No. of Recommendations: 7
JPMorgan Chase
-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.

-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.

-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.

Wells Fargo
-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.

-“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.

-Wells took $25 billion in TARP money at the end of 2008—and has spent more than $12 million on D.C. lobbyists in the 30 months since then.

- The sins of Citi start with Sandy Weill—the perfect poster boy for the subprime era. It was in 1986 that Weill, then a 53-year-old Wall Street castoff looking for his next act, bought a mangy, third-rate lender called Commercial Credit. You’re buying a loan shark, his otherwise loyal personal assistant said of this chain of storefront lenders in the business of gouging working-class customers looking for financing on small purchases like refrigerators and bedroom sets. But Weill saw its potential, aggressively moving Commercial Credit into subprime mortgages and then using the profits to go on a buying spree

It’s hard to overstate the destructiveness of Weill’s greed. By the time he made his play for Citi, Weill had already swallowed up Travelers Insurance, Smith Barney, and Salomon Brothers. Except a Depression-era law, the Glass-Steagall Act, dictated that banks, with their federally insured deposits, couldn’t take over insurance companies or Wall Street investment houses. But Weill put together this behemoth anyway and went about masterminding the repeal of Glass-Steagall, which happened in 1999.

The repeal of Glass-Steagall set the stage for the financial meltdown that would follow years later. The rationale for Glass-Steagall was never more clear than in the final months of 2008, when federal officials faced the potential for widespread bank failure largely because of the great risks taken by its investment-banking arms.

-here was Citi’s takeover in 2000 of The Associates, a subprime-mortgage lender widely considered the industry’s most predatory. Two years later, Citigroup paid a then-record $215 million to settle charges leveled by the FTC that The Associates, renamed CitiFinancial, used deception to convince customers to refinance at usurious interest rates—and agreed to reform its ways. Still, the company would set another record when in 2004 it paid the Federal Reserve $70 million (without admitting its guilt) to resolve new charges against CitiFinancial.

-Citi played the securitization game as well. The bank wrangled more than $20 billion in mortgage-backed deals in 2006 alone. On October 19, Citi agreed to pay $285 million (without denying or admitting guilt) to settle a complaint filed by the SEC charging that the bank had defrauded its own clients by selling them shares in a rigged mortgage-backed security.

Bank of America
- Bank of America’s story is similar to that of the other big banks. It paid $137 million to federal and state authorities to settle charges that it rigged bids on municipal bonds, defrauding schools, hospitals, and a long list of municipalities, and it coughed up an additional $20 million to resolve claims by 160 or so military personnel claiming they had been illegally booted from their homes in a foreclosure.

-Yet one way Bank of America stands out from its competitors: shareholders are suing the company over its purchase of Merrill Lynch, claiming company executives failed to disclose the worst about Merrill until after the deal had closed. The bank (without admitting or denying guilt) already settled SEC charges that it deceived its shareholders over the Merrill acquisition, paying $150 million—a dollar figure the federal judge approving the deal called “paltry.”

-A study by Moody’s released at the end of last year found that Bank of America took longer than any of the other major banks to resolve a delinquent loan. And data from HAMP, the program the Obama administration set up to help homeowners avoid foreclosure, shows that Bank of America has the highest number of customers eligible for a loan modification under HAMP—but the lowest rate of success: it provided loan modifications to fewer than one in three homeowners eligible for the program.

-Bank of America received two bailouts from Washington totaling $45 billion—and since that time has spent more than $9 million on D.C. lobbyists. The bank was particularly generous to Ken Lewis, the deposed CEO behind the ill-conceived purchases of Countrywide and Merrill: he left the company with an exit package of nearly $64 million in retirement pay. It has been similarly munificent with Brian Moynihan, who took over the company at the start of 2010.

Goldman Sachs
- The Goldman Sachs advantage, in contrast, is that so many of its former partners are the government. Henry Paulson, the CEO and chairman of Goldman Sachs before becoming George W. Bush’s secretary of the Treasury, let Lehman Brothers (a longtime Goldman rival) die because he believed in the free market. Several days later, however, Paulson helped save Goldman’s bacon when he spent $85 billion in government money to bail out the insurance giant AIG.

-In mid-2009, Goldman paid $60 million—literally less than the amount of revenue booked in a half-day that year—to end an investigation by the Massachusetts attorney general into its subprime-mortgage activities.

-And, of course, there’s Abacus and the $550 million the company paid the SEC (without denying or admitting guilt) because it failed to inform clients that it had allowed John Paulson, a prominent hedge-fund manager seeking to bet against its success, to handpick subprime home loans he thought had the greatest chance of failing.

-The German magazine Der Spiegel published a long piece last year charging Goldman Sachs of helping the Greek government mask the true extent of its debt (Goldman denied comment when contacted by the magazine). Harper’s ran a provocative article by Frederick Kaufman that essentially charged Goldman with messing up the world market for wheat simply to turn a buck—and inadvertently causing widespread hunger across the globe. (Again, Goldman declined comment.)

-Goldman received $10 billion in TARP money—and then seemed to spit in the face of those choosing to bail out Wall Street’s banks. It ended 2008 with $2.3 billion in profits but paid only $14 million in taxes that year—rather than the $800 million it would owe if paying the standard 35 percent that corporations even sometimes pay. Goldman explains a tax rate of less than 1 percent by pointing to a change in its “geographic earnings mix”—or as Lloyd Doggett, a Democratic congressman from Texas, explained it, “With the right hand out begging for bailout money, the left is hiding it offshore."
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