“That Swine Flew!”

Who is going to stand up to the large banks? When are we going to have enough of the banks’ selfish, me-first, screw the consumer, screw the public, screw the government attitude?

This always has been the bankers’ MO, but—in good times—people tend to look past it. However, banker greed and selfishness stands out more starkly in these tougher times.

I know banks are not social institutions, but they are chartered by the states and federal government, so they have some responsibilities and obligations, besides taking every penny of TARP funds and Fed cash on which they can get their hands.

What have we reaped for financially supporting them?

Let’s see, the banks have opposed Sen. Dick Durbin’s “bankruptcy changes,” which would permit bankruptcy judges to ease mortgage foreclosure costs for defaulting borrowers. The banks have opposed changes to the credit card laws that would prohibit the worst of their pricing and marketing practices. President Obama just singled out the banks and the hedge funds to their opposition to taking a “haircut” on their Chrysler “assets.”

In these difficult times, why should banks figuratively stick out their tongues and refuse to help or do their share, when US taxpayers, labor unions, the federal government, suppliers, small and large businesses, and others, not to mention furloughed or fired employees, feel the pain?

“Yes,” commercial banks have first amendment rights and “yes” they are permitted to oppose legislation they don’t like. But, do we still have to pay them as they screw the public?

The Treasury and FDIC should let a few more go belly up and stop “TARPing” a few others, until the banks drop their intransigence and rein in their greed. (There is precedent for no institutional interactions with Capitol Hill, in the Fannie/Freddie takeover. Treasury Secretary Paulson—as part of the “aid agreement”--banned the companies from having or employing congressional lobbyists. I say apply the same rule to the TARP recipient banks.)

Banks and their reps love the federal support but love to complain about any concomitant federal obligation. The banks’ congressional apologists still are complaining that commercial bank “CRA lending requirements” (Community Reinvestment Act) caused part of the financial meltdown.

Does anyone, beyond Jed Hensarling (R-Tex) and a few others, really think that because banks made a few loans to lower income families in lower income neighborhoods (many of them minorities) that the wheels came off those institutions or our financial system?

Even though that’s more bank propaganda, I think that many financial service advocates believe it.

Obviously, these blind solons have never heard of the Wall Street firms and their “private label mortgage securities,” filled with financially toxic subprime loans which were originated for and by the same investment banks through their captive mortgage broker networks?

I guess those facts of life just don’t exist in the House and Senate Republican caucuses. (The GOP is going to be surprised by the “Truth Commission’s” product!)

It’s not in their institutional personalities, but somebody at the Fed or the Treasury may want to call those big bank boys in, again, and explain to them some of the cruder facts of life.

Better yet, just have them meet, a second time, with Obama Chief of Staff Rahm Emanuel, who I am certain could make himself easily understood to the banks about why what they have been doing is objectionable, while they sup at the federal breast.

One observer wrote last week that the banks actually were hurting themselves by opposing bankruptcy “cram downs,” because the failure to support bankruptcy relief to single family homeowners will undercut the value of other homes which banks hold as security on mortgages and other consumer loans.

She wrote, “The bankers and their lobbyists on the Hill just did not get this. They may be voraciously greedy and anti-democratic, but, ironically, they are not pursuing their own best interests. By defeating Senator Durbin's amendment, they are voting for more foreclosures, more bankruptcies and more bank failures. In other words, they are like turkeys voting for Thanksgiving.”

All is not lost! The nation has been handed one saving grace by the misbehaving banks and, as with many things, it was an accidental blessing, but one I’ll take all the same.

Just two weeks ago, a large commercial bank walked away from another mortgage commitment it had made, this time to an elderly gentleman, steeped in Southern culture.
Rather than resort to swearing, to describe the bank’s actions, the man just told a friend, “That swine flew!”

Like magic the man’s description of big bank behavior caught on. Everywhere I turned I heard the phrase being used. Of course the public’s overreaction to the possibility of a Mexican pandemic coming north may have helped some. But, I knew what all of those people were really saying.

I think “Swine flu or Swine flew” is a great description of how banks recently have treated their customers and depositors.
So why are the Treasury and Fed still pushing money at the banks?

Mike Bradfield

Congratulations to Mike Bradfield on being named General Counsel to the Federal Deposit Insurance Corporation. Mike was GC for part of my time at the Fed, back in the early 1980’s, and earned his central bank nickname of “Spike.”

Maloni 5-4-2009