Now we know where the money did — and did not — go.
We are talking about the trillions of bail out and recovery dollars that went to banks — domestic and foreign — that were too big to fail. The ones who predicted Armageddon six weeks before the last presidential election unless they received the largest blank check in history. Which they got.
The money did not go to save businesses or work out loans. Neither did it go to modify mortgages or “troubled assets.” It went to lawyers — billions and billions of dollars.
During the first nine months of 2010, banking giant J.P Morgan Chase spent an $5.2 billion on legal costs. That’s $27 million every business day.
Bank of America spent $1.2 billion during the same period. These are under-reported legal fees from just two banks.
Banks are not required to identify legal costs in their public reports although some choose to. Banking analyst Richard Bove predicts years of litigation ahead for the financial industry similar to that faced by tobacco companies, big oil and asbestos manufacturers. They will face class action lawsuits, shareholder lawsuits, public interest lawsuits and claims for recovery from receivers.
What are these big banks getting for their money? They are getting possession of a lot of foreclosed homes — just over a million of them in 2010. They are taking back lots of property and buildings from developers and closing down lots of small and medium-sized businesses. All of this leads of course to higher unemployment; except among the legal profession.
Interviewed by the TV show 60 Minutes, Fed Chairman Ben Bernanke admitted that he sees no sign of a reduction in our stubbornly high unemployment rate for four or five years. Why should he when the people who create jobs are under attack from banks and their lawyers? Isn’t it ironic that the man who refused to let the big banks fail has become the man who has financed this legal assault on home owners and business.
Why were there no conditions to the bail out that prevented this? Why was banking reform watered down into meaningless regulation? It’s because the people in this country who make things and drive our economy have been relegated into second class citizens. Citizens who must play second fiddle to the financiers. No wonder China is over taking us.
What could be more stupid than our current policy of paying lawyers billions of dollars to litigate when those same dollars should be used to modify loans and keep businesses alive.
Speaking to financial analysts, Bank of America CEO Brian Moynihan said his approach to litigation was “hand to hand combat” while Chase Chairman Jamie Dimon describes it “as the cost of doing business” Neither appears concerned about the effect this litigation is having on customers or our country.
Why should they. The “too big to fail” have grown into the “untouchables.”
Mick Pattinson is the president of a home building company in Encinitas, Calif., and founder and of the Building Industry Coalition for Economic Recovery. He has been a director of the National Association of Housing. Reach him at MickPattinson@verizon.net.
