollar in that instance. Citi also feared losing business in its branches in states like Michigan and Ohio where consumers might blame it for Chrysler’s demise. (173)

That didn’t make sense to me given that Citi doesn’t have branches in MI and OH; the closest actual branches are in Chicago. Compare that to Chase, which just took over from Comerica as the biggest bank in MI by deposits and was presumably second at the time of the bailout negotiations. Citi should only fear retaliation from consumers elsewhere, in those urban areas that actually have Citi branches, or they should fear retaliation some other way, presumably through their credit card business. I asked Rattner why Citi was worried, but JP Morgan Chase was not, given its much greater involvement in the auto states. He responded, “Yes, they were definitely worried.”

Frankly, I don’t know what to make of this. Given the context of the claim–in which Goldman and Citi are portrayed as talking Jimmy Lee down from a hardass negotiating position–JPMC appears not to have been sufficiently worried to change its behavior. And the Citi claim doesn’t make sense on its face. Perhaps Citi was worried about something else. Perhaps they were just more worried because they were insolvent? There are a few details he pretty clearly got wrong in his book (such as his claim that Nissan’s consideration of a deal with Chrysler was secret), but this seems instead like one of the abundant examples of where Rattner is an unreliable narrator. Rattner chose to portray Citi as worried (and quickly agree the hard-bargaining JPMC was, too), but it’s unclear whether that was really true or just nice spin on the banks.

What Rattner probably didn’t know was that FDL was trying to increase this worry at the time by encouraging people to take their money out of Chase. That was a mostly unsuccessful effort (let me tell you, Chrysler is  no more popular in this country than the big banks) to target the banksters for actions that hurt the communities they’re in.

As unsuccessful as our effort was in terms of numbers, if Rattner-the-unreliable-narrator’s claim has any basis in fact, then our effort to pressure JPMC to behave better worked. Sort of.

Since then, Arianna’s Move Your Money campaign has more successfully advocated for people and institutions to move their money out of the big banks. By April, they claimed $5 billion had been moved. And it does seem like some of the banks are losing market share to smaller banks.

The largest banks in Michigan are losing market share and Chase Bank now has the most deposits in the state, according to new data released Thursday by the Federal Deposit Insurance Corp.

As of June 30, the five biggest banks in Michigan — Chase Bank, Comerica Bank, PNC Bank, Bank of America and Fifth Third Bank — accounted for 55% of all deposits in the state. That’s down from 57.3% on June 30, 2009.

I raise all this because of another interesting discussion about whether consumer action might more effectively target the banks. Via Yves Smith, I found this Playboy article on Edmundo Braverman’s’s proposal on How to Destroy a Bank (Yup, it appears you have to have a pierced navel and no pubic hair to be a Playboy model these days).

This article set forth a plan for how consumers could destroy one of America’s four largest banks. Customers would deliver a series of escalating threats against Wells Fargo, Bank of America, JPMorgan Chase and Citibank, demanding policy changes. The threats would culminate in a series of flash-mob bank runs that targeted one of the banks.

In a comment in Yves thread, Braverman acknowledged his idea was a thought exercise to take Move Your Money the next step.

The whole thing was inspired by Arianna Huffington’s “Move Your Money” idea. I thought it was a good idea, but not one that would be dramatic enough to produce any changes in the way the banks did business. So I asked myself, “What would have an impact on the banks?” and that’s when I came up with the Tank-A-Bank plan.

It was always just a thought exercise, and never something I advocated.

Yves seems to be thinking more about this; what can consumers do that won’t get them jailed as terrorists but will get us to a point where the finance industry isn’t dragging our country down even while stealing our money in the process?

There are a couple of important points in the Playboy article on this. First, there’s the insight into the role consumer banking plays in this big scheme.

A former senior bank officer was horrified by Eddie’s plan. “The consumer bank divisions are the ones with the rules,” he told me. “They’re the ones that help the community. They’re the real bankers. Why attack them?” But according to Eddie, the banks are “using their consumer banking customers like human shields.” While the investment and commercial segments of a bank are separate, major losses from the investment side could still destabilize consumer accounts. That’s a fundamental reason bailouts are needed if catastrophic losses occur. Eddie’s plan allows those human shields to mutiny.

That’s an important point, it seems to me. The consumer banking stuff isn’t big enough to do more than scare a Citi or Chase, it seems to me. But the cowboys in the investment and commercial segments basically use consumer banking as a hostage with which to demand bailouts and freebies. Thus, while moving your money is necessary (in that it rescues hostages before the shooting starts), it’s not sufficient to humble the banks.

Then there are a few observations from Bill Black, who notes that the Fed would “hang bags filled with millions of dollars from the teller windows” if consumers rebelled. He also reminds that such a run has already happened:

He told me that flash-mob runs had already been carried out many times over the past 15 years and on a greater scale than Eddie had ever dreamed of. But it hadn’t been individuals working together to withdraw their money from consumer banks. It had been investment banks, moving in sync to attack their own. “The current institutions—the banks and broker-dealers and hedge funds and shadow-banking people—already move as organized mobs to take billions of dollars out of institutions in minutes.” Black was referring to the rapid trillion-dollar movements out of Long-Term Capital Management, Bear Stearns and Lehman Brothers, movements that occurred when it was rumored these institutions were unstable. “The banks will inevitably do it to each other again,” said Black.

While we would never be allowed to exert our power over the banks, the banks themselves have that power and are allowed to use it.

Mind you, I don’t know what the answer is. But it does seem that a range of people are looking to other alternatives to fix what the banksters and the politicians refuse to fix.

  1. PJEvans says:

    I’m trying to get out of my TBTF bank. Problem is finding a local one that actually wants customers enough to not set up a series of obstacles to opening an account. (The one that’s easiest to get to wants dated identification, as in issue and expiration dates. The company I work for issues undated photo ID, and it’s both large and local: what’s the problem with using that? Damfino.)

  2. thatvisionthing says:

    Do you have a timeline? In late January or early February 2009, my local Citibank branch (Southern California) installed plexiglass cages around their tellers. Before then (forever) they had been open air. It looked like fear to me.

    • Teddy Partridge says:

      Chase, on the other hand, opened a ‘new-model’ branch in a transitional SF neighborhood about 18 months ago. It not only has no glass between customer and teller, but each teller is at a stand-alone stand-up desk, with room to walk around into the teller’s workspace on either side. Very non-bank looking and not at all compelling.

      I deposited some money there and kept it at Chase long enough to get the $100 premium they were offering. When I went to deposit a check soon afterwards, was told I had to endorse the check in front of the teller and THEN was told I couldn’t make a deposit with it because the check was dated the following day, I was done with them. I told the manager they had now supplied me with a completely negotiable-by-anyone instrument that if I got jacked in the neighborhood (and entirely reasonable scenario) and lost my wallet and the check, would make it very useful to my robber.

      They wouldn’t even agree to hold the check at the bank (“we’ve got nowhere to keep it!”) until the next day for me to return and make my deposit. So I cleared out my small checking account and was done with them.

      I won’t ever go back; I’m very happy with my credit union here in Portland.

      • readerOfTeaLeaves says:

        Teddy, I’m thinking that your Chase branch was using a style that as near as I can tell was invented by Washington Mutual (WaMU, which so spectacularly helped pump up the bubble).

        Go back to the late 90s, and my kids needed to open checking accounts of their own, and set up some CDs. What bank offered free checking, and had lots of outlets in cities where my kids would be? What bank offered **free** ATM transactions throughout WA state? WaMu.

        Who bought out WaMu? Chase.
        (Oh, and FWIW, once Chase bought out WaMu, they screwed SAM – Seattle Art Museum – on the financial obligations that WaMu had undertaken for the new art museum building in downtown Seattle, which was built as a deal where SAM had one side of the building and WaMu had the other. Is Chase honoring WaMu’s obligation on that gig? Hell no.)

        But WaMu had the ‘personal style’ of banking that you describe in many of their local branches. And they made it super convenient to set up accounts and bank at WaMu.
        Until, you know… it turned out that about 80% of their mortgages were fraudulent. Which is another whole thread…

        • thatvisionthing says:

          The end of your comment dovetails with the point EW made toward the end of the diary, that the investment side of the bank is huge and can bring down the customer side, which the investment side uses as “human shields.”

        • readerOfTeaLeaves says:

          Actually, at the risk of blogwhoring (yipes!! 3 comments on this thread.. yikes!):

          It’s wayyyyyy worse than you can imagine, I’ll bet.
          Worse than I can really get my head around, except in rough images.

          Not only have the megabanks been able to set up hedge funds inside of themselves, they then create SIV’s, which are basically ‘off books balance sheets’. So they can basically use the money listed in their customers’ checking accounts as the basis for their hedge fund arms creating ‘hedges’ (i.e., ‘bets’).

          So Phase I: set up an SIV, which you don’t report and is off the books, so it’s opaque.
          Phase II: use the reported dollars in your own customers millions of checking and savings accounts as your ‘collateral’, which
          Phase III: your in-bank hedge funds then use as the ‘collateral’ for the basis of ‘hedges’, or gambling bets in terms of the way they are used to seek profit
          Phase IV: if you lose the bets, go whine to the Fed that they have to bail out your sorry ass because you’ve basically lost all the money in the accounts of all your teachers, cops, waitresses, nurses, firefighters, dentists, students, elderly retirees, and anyone else who put their money in your FDIC approved bank.

          Now, this is the way that I understand it — doesn’t mean that Nomi Prins should be blamed if I have incorrectly understood her.

          But this is also my understanding from what I’ve read in Yves Smith’s Econned (which I am currently re-reading).

          This is **my** understanding; I’d love someone who really grasps all this to confirm whether my mental models are accurate.

        • thatvisionthing says:

          This is **my** understanding; I’d love someone who really grasps all this to confirm whether my mental models are accurate.

          See Michael Moore on Charlie Rose, October 9, 2009 (youtube):

          CHARLIE ROSE: Well, define credit default swaps for us, while you’re here.

          MICHAEL MOORE: Let me tell you an interesting story that I’ve not shared publicly, because I couldn’t get him to come to be in the film, but I ran into a former member of the Fed, of the board.

          CHARLIE ROSE: Right.

          MICHAEL MOORE: And he tells me this story that the day that they – they had a guy come in one day to explain credit default swaps to the Fed board.

          CHARLIE ROSE: Right.

          MICHAEL MOORE: And he’s sitting there, and he says “I’m sitting there and I don’t understand one word–”

          CHARLIE ROSE: What is this, who’s chairman, this is John– Alan Greenspan is chairman, or this is…?

          MICHAEL MOORE: Well, yes.

          CHARLIE ROSE: …or Ben Bernanke’s chair?

          MICHAEL MOORE: No, no. Greenspan is chairman. Ok. And he’s on– you know there’s nine Fed boards around the country in the different regions, you know, Philadelphia, San Francisco, etcetera, so he’s on one of these nine, one of the nine Fed boards, and he said, “I sat there and I was afraid to like ask any questions. I couldn’t understand a damn word the guy was saying.”

          CHARLIE ROSE: This is a member of the Fed board?

          MICHAEL MOORE: Yes. So after the crash last September, a year ago September, he called up one of his old buddies who was on the board with him. He said, “Remember that day the guy came in to define credit default swaps to us? I didn’t understand what he was saying. Did you understand– ?” He goes, “No I didn’t understand either.” He said, “I wonder–” Then they asked a couple others. Nobody in the room knew what this guy was saying.

        • bobschacht says:

          Was it a matter of the bankers not understanding the testimony, or the testimony being a bunch of BS that was designed not to be understood?

          The first thing that came to my mind on reading your comment was that, when confronted with a question that they have no clue about, grad students can show considerable ingenuity in fabricating a BS answer that sounds responsive, but isn’t.

          Bob in AZ

        • thatvisionthing says:

          Re the incomprehensible built into our governance — there was a comment left in the Wellstone diary implying Sonny Bono, Michael Kennedy, John Denver and RKF Jr. were all conspiracy victims — to which I thought, huh? But hey, thinking again now… I remember Sonny Bono as a congressman (1995-98) was in a committee where they were discussing legislation and he stopped them and said, say this in plain English so I can understand. Now I can’t even find that story, but I remember it from the day. Wow, what a thought — what if — what if pushing for comprehensible law could get you killed! Jig’s up, MOTUs!

          ~ 8- /

        • bmaz says:

          Yes, same thought here. I only had occasion to walk into a WaMu branch once, but it was pretty unique and bizarre – and it was exactly as Teddy described. It seemed a terrible use of floor space and I would think pretty weird for the young tellers. I did not care for it, although it was certainly an attempt at something different.

        • Teddy Partridge says:

          I bet it was a WaMu branch in its previous life; I never paid attention. But it was right about the time of the Chase takeover, they were opening new branches and converting old WaMu branches at the same time.

      • Mauimom says:

        I won’t ever go back; I’m very happy with my credit union here in Portland.

        I’d love to take my money out of the Hawaiian not-big-but-definitely-incompetent local banks and put it in a credit union, but the only one here requires that you be employed by the state, local or federal government to join.

        So . . .

        • Teddy Partridge says:

          You should probably let the credit union know about your interest, then.

          Credit unions can expand their charter to a geographic basis, not an employment basis. That’s how Patelco in SF went from being a credit union for phone operators (mostly women and therefore, if single or wanting to keep their own money separate) unable to sign the forms to open a bank account independently until the Fair Credit Act, iirc.

      • thatvisionthing says:

        I was trying to verify what I think was the answer to Cenk’s question @5, who slipped the uncap on CEO salaries into the bailout. I think it was Dodd, who at first denied it up and down, and then said he did it because he was asked to by the White House (and the White House left him hanging out to dry). That’s what I remember. But I came across this description of AIG Financial Products offices on my Dodd google:


        The business created some of the densest, most obscure market transactions in history – knotting AIG’s finances with dozens of major financial houses with so-called credit swaps and other instruments. But inside, it operated, ironically, in an almost too-transparent office designed like “one huge trading floor,” former employees said.

        Employees were seated in pods of eight desks facing each other, according to one employee who left for another job. The area was flanked on all sides by conference rooms, but even those were see-through, divided only by glass walls.

        “There was no privacy, no way to play on the Internet or talk to your friends on the phone,” she said. “It keeps everybody working.”

        A former administrative worker who left in 2007 said the office lacked any substantial decorations. She described the walls as “almost hospital-like, as bare and as plain as you can make it.”

        She said she found the “deathly quiet” and open office to be suffocating.

        “Everybody at your pod knew if you were fighting with your husband,” she said.

        Former employees did not want to be identified out of fear of retribution within the finance industry.

    • thatvisionthing says:

      You know, that’s an interesting link I just gave to my old comment on Daily Kos. Just keep jumping up, parent, parent, parent… and finally get to the diary itself, Who Keeps Screwing Us Over? by Cenk Uygur, Thu Feb 12, 2009, which I would love to be able to quote in its entirety. Pure anger and frustration. The short – dog and pony Congressional hearings to scold Wall Street execs was cover for (next day’s story!) that Congress was removing the salary cap on bailout, so those same CEOs could keep getting horrendous pay, which we pay for.

      I want to know – no, I demand to know – who killed this provision? Who argued for taking this cap on executive pay out of the stimulus bill? Do we have a free and strong press in this country? Or are they in on it, too? If not, then find out who did this to us?

      We’re wasting our time here. Just nationalize the damn banks already. Almost all of the top economists are now in agreement that we should take this step. The people who put the money in are the people who own the company – that’s how capitalism works. I’m a die-hard capitalist. I don’t want the federal government owning banks for an extended period of time. But what’s worse is to continue letting these bankers rob us of our money day in and day out while we sit around like fools.

      We buy it, we own it. Kick the clowns out. Run it for a limited amount of time while we stabilize the credit markets. And then sell them off in the free market. Instead of begging the bankers to loosen up credit, we take the banks and do it ourselves.

      As Joseph Stiglitz says, they are bleeding the banks right now. It’s a zero sum game, every dollar they take out is a dollar we have to put in. Why are we paying them for their incompetence?

      Stiglitz (youtube) talks about the Citibank deal, and about putting the banks in bankruptcy. “They may be too big to fail. They’re not too big to reorganize… We are an owner without control. That is a recipe for disaster.”

  3. Teddy Partridge says:

    Thank you, Marcy, very good post.

    I wish someone would scope out the fine line between advocating customers act against their big banks versus financial terrorism. Seems to me the laws that ALEC has gotten states to enact, plus of course all the federal laws against citizen advocacy, have created a real bind. I always hoped Arianna was getting the very best legal advice; it would help if citizens were also reminded about what we can and cannot say about our bank overlords without giving legal, actionable offense in the eyes of our government.

  4. SaltinWound says:

    It seems like banks are more concerned with what other corporations think of them. Is it possible to get into the business of which banks are used by which publicly traded corporations? If a bank could be shown to be worse than the others, then pressure could be exerted on corporations not to bank there.

    • readerOfTeaLeaves says:

      Read Nomi Prins’s “Other People’s Money”; it’s the best explanation that I’ve read of how telecomm, energy, and banking concentrated in the late 1990s (in ways that would never have been possible without larger, global shifts as well as Reagan-era legislation).

      She explains how legislative changes in the definition of ‘what a bank is’ were altered so that basically Citi and everyone else were able to set up hedge fund divisions, etc, etc. Note that your local bank sure wasn’t writing CDOs and CDS’s — it was the megabanks. She explains the rise and significance of megabanks in that book. And wow, does she ever identify where every single piece of data in her book came from — tremendously good footnotes.

  5. thatvisionthing says:

    Reading more from Bill Black at your link:

    “The Fed’s mantra is independence from politics. Which is to say,” he adds, “independence from democracy. Responding to the will of the people is their greatest fear. The Fed would never allow this plan to work, because it would mean the people were dictating which institution or leader was fit. If they want a bank closed, they close it. No one else.”

  6. thatvisionthing says:

    Wow, all this on page 8 (of 10)… Ewww!!!

    I began to understand why Eddie Braverman had showed fear when I asked him to release his real name. “If this worked to any degree it would screw over a lot of wealthy and powerful people,” said Eddie. “I don’t fear the banks as much as I fear their lapdogs in the government. I’ve already had the IRS so far up my ass I could taste Brylcreem. I’m not interested in going through that again.” When Eddie first told me this, it sounded paranoid. Now I wasn’t so sure. “Back when I was working,” Eddie said to me, “it was the individuals in the system, the traders, maybe their managers, who were bending the rules and doing the dirt. But now it’s the leaders of the system who are dirty.” Apparently that applies not only to leaders of institutions but to regulators as well.

  7. thatvisionthing says:

    Re this quote from Black that you included in the diary:

    “The current institutions—the banks and broker-dealers and hedge funds and shadow-banking people—already move as organized mobs to take billions of dollars out of institutions in minutes.” Black was referring to the rapid trillion-dollar movements out of Long-Term Capital Management, Bear Stearns and Lehman Brothers, movements that occurred when it was rumored these institutions were unstable.

    See, isn’t that what Elizabeth Warren said was a result of a sponsorless amendment (hark Cenk @5!) to the 2005 bankruptcy act that made Wall St. bankruptcies into a “run on the bank” (Warren’s words) by those who held toxic assets? They could exchange their bad assets for whatever good assets there were, ahead of anyone else? So the lapdogs don’t stop at the IRS/regulator level — they’re in Congress itself.

    But what I don’t understand is that LTCM failed in 1998, before the 2005 bankruptcy act. Wikipedia says it was bailed out by the NY Fed:

    Some industry officials said that Federal Reserve Bank of New York involvement in the rescue, however benign, would encourage large financial institutions to assume more risk, in the belief that the Federal Reserve would intervene on their behalf in the event of trouble. Federal Reserve Bank of New York actions raised concerns among some market observers that it could create moral hazard.[25]

    Was the 2005 act papering over 1998?

    • readerOfTeaLeaves says:

      Yes, if you read Nomi Prins (“Other People’s Money”, or “It Takes A Pillage”), or Charles Morris’s “Trillion Dollar Meltdown”, or a number of other books – some FDL Book Salon titles – you’ll see that LTCM was the precursor.

      It was a sign that things were badly wonky, and the fact that it was bailed out was a symptom that the capital markets and financial recklessness was controlling the government, rather than the other way around.

      For a more technical background on the failure of LTCM if you have have time, read “Demons of Our Own Design”, which is a stunner. (And anyone interested in computers or networks should **definitely** read that one.) He explains from the ‘quant view’ how the networks and computer technology arose, and then he also has some very interesting cultural observations of what I might describe as the sociology of these organizations.

      I’m kind of with Barry Ritholz in viewing Wall Street as having a very bad case of ‘dot com penis envy’. Bookstaber doesn’t describe it in those terms, but you can see that in the subtext of “Demons of Our Own Design”.

      It’s a thick read, but just an amazing resource.
      And if you are at all geeky, it’s terrific.

      • thatvisionthing says:

        Thanks — and anything you can say to capsulize it would be helpful as I just can’t read whole books — I think I have ADD.

        • readerOfTeaLeaves says:

          I sympathize with your plight – I’d love 5 more lifetimes to read all the things that I’d love to get to ;-)

          Meanwhile, this might better fit your needs:
          The movie Inside Job is now playing around the US.
          I’m hoping to get to it this week (Seattle area).
          It’s also playing in most large cities around the nation.

          You can see the trailer at this link, and also get some updates on theaters where it is playing in your city.

          One really solid first step for getting control of our economy and cleaning up bank fraud is education.
          Honestly, I think there needs to be a grassroots push to get people to this movie, and get them to put it in Netflix queues as soon as it is available.

          Dylan Ratigan at MSBNC had the director/producer on his show and gave this movie an enthusiastic rec. Yves Smith also recommends it highly.

      • thatvisionthing says:

        Yes, if you read Nomi Prins (“Other People’s Money”, or “It Takes A Pillage”), or Charles Morris’s “Trillion Dollar Meltdown”, or a number of other books – some FDL Book Salon titles – you’ll see that LTCM was the precursor.

        It was a sign that things were badly wonky, and the fact that it was bailed out was a symptom that the capital markets and financial recklessness was controlling the government, rather than the other way around.

        Didn’t the 2005 act then concrete in exactly the fail of 1998? It ensured that broke would progress to systemically broken, and not to fixed? And keep it away from bankruptcy courts and judges?

        • readerOfTeaLeaves says:

          I’d love to be able to give you a response, but I wouldn’t be able to synthesize, and I fear being inaccurate.

          Perhaps if EW or bmaz are in contact with Yves or with Nomi Prins, someone could get an accurate answer. Because I think that your question is a really good one.

  8. bmaz says:

    (let me tell you, Chrysler is no more popular in this country than the big banks)

    Big banks are increasingly unpopular (although most people still patronize them of course); Chrysler on the other hand just seems increasingly irrelevant as opposed to hated.

    • emptywheel says:

      Oh, you probably want to get out of BoA before they. It’ll be a race to see whether this foreclosure thing brings BoA or Citi down first, but my $$ is on BoA.

      • readerOfTeaLeaves says:

        I’m with you on the BoA going down first.
        My spouse is still with them for some of his money; I just shrug and shake my head.

        But here’s what I’m wondering: is this the kind of thing that builds slowly, then pops? I think that it may be.

        I was receptive to your notions of getting out of my megabank last year, and moved some money to the local credit union. But frankly, I’m kind of spoiled by the online banking aspects of my megabank, plus the business accounts are convenient… so moving has turned out to have more complications than I had foreseen.

        However, I had something happen with my megabank last week that had me just seething; one of my kids thought I was overreacting, but they got an earful of what I’ve been following the past 18 months and just sat open-mouthed. (When Chase took over WaMu, she yanked her money out. That kid is a ‘saver’, so Chase really lost a good customer. Hahahaha.)

        So I’m still in the ‘oh, my Lordy, what a hassle and pain it is going to be to move X number of accounts from A to B, and do I move all of them, or only 3? And what do I do with the rest of them…?’

        It just takes more planning than I had anticipated.
        At least, in my case.

        But although I have not actually made the move yet, I can tell that psychologically and emotionally I am in a mindset that I could not have dreamed about even one year ago. And the reason that I got so pissed this week was largely the background context of reading Yves information about the mortgages with no actual documentation, the extent of the fraud, etc, etc.

        When the bank made a mistake (on their behalf, of course), it just felt to me as if these clowns have created computerized bullshit that is trip-wired. I had specifically requested a change to one account (by phone) two months ago, and the guy told me that things had been altered. Were they? No.

        How does it happen that megabank says, “Call us, we’ll help you.”
        You call them, they help.
        Then, your account takes money on Day X and moves it to account Y on that day, when you told them to move it on Day R? And they told you that they’d made the change!

        Personally, if I talk to the bank by phone **at all** these days, I write excellent notes, and I file the damn things.

        Just earlier this month, I was talking with an accountant.
        She can’t believe what she’s reading about the banks.
        AND she’s starting to clear clients from her list if she has any whiff or nervousness that clients are failing to provide her with full and complete documentation. As she said, ‘it’s not worth the liability’ to her as an accountant to screw around with clients who may be unethical.

        So I think that it’s more than simply those of us who come to read and post on blogs — I think the sentiment about feeling totally betrayed by banksters is really wide spread, but still in the formulation phases.

        And just wait until the accountants have to deal with clients whose banking issues are screwy because of failing banks.
        I think the curtain’s still coming up on this story.

        I think that (for the politically ambitious) it’s a really good time to be a state AG with full subpeona powers and a passionate drive for justice.

      • bobschacht says:

        Thanks for the warning.

        Oh, you probably want to get out of BoA before they.

        There’s a word missing, but I can kinda fill in from the context of your next sentence!

        Bob in AZ

      • bobschacht says:

        Edit time too short–

        …It’ll be a race to see whether this foreclosure thing brings BoA or Citi down first, but my $$ is on BoA.

        We have a (really bad) mortgage with BOA on a condo in Hawaii that we can’t refi. If BOA goes down, what’s likely to happen to our mortgage? or, more generally with other BOA mortgage holders?

        Bob in AZ

        • emptywheel says:

          Does BoA have it, or do they just service it? There are online databases to check if Fannie or Freddie own your mortgage.

          If not, then it’ll get picked up by someone else.

          You SHOULD however, ask BoA where your note is.

      • Teddy Partridge says:

        I have to wonder if pushing Angelo off the ledge won’t buy BofA some time in the race to collapse, though. That recent settlement re: Countrywide would seem to put Citi ahead in terms of deserving public humiliation and punishment.

  9. scribe says:

    What people seem to be forgetting is that the September, 2008 collapse – which led to TARP and all the rest, was likely the fruit of just such a run on the bank. Only the run was the sudden withdrawal of $550 billion from the Federal Reserve in a couple hours on September 15, 2008. Rep. Kanjorski was the only one who let on about it in public, on this clip.

    This article tries to shoot it down, but no one has actually ever honestly answered all (or, for that matter, any) of the questions stemming to this incident.

      • readerOfTeaLeaves says:

        But also recall that the Financial Times linked that sudden, vast withdrawal to the preceding month invasion of (Soviet) Georgia. And neither Dick Cheney nor GWBush were anywhere near a photo op when all that sh*t happened.

        IMVHO, there are linkages to Caspian Sea oil and resource wars in all of this, although they are far, far above my expertise.

        But when the FT publishes the linkages, I find that more than interesting.

        I also thought it was interesting that John McCain noted that ‘we are all Georgians now’ in Aug 2008, during that invasion. Biden, who was still in the Senate (Foreign Relations) went quietly over the Soviet Georgia to probably douse a few foreign policy fires – that trip hardly mentioned in the US.

        Then also of interest to me was the fact that Randy Scheunemann was McCain’s foreign policy advisor (and is now backing Palin). No better lobbyist for oiligarchs than ol’ Randy, I’m sure.

        So we had the FT mentioning linkages between the invasion of Soviet Georgia and the Sept 2008 meltdown; we had McCain using the lobbyistsForOligarchsAndTinpotAuthoritariansEverywhere running is so-called foreign policy gig, and we still have Palin.
        Oh, and a subfunctioning economic system.

        Fun, fun, fun!

        • Gitcheegumee says:

          AND… “Foreclosure Phil “Gramm was McCain’s campaign co chairman and financial guru back in 2008-Gramm,of Gramm Leach Blieley infamy,that deregulated Glass Stegall.

          Gramm was hired by Swiss mega bank UBS after he left Congress.And that’s another whole kettle o’ fish.

      • scribe says:

        Not exactly, as i-banks and banksters staging a coordinated run on the Fed is a whole level of different from staging raids on fellow i-banks or banksters.

    • thatvisionthing says:

      When I was looking for the MMoore quote @33, I saw this youtube (Michael Moore: “Communism has won”) from the world premiere of “Slacker Uprising,” so that dates it to 9/18/08 in Ann Arbor MI:

      MICHAEL MOORE: Communism has won! Communism has won! All right! All right! Socialism has prevailed! [laughs] The government now owns the majority of the mortgages, the majority of the homes in this country. We own the largest insurance company in the country. We’re going to own a bank or two! Oh, man! Isn’t it great? Whee hee hee–

      Socialism for the rich. That’s right. Oh, they’re right there for the handout when they’re in trouble, aren’t they? Eh? [laughs] Oh, man. Unbelievable, isn’t it? Unbelievable what we’re going through. And they step right up there, right up there to help them out. The millions of people who have lost their homes – no help for them. The 45 million with no health insurance, over 50 million have no health insurance during some part of the year – no help for you. You’ve lost your job? No bailout for you. Can’t afford to send the kids to college? No bailout for you. But if you’re AIG…

      You know what happened last night, in the middle of the night, at 3 in the morning, at 3 a.m.? The Federal Reserve calling up banks around the world, begging for money. And by 5 a.m. they’d raised 180 billion dollars, mostly from Arab and Chinese banks. Unbelievable. It’s just the most amazing thing I have witnessed economically in this country in my lifetime. And it’s not over yet. It was funny this morning, everybody’s been wondering, “Where’s Bush?,” right? You know, it’s because he’s been silent during this whole thing. And he– [laughs] and I thought he was probably up in that same plane he used to fly over New Orleans. He’s probably, like, flying over Wall Street, looking out the window.

  10. readerOfTeaLeaves says:

    Oh, I just saw that this thread is now frontpaged.
    I’m going to go crawl under my carpet from sheer blogwhoring mortified embarrassment.

    Apologies for wayyyyyyyyyyyy too many posts on one thread.
    Sheesh… (blushing)

  11. jcgrim says:

    There are a few details he pretty clearly got wrong in his book… but this seems instead like one of the abundant examples of where Rattner is an unreliable narrator.

    This is the money quote. Rattner is more than unreliable. Read more about his involvement in blocking NYCity charter school audits.

    A couple of weeks ago, Bloomberg and Sulzberger were the two co-hosts of Rattner’s book party, which was attended by the financial and power elite of NYC, including the head of Goldman Sachs, JP Morgan, Joel Klein etc. This very public celebration of Rattner and his accomplishments occurred just as Rattner was pleading guilty to a “pay to play” kick-back scheme of bribing the former State Comptroller to grant Quadrangle, Rattner’s investment company, millions in state pension funds to invest in 2004 when Hevesi was Comptroller.

    Rattner paid $1.1 million in finder fees to Henry “Hank” Morris, Hevesi’s former chief political consultant, and he also agreed that Quadrangle would help finance a B-movie made by the brother of the pension fund manager. Rattner first claimed he had nothing to do with this B-movie deal, but emails apparently reveal that he helped put it together. As a result, he has agreed to pay a fine of $5 million and accept a ban from the securities industry for at least five years. He could also face perjury charges for lying about his involvement in the bribery scheme.

  12. TarheelDem says:

    The current institutions—the banks and broker-dealers and hedge funds and shadow-banking people—already move as organized mobs to take billions of dollars out of institutions in minutes.

    Isn’t this classic trust behavior that anti-trust laws were intended to stop?

    • scribe says:

      Maybe – very arguably maybe – a violation of Sherman sec. 1.

      That’s the one that bans conspiracies in restraint of trade. The usual uses for that section are either:

      – a conspiracy to fix prices (Acme Co. and Universal Widget get together and agree that they will not undesell the other on price);

      – a conspiracy to fix bids (Acme Construction, Tony Soprano Construction and a couple other construction companies get together and decide that, for a series of construction jobs, Acme will be the low bidder on job #1, Tony wil be low bidder on job #2, and so on. This is really a subset of fixing prices, as bids for a job are a form of prices.);

      – a conspiracy to divide territory (Acme gets Jersey City and Tony Soprano Co. gets Newark, and neither will bid/sell in the other’s territory.);

      – a conspiracy to ruin a competitor (by underselling, destroying his means of delivery, forcing his suppliers to stop dealing with him to keep dealing with you);

      – a concerted refusal to deal (as opposed to a boycott – a fine line, this).

      Those are the kinds of things usually addressed in a Sherman sec. 1 case.

      The problem are the elements of “affecting commerce” and “restrant of trade” – both terms are “terms of art” and just what constitutes “commerce” or “trade” for the purposes of the antitrust statutes is subject to a whole lot of intepretation. I don’t know that raiding banks like is being described here is either “commerce”, “trade” or “affects commerce” or “restrains trade” within the meaning of the statute.

      The other things you have to remember about the antitrust statutes are that they are a century or more old (the Sherman Act was passed in 1890, IIRC), they were very simply written (you can write out the original Sherman act on one or two pages) and have therefore had a whole lot of judicial interpretation put on their words, and for the majority of the time since they have been on the books they were one of the big retraints on corporate America. As to why you should consider that last point as the most important, you should remember that being the biggest restraint on corporate America, defending against them – both in court and in the intellectual development of the law – drew both the best minds and the most expensive minds in the legal world for a century.

      You’re talking about the business lives of major corporations – and they will do anything and pay any amount to defend themselves against such cases.

      For example: Bork first drew attention as an academic as an expert in antitrust law back in the 60s. As I recall it, David Boies (he of Prop. 8 trial and cross-examination) made his bones as a litigator working to defend the US v. IBM civil antitrust case in the late 60s and early 70s. He and IBM litigated the United States to a standstill and, effectively, won. Gerhard Gesell, the judge in the Ollie North case, was a preeminent lawyer defending mostly antitrust cases. It was said JFK had him appointed to the bench b/c he was beating the government on too many antitrust cases.

      And, more recently, you saw just how stupid and forgetful Bill Gates got when Microsoft was sued for violating the Sherman Act (that was mostly about section 2 – the anti-monopoly provision) and how they strung that case out until Bushie had his DoJ settle it on terms favorable to MS.

      • TarheelDem says:

        Thanks. Looks like trust-busting needs to go back on the political agenda.

        And taxing law schools on the basis of the incomes of their graduates ;)

  13. rosalind says:

    ot: Omar Khadr officially sentenced. Carol Rosenberg Article here.

    A military jury on Sunday sentenced teen terrorist Omar Khadr to 40 years in prison for killing a U.S. soldier in Afghanistan, a symbolic punishment because the U.S. has agreed the Canadian will serve at most eight.

  14. thatvisionthing says:

    Follow the law… like following the money… more from my Dodd google:

    Dodd’s Chief Counsel Bought Financial Stocks During 2008 Crisis

    March 18 2010 (Bloomberg) — Senate Banking Committee Chairman Christopher Dodd’s chief counsel in 2008 traded stock in Morgan Stanley, Wells Fargo & Co., American International Group Inc. and other rescued companies as the panel considered legislation to address the credit crisis, according to her financial disclosure form filed with the Senate.

    Amy Friend, 51, who is now leading the panel’s effort to write a bill overhauling Wall Street regulations, bought $1,000- to-$15,000 stakes in four banks, weeks after Dodd hired her in January 2008, the form shows. She also owned shares of Fannie Mae, Freddie Mac, AIG and other insurance firms, according to the disclosure document, which she signed on June 5, 2009.

    The transactions, permissible under Senate rules, included buying $1,000 to $15,000 of Federal Home Loan Bank bonds and Fannie Mae debt in June and July, 2008. On July 30 of that year, then-President George W. Bush signed into law a Dodd-sponsored bill setting out new regulations for the housing finance agencies and allowing the Treasury Department to give them cash injections.


  15. Rayne says:

    How much of Citi’s revenues were from credit cards? I’m having a heckuva time trying to pull up the 8-K filed before GM’s bankruptcy, but I’m wondering if retail customers included credit card users who might not only cut up their cards but default on accumulated credit card debt — especially if they lost their jobs because of the GM bankruptcy? It wouldn’t be just the immediate employees; it’d have been Tiers I through III which would have felt the pain and have considered default.

    How wound into swaps which included GM/GMAC exposures was Citi? I’m sure we wondered about this at the time.

    And if Citi had a run by other retail customers in the states where it actually had a footprint after an avalanche of credit card default, what would the government have has to do to stem it? A bank holiday? Receivership? Auditing once receivership had been established?

    Was there gross ignorance that Citi didn’t want anybody to see (see thatvisionthing above) or was there worse, a la shades of BCCI?

    • PJEvans says:

      I don’t know, but they used to handle a lot of student loans, back before the government privatized those. I’d bet that there are a lot of defaults and deferments on those.

      • Rayne says:

        I’m thinking that Citi was worried about a domino effect
        — the credit cards cut-up or debt default in automotive states might trigger swaps
        — which in turn might demand more liquidity
        — in turn receivership and audits follow
        — anything BCCI-like gets disclosed.

        That’s what I’m thinking.