Friday, July 13, 2012

Big, Bad Banks

If you ever had faith in big banks, my guess is that your belief has been shaken. At least it should be.

There are three stories about big banks in today's news. And each is about deception, greed and selfishness.

Let's start with JP Morgan. That big, bad bank has been caught in a cover up to hide risky activity by its traders. Traders playing with other people's money. Traders with no regard for the people whose money they were entrusted to handle safely. Money that at least some clients  had earned and planned would carry them into retirement, home payments, children's education and financial security generally. JP Morgan has no idea how much of its clients' money it has lost; the latest estimates are $7 billion.

$7 billion. That's 70,000 clients investing $100,000. Or 35,000 clients investing $200,000. Either way, it's a lot of people whose money has been lost.

On to Barclays. That big, bad bank attempted to manipulate the cushy loan rates that bank use to lend to each other, known as the London Interbank Offered Rate, or LIBOR. Now, that sounds pretty innocuous, like one bank trying to con the others. Like someone conning his family and friends. But make no mistake: This is price fixing and market manipulation, and we all pay a price for such misdeeds – such as through big, bad banks passing on their losses to others (i.e. consumers). And, if Barclays tries to con its kin, how do you think it regards regular people?

Saving the best for the last: All of the big banks. Today, I read that big banks are reinvigorating their efforts to foreclose on homeowners who have fallen behind on their loans. According to an Associated Press story, "The increase in foreclosure starts comes as banks make up for time lost last year as the mortgage-lending industry grappled with allegations that it had processed foreclosures without verifying documents."

In other words, banks are redoubling their efforts to throw the very people out of their homes to whom they extended easy credit and for whom they failed to examine their ability to pay for the credit extended to them, and for whom they tried already to kick out of their homes illegally. Banks are making homeowners the scapegoats for their own giddy, greedy, reckless pursuit of money. It's like someone robbing a store and then getting paid for the heist, rather than thrown in jail.

And you wonder why we remain in the mess that we're in.

I don't wonder at all. I have no doubt. It's those big, bad banks.

And yet they still get away with it.

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