It sure is great being a banker these days.
Let's take the example of Countrywide Financial.
Today both California and Illinois opened lawsuits against Countrywide for "using misleading advertising and other unfair business practices to trick borrowers into taking on risky home loans they didn't fully understand". Also today, Washington State is moving to pull Countrywide's licenses after it found "evidence of predatory practices aimed at minorities".
This is after a year in which Countrywide stock has dropped from nearly 40 to just 4.58.
What's so great about that? Look no further than Washington D.C. for an answer.
Bank of America Corp.'s $3 billion takeover of Countrywide Financial Corp. will be financed by 138 million tax-paying Americans.
Taxpayers may pick up about $5 billion of Countrywide's losses over 20 years, he said. Countrywide shareholders approved the sale today.
That's what great about being a banker these days. You can totally screw over people until you make tens of thousands of people homeless, while at the same time running your business into the ground while collecting a $110 million severance package, and then the taxpayer will come and bail you out.
Is this a great country (for bankers) or what!
Oh, and did I forget to mention the best part?
Remember the housing bailout bill that is making its way through the Senate right now? You know, the one that is supposed to help out the little guy that was getting screwed over by Countrywide?
It turns out that the bill was actually written by Bank of America - the guys who are purchasing Countrywide Financial.
This discussion document (dated March 11, 2008) would appear to support the contention that BofA essentially wrote the bailout section of the bill. Almost all of BofA's preferences are mirrored in the Dodd-Shelby legislation. The BofA document even offers PR tips, such as "We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bail-out of the bond market."
The BofA doc is worth posting here for a couple of reasons: First, the similarities between BofA's ideal bill and the bill before the Senate are obvious even to the layperson — read the document, then read David C. John's analysis of the bailout and see for yourself.
Let me point out that this bill hasn't passed yet. Therefore the $5 Billion that the taxpayers are going to be giving BofA over the next 20 years is a separate issue.
No, this bill involves the taxpayer underwriting mortgages for troubled homeowners that the banks are currently on the hook for. Thus privatizing the profits while socializing the risk.
Since the new loans would be guaranteed by the Federal Housing Administration (FHA), taxpayers would ultimately pay for defaults. The Congressional Budget Office projected that this could cost $1.7 billon over five years.
Here's the kicker: our brave Democratic Senators have no problem with the idea of bailing out these predatory banks. Let's see what Barney Frank has to say.
"The alternative to having the banks as participants was a massive federal bailout," Frank said. "They [the banks] benefit, but they benefit by losing less."
You see, we either bail them out now, or we bail them out later. Either way the bankers never have to worry about suffering the consequences for their actions. No one is asking them to return part of their hundreds of millions in salary. At least that is the way the guys in the Senate see it.
And you wonder why bankers today take immense risks with their business practices?
Of course there is always a few critics out there that get hung up on stuff like facts.
"It is ironic that Congress, responding to a crisis that was created in large part by irresponsible lending, would produce a bill, the main beneficiaries of which are likely to be those lenders," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal research group. "There are aspects that work hugely to the banks' advantage."
Obviously Dean Baker needs to get with the program. Our brave, billionaire bankers screwed up their businesses and the economy in their rush to screw over the working man, and now they need taxpayer help.
This all makes perfect sense to me.