The bad news about subprime lending has been with us for almost a year. I took my own first serious look at it last year on March 16, when I first explored framing it as the new generation of Triangle Trade: racism to greed to subprime lending. Since then I have broadened my scope of impact beyond racism to an all-out War Against the Poor. Of course every war needs its commanding generals; and, since ours is not a culture that views acts of war against the economically disadvantaged as crimes against humanity, the only alternative to bringing such generals before a world tribunal seems to be to assign them Chutzpah of the Week awards. Fortunately, I can thank the Center for American Progress (CAP) for bringing three of the most damaging of those generals to my attention. I present them to you as the CAP presented them to me: who they are, the institutions they represented, and the severance agreements concluded with those institutions. All hyperlinks were provided by the CAP:
Countrywide’s founder and CEO Angelo R. Mozilo
$704 million: Countrywide Financial Corp. net loss in 2007.
11,000: Number of workers Countrywide laid off between July, 2007, and January 29, 2008.
$37.5 million: Approximate value of cash severance payments, consulting fees, and perquisites (including private airplane use) that Angelo Mozilo, founder and CEO of Countrywide, gave up after Countrywide’s merger with Bank of America.
$23.8 million: Estimated value of Mozilo’s company retirement plan in December 2006, the last year for which data are available. Mozilo did not forgo these benefits.Merrill Lynch’s former Chairman and CEO E. Stanley O’Neal (ret. Oct. 30, 2007)
$161.5 million: Value of securities and retirement benefits that Stanley O’Neal walked away with from Merrill Lynch when he retired. O’Neal did not receive a traditional severance payment.
$7.8 billion: Merrill Lynch net loss for all of 2007.Citigroup’s former Chairman and CEO Charles Prince (ret. Nov. 4, 2007)
$17.4 billion: Citigroup write-downs on subprime related direct exposures in 2007.
$9.83 billion: Citigroup’s 2007 fourth-quarter loss.
$40 billion: Approximate value of Prince’s retirement package, shares, and options in Citi stock upon his retirement in November, 2007.
It is not often that we can put a price on chutzpah, so CAP should be thanked for compiling these data points. Needless to say, these Chutzpah of the Week awards will provide little comfort to all those victims now littering the battlefield of this War Against the Poor; but, if they raise any awareness that this military engagement is as grievous a fault as our "adventures" in Afghanistan and Iraq, then it will have served its purpose.
When ATM fees went up in the late 1990's, the banks found a new source of profit: banks save money when people use ATMs because they don't have to hire as many human tellers. So they already profit from holding people's money, and profit from lending money, and save money when people use ATMs, and furthermore profit from charging people to access their money more conveniently. And I'm sure they profit off selling customers' demographic data too.
ReplyDeleteIn the last year, Bank of America has spent over $25 billion in acquisitions. Now they're lobbying Congress for a handout.
http://www.nytimes.com/2008/02/23/business/23housing.html?_r=3&ref=business&pagewanted=all&oref=slogin&oref=slogin
Are they buying troubled lenders because they're betting on a windfall bailout?
All this talk about economic collapse sounds more and more like the banks saying "Hey everybody, we screwed ourselves while screwing you, so screw your kids' economic future to help us out or we'll screw you again." This politics of fear is an epidemic.
How can they be in so much trouble unless they've acted exceptionally irresponsibly? How do level-headed economists account for -- among banks as well as CEO severance packages -- such flagrant rewarding of incompetence? What a mess.