Cenk Uygur: We are going to talk to Matt Taibbi from Rolling Stone about a great piece on Bank of America being too crooked to fail….
$230 billion doesn’t begin to cover the level of fraud of Bank of America. In fact, Countrywide was taken over by Bank of America. And in Matt Taibbi’s news piece there is a stunning fact: “a staggering 97% of the [Countrywide] loans didn’t meet the stated underwriting standards.” So meaning 97% of them were in someway fraudulent. Is that a large enough number for you?
And then the list of frauds that Bank of America has done is so large but let me give you just one sense of it here. Bank of America paid a hundred and thirty seven million dollar fine for its sabotage of the government contracting process. Now Matt points out that’s what mobsters used to do to rig bid on garbage collection, etc., etc. It was a terrible crime; you went to jail for it. Bank of America does it, they admit it, they pay a fine for it, and they are free to go. And they do it all the time.
Meanwhile what do the Republicans think? Of course, we were supposed to bailout the banks. Look at Mitt Romney on the campaign trail:
“There was a fear that the whole economic system of America would collapse; that all of our banks, or virtually all, would go out of business. And in that circumstance, President Bush and Hank Paulson said we got to do something to show that we are not going to let the whole system go out of business. I think they were right. I know some people disagree with me. I think they were right to do that.”
Cenk Uygur: All right, well, Matt Taibbi of Rolling Stone is going to join us to tell us whether Mitt Romney is right or not. I see you shaking your head already, Matt. Go for it. Is Mitt Romney wrong?
Matt Taibbi: Well you know what, I could almost see the argument that in two thousand eight when the government was blindsided by all the problems that happened uh… and all these companies were in trouble Lehman Brothers and Citigroup and Goldman Sachs and Bear Stearns, I can almost see the rationale of coming in and saving some of these companies temporarily, uh… but not only did they not go in and take these companies over and fire all the people who were responsible for all of this fraud, they continued to support this company for years after they had already put it back on its feet, and that to me is what the most inexcusable part of it is. It’s one thing that they gave it forty five billion dollars in two thousand eight, but they kept supporting it uh… with billions and billions of dollars of low interest loans after that, and that’s the real problem.
Cenk Uygur: So basically there were no strings attached and you know, and I think a lot of people look at that, and they look at that from a simplistic point of view because unfortunately a lot of media has covered it that way: well, the banks took some money and then they paid it back and they are fine and they’re all upstanding citizens who, you know, make these million dollar contracts, etc., because they are geniuses. Well, you know, your story says that might not exactly be the case. So tell the people watching at home why do you think Bank of America, among the others, actually does fraud, does things that are criminal and should be, you know, it is not normal business that they should be rewarded for.
Matt Taibbi: First of all let me just back up with that that popular perception that these guys are really smart and they’re making their money honestly and they paid the money back. These banks are essentially getting their money for free from the Federal Reserve. Bank of America at one point had owed the Federal Reserve as much as ninety billion dollars. They have basically this endless tap of zero interest loans from the Fed.
In banking the entire business is all about cost of capital. If your cost of capital is zero, it’s virtually impossible not to make money. Think about it. They’re getting their money at zero from the government for letting it out to us at five percent for mortgages or fifteen percent for credit cards. How do you not make money when you have an endless supply of free money? And that’s what uh… all these banks have been doing all these years. They just simply go to the Fed, they get a bunch of money, and then they lend it out to us, and they take the cut. And that’s what they’ve been doing, before we talk about the fraud right.
Cenk Uygur: So the genius they had was, “hey, I got it. It turns out I can buy American politicians. And if I buy them, they give me free money, and with free money, I can’t lose.” That’s the only thing they figured out. That our system is unfortunately deeply corrupt. Now talk to me about the fraud and whether what they’re doing is, you know, in some way illegal or is corrupt.
Matt Taibbi: It’s totally illegal. First you have to go back to two thousand eight, two thousand seven, two thousand six, that period. What Bank of America and what all the big banks were involved in essentially was a giant fraud scheme. It’s no different than here in the streets of New York where you see people selling fake Prada bags out in the street or phony blue jeans. What they were doing was selling phony mortgages. They were taking really poor mortgages, sub-prime mortgages of very poor quality lent out to extremely risky borrowers, and they were disguising them as Triple-A rated high quality loans. They were essentially lending out home mortgages to everybody with a pulse. They were taking those loans, chopping them up, and then selling them off to unsuspecting unions and pensions and foreign retirement funds, representing them as these high quality securities. It was a giant fraud scheme. They were doing this all over the world, and as part of these deals, they were required to buy back any defective loans that were in default, and that’s what Bank of America is facing right now. They’re supposed to be buying back all these bad loans and they’re not doing it. And there is this gigantic string of outraged customers knocking on their door demanding their money back.
Cenk Uygur: So opens up to things that are really important. One is who did they rip off. And as you explain, and again not explained nearly well enough in the rest of the media, it was the pensions. And I talked to Nomi Prince, who used to be the managing director at Goldman Sachs, she said that’s the suckers at the table. When you go to rob people, who do you go to rob? The average American and their pensions. So what did they do to the pensions?
Matt Taibbi: Look, who buys these mortgage-backed securities? The customers were these big institutional investors and a very typical customer was like a state pension fund, the New York State Pension Fund, the New York City Retirement Fund, the Los Angeles County Retirees, the State of Mississippi Retirement Fund. All these people went to Bank of America and they bought mortgage-backed securities that they thought were very high quality. What people need to understand is that the fraud on Wall Street, they think it’s some abstraction, bankers ripping off other bankers, it’s some kind of insider trading scheme where it’s a victimless crime. That’s not what it is. It’s bankers ripping off old people and retirees. They are essentially stealing their life savings and that’s what went on in two thousand six, two thousand seven, two thousand eight and beyond, and they still have not paid the money back.
Cenk Uygur: Now that’s the case of mortgages right, where they rip off the retirees, etc. And then there’s the case of the municipal bonds where they rip off the local cities and then counties like Jefferson County in Alabama, go bankrupt, and then everybody loses their money. They take the money from someone, and ultimately it is us that they take it from. But Matt, as I am reading your long piece here, constantly the thing that they come back to is that there’s never any consequences. They are in essence too big to comply. Because they turn to government and say, “what are you going to do about it?”
Matt Taibbi: Yes, just this week we found out that the number one recipients of municipal bond business in America, the number one in two companies are still Chase and Bank of America, and those two companies both have paid hundred million dollar settlements for bid rigging. Chase got caught in twenty five different states rigging municipal bids, and Bank of America got caught rigging at least eighty eight different bids in different municipalities. And again this is not a victimless crime. If your town wants to raise money and issue a bond to build a new basketball court or a school and they [the banks] are paying a million dollars instead of three million dollars for the [town’s] investment banking business, well that money eventually is going to come out of your pocket. They are going to raise taxes to make up that money that they didn’t make from the banks. So they are paying artificially low bids for these contracts and they’re doing it all over the country.
Cenk Uygur: Like you wrote, that’s what the mob used to do. One last thing I have to ask you about. So where does the money go. All these people get ripped off. Where does the money wind up?
It’s interesting in 2011 Bank of America got over a billion dollars in a tax rebate. They didn’t pay any taxes. In fact, they got a billion dollars back. Why? Because they said they got out $5.4 billion in losses in the earlier year. Well the problem is that they paid $35 billion in bonuses and compensation. So when you look at that, Matt, isn’t it obvious that the executives are just taking the money and putting in their pocket and then they go, oh, look at that, we had no profit, ha ha ha.
Matt Taibbi: Oh yeah, absolutely, that’s exactly what goes on. And if it’s not converted into profits and bonuses they just leave it offshore: that’s another method of dealing with the whole tax problem. Bank of America last year, I think, had seventeen billion dollars in revenues that stayed off shore. So if they don’t want to pay taxes, they just issue bigger bonuses and leave their money overseas, and they don’t pay taxes. They didn’t pay a single dime last year or the year before in taxes which is an extraordinary testament to the holes in the system.
Cenk Uygur: All right. Matt Taibbi shedding light on this at Rolling Stone. Great job. Thank you so much for joining us. Really appreciate it. And let me just say this is one of the largest thefts in American history. It is happening right under our nose and it is happening right now. That’s what you got to know. Not something that happened in the past.
Transcribed by The Barefoot Accountant
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