If the Occupy Wall Street protesters want to target a single big bank, which should they choose?
The decision wouldn't be easy, given the bad behavior of the country's biggest brand-name banks. We look at the country's four largest — Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo — and throw in Goldman Sachs, a natural target of any protest. Here's a taste of the deadliest sins committed by the banks, followed by a full account of all the gory details at each bank. Warning: It isn't pretty
The Seven Deadliest Sins of the Big Banks
1. JPMorgan Chase kicks 54 military families out of their homes — despite a law against doing so.
2. Wells Fargo gives bonuses to loan officers to put minority borrowers into high-priced subprime mortgages — internally dubbed "ghetto loans."
3. Citigroup, Bank of America, and Goldman Sachs all pay huge fines to settle charges they duped their own clients.
4. Goldman Sachs assists in Europe's economic collapse by helping Greece mask the truth about its finances.
5. JPMorgan turns a blind eye to Bernie Madoff's deceptions.
6. Bank of America pays $137 million to settle government claims it rigged the municipal-bond market.
7. Despite these and other unpardonable sins, banks showers tens of millions of dollars in bonus money on top executives.
Jamie Dimon is "America's least hated banker," the financial writer Roger Lowenstein wrote in The New York Times Magazine at the end of 2010. But if JPMorgan Chase & Co. is the best of the bunch, then that speaks volumes about how horribly banks have acted in recent years.
Where to start?
There's the $211 million fine JPMorgan paid in July to settle charges that it defrauded local governments in 31 states — along with the $130 million it returned to municipalities it was accused of duping.
There's the $722 million in fines and restitution payments it made after JPMorgan confederates were caught paying off officials in Jefferson County, Alabama (home to Birmingham), to secure a municipal finance deal that nearly bankrupted the county.
There's the fact the bank was in so great a rush to evict people from their homes that it admits that some of its people might have forged foreclosure documents — a problem so widespread that it felt compelled to suspend 56,000 foreclosures while it investigated its own behavior.
Or maybe the biggest sin is the central role JPMorgan has played — and continues to play — in the rise of what might be called the "poverty industry": all those businesses that exploit the working poor, such as the payday-loan industry, where lenders charge 400 percent interest on short-term, small-denomination loans against a person's next paycheck (or their Social Security or unemployment payments).
And don't forget the Bernie Madoff connection. Perhaps it's not fair to blame JPMorgan for Madoff's sins just because the infamous fraudster used Chase to handle billions of dollars in investors' cash. Nonetheless, Madoff trustee Irving Picard has pointed an accusing finger at the bank. He has sued the bank for $6 billion, claiming that not only should it have known about the fraud, it did know. In June 2007, 18 months before Madoff's fraud was exposed, an officer in the bank wrote an email to colleagues reporting that another bank executive "just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme." The bank, the suit contends, had withdrawn all but $35 million of the $276 million it had invested in Madoff-linked hedge funds by the time the fraud was revealed. A JPMorgan spokesman "vigorously" denied Picard's charges — and Picard has responded by tripling damages to $19 billion.
Goldman Sachs is widely reviled for duping its own clients by selling them shares in a mortgage-backed security the investment bank dubbed Abacus. But JPMorgan had its own Abacus. It was called Squared CDO 2007. And according to the Securities and Exchange Commission, JPMorgan's behavior was just as contemptible as Goldman Sachs's. It, too, let a hedge fund secretly choose the subprime loans in a product that the hedge fund wanted to bet against; it, too, failed to inform clients purchasing shares in Squared that it had let a hedge-fund manager rig the game.
In June, JPMorgan Chase (without denying or admitting guilt) paid $154 million to settle Squared-related charges filed by the SEC — equal to less than two days' worth of company earnings that quarter. The bank also returned $126 million to clients who lost money on Squared and, for good measure, paid $57 million to investors who lost money in a second, similar deal called Tahoma CDO-I.
Yet a lack of candor in dealings with its own clientele is only one way JPMorgan contributed to the subprime disaster, causing so much misery for so many. Through its subprime arm, Chase Home Finance, the bank fed the subprime machine by originating billions of dollars of subprime home loans a year — $12 billion just in 2006, the year the subprime-mortgage orgy reached its peak.
And the bank, through JPMorgan Mortgage Acquisitions, was a huge player on the other side of the equation as well. JPMorgan Acquisitions snapped up $18 billion in subprime loans in 2006 alone, holding on to them long enough to pay a rating agency to stamp them Triple-A before selling them in bundles to pension funds, municipalities, and others.
JPMorgan's treatment of active-duty members of the armed forces has been particularly shameful. The Servicemembers Civil Relief Act forbids a bank from foreclosing on a soldier fighting overseas, and caps home-loan interest rates at 6 percent for most active-duty personnel. JPMorgan has admitted to congressional investigators that it has overcharged 10,000 military families on their mortgages and foreclosed on 54 of them.
Then there are the multimillion-dollar lines of credit JPMorgan provides (according to "The Predators' Creditors," a report by National People's Action, to Ace Cash Express and Cash America, two of the country's larger payday lenders. JPMorgan has also been a central player in the rise of the instant tax-refund business. Until leaving the business last year under pressure from federal regulators, JPMorgan was the bank to 13,000 of these instant-refund mills, which cater to people so desperate for quick cash that they'll pay triple-digit interest rates to get their tax refund immediately rather than waiting two weeks.
JPMorgan received $25 billion in TARP money at the end of 2008 — but with financial reform on the horizon, the bank spent $6 million on lobbyists in 2009 and an additional $7 million in 2010. 2010 was a particularly good year for JPMorgan, which booked $17 billion in earnings, and for Jamie Dimon, who received $21 million in compensation — or 900 times more than the $23,000 a year the average Chase teller makes. Still, that was half the $42 million Dimon paid himself in 2006 and less than the $34 million he received in 2007. It was slightly better than the $20 million Dimon made in 2008 — but, then, 2008 was the year that Dimon and his fellow bankers nearly brought the global economy to its knees.
Wells might seem small, at least when compared to giants like JPMorgan or Bank of America, and therefore not as worthy of revulsion as the other big boy banks, but then looks are deceiving. Wells is the country's second largest bank in terms of deposits and its stock is valued at more than that of JPMorgan Chase, Citi, Bank of America, or Goldman Sachs.
It's also the bank with the most shameful record on race.
Don't take our word for it. Consider the sworn affidavit of a whistleblower named Tony Paschal, who for 10 years worked in Virginia as a loan officer for Wells Fargo Financial, the bank's subprime subsidiary. "They referred to subprime loans made in minority community as ghetto loans," Paschal said in an affidavit he gave shortly after the subprime collapse. "The company put 'bounties' on minority borrowers. By this I mean that loan officers [like myself] were offered cash incentives to aggressively market subprime loans in minority communities."
Another whistleblower, Camille Thomas, who reviewed loan papers at four Well Fargo offices in the Memphis area between 2004 and 2008, said in an affidavit she gave last year, "It was generally assumed that African-American customers were less sophisticated and intelligent and could be manipulated more easily into subprime loans." Elderly blacks who were house rich but cash poor were particularly prized, given the profits the bank could make bamboozling them to refinance with a high-fee, high-interest loan crammed with expensive extras.