December 22, 2010 |
Wall Street has worked hard to keep its inner workings from seeing the light of day. But one of the worst offenders in the financial crisis may be about to face the kind of public disrobing that government regulators, the corporate media and transparency activists are incapable of performing. If the rumors that have been swirling around in recent months prove true, Bank of America's dirty secrets may soon be exposed for the world to see, courtesy of the whistle-blower site Wikileaks.
The banks prefer not to give out information, even when required to do so by law. Consider their potentially illegal response to a campaign by the service employees union, SEIU called, “Where's the Note?” that helps homeowners request a copy of their mortgage-holder's proof that it actually holds the note on their properties. According to SEIU – and confirmed anecdotally by others – borrowers who take advantage of SEIU's system have faced retaliation in the form of lower credit ratings: they send in the request, and see their credit scores fall. It's a likely violation of the Fair Lending Act, and as Roosevelt Institute fellow Mike Konczal noted, it's a serious threat:
In the middle of a foreclosure fraud crisis where people aren’t sure who owns their mortgage, a simple ask of “can you show me the contract I signed with you, just to make sure it is there if there is a dispute” is being used to threaten someone’s credit score.... Since credit scores impact everything else in your life, from being able to turn on your lights and electricity to renting an apartment to purchasing things, this is a serious threat, one of the more grievous ones a private company can deliver.
David Dayen at Firedoglake adds that the heavy-handed response to SEIU's campaign “is part of a broader trend, where the servicers and big banks, having been exposed by the foreclosure fraud crisis, are now lashing out at their critics.”
The St. Petersburg Times reported that one company, Nationwide Title clearing, has taken to using legal bullying tactics to stifle its critics. The company filed an injunction against Sarasota lawyer Christopher Forrest “to remove videotaped depositions he had posted of three Nationwide Title employees describing an assembly-line process of signing mortgage-related documents.” The ACLU of Florida filed an emergency appeal of the injunction, calling it a "gag order" and a restraint of free speech.
The company then sued Matthew Weidner, a St. Petersburg lawyer who defends homeowners against wrongful foreclosures, for defamation and libel after he reposted the videos and added some commentary.
Barbara Petersen, the president of Florida's First Amendment Foundation, told the Times that Weidner had played a pivotal role in exposing serious issues in the foreclosure process, “including court hearings from which the public was barred.” "I've been working with Matt on trying to open the foreclosure process and we've made great strides that have a lot to do with his activism," she said. "He's bringing a great deal of national attention to what's going on in Florida."
Nationwide Title claimed that Weidner defamed the company by including the widely used term “robo-signers” in his posts. The charge will be hard to prove, but as Naked Capitalism's Yves Smith noted, the act of suing a lawyer with a small practice “throws a wrench in their operation” as “it takes time to deal with litigation, and often money, plus the stress is also a considerable distraction.” She adds: “Of course, the hope is no doubt that this sort of risk will also deter other lawyers and critics.”
At the heart of all these efforts is the banks' imperative to avoid transparency – transparency that might offer irrefutable evidence for scholar and former regulator William Black's assertion that there was widespread “fraud at every step in the home finance food chain.” (Just this week, the attorneys general of Nevada and Arizona slapped BofA with a “blistering” lawsuit alleging various fraudulent practices on the part of the mega-bank.)
That's why execs at Bank of America must be squirming after a series of messages posted on Twitter by Wikileaks last weekend. One read, “We ask that all people who love freedom close out their accounts at Bank of America,” and a second asked, “Does your business do business with Bank of America? Our advise [sic] is to place your funds somewhere safer.”
Bank of America, following the lead of firms like PayPal, Visa Europe and Mastercard, blocked payments to Wikileaks last week, saying the move was “based upon our reasonable belief that Wikileaks may be engaged in activities that are, among other things, inconsistent with our internal policies for processing payments.”
BofA doesn't only need to worry about hackers launching attacks on its site in retaliation – as they have done to a host of other organizations that have come out against Wikileaks – because the whistleblower itself may have enough dirt on BofA to bring the supposedly too-big-to-fail bank to its knees.
The rumors date back to a 2009 interview Wikileaks founder Julian Assange gave to Computerworld, in which he claimed he was, “sitting on 5GB from Bank of America, one of the executive's hard drives." Last month, Assange told Forbes' Andy Greenberg that the anarchist media group was planning on releasing a “mega-leak” in early 2011 regarding a major U.S. bank, and more recently the Financial Times reported that Assange promised to “release information about the financial services sector in spite of facing 'attacks' by banks.”
Nobody knows what Assange may be sitting on. As Greenberg pointed out, any information Assange was talking about in 2009 is now a year old. But the import of such a release could be far-reaching. As I wrote last month, part of the reason there have been no prosecutions of senior personnel resulting from the fraud that built the mortgage bubble is that the FBI slashed the number of agents dedicated to unearthing financial crimes by some 75 percent since the 1980s, even as the complexity of the alphabet soup of Wall Street's “exotic” investments increased exponentially. Dumping a bank's inner communications on the world's consumer watchdogs, banking reformers and even bloggers would offer thousands of people the opportunity to dig through the raw material.
Another possible reason no big fish have been caught in the Justice Department's net is that senior executives may have learned a lesson or two during the Savings and Loan crisis, when over a thousand bankers were prosecuted, and are far more cautious of leaving a trail of incriminating evidence. It's conceivable that something on some exec's hard-drive might become a smoking gun implicating top management -- proof that fraud wasn't isolated to the "few bad apples" at lower levels who have been prosecuted so far.
A less dramatic revelation could also cause major damage to BofA: revealing to investors that its balance-sheet is full of hidden garbage. As I noted in November, BofA has allegedly been playing fast-and-loose with its numbers. “The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet,” wrote Bloomberg columnist Jonathan Weil, “is that it’s largely impenetrable.” Nobody really knows the true values of the assets these companies are holding, which has been the case ever since the collapse. But according to Weil, some of BofA’s financial statements “are so delusional that they invite laughter.”
These are just a few scenarios that could prove disastrous for the bank. And it's worth keeping in mind the context: the ostensibly 'too-big-to-fail' banks were bailed out under George Bush with the complicity of a Democratically-controlled Congress. It proved to be wildly unpopular, and was used by GOP operatives to help launch the Tea Parties. Now, with a Democrat in the White House and a Tea Party Congress, an additional bailout would be a tall order.
But BofA shouldn't be the only bank sweating over what might be revealed by Wikileaks. Assange told Greenberg that “he had unpublished, potentially damaging documents on multiple finance firms, beyond the bank 'megaleak'” he teased in the interview. It's worth noting that while Wikileaks has been propelled into the spotlight releasing U.S. government documents, its bread-and-butter has been exposing corporate malfeasance. “It is our normal business to publish information about banks,” Assange told reporters earlier this month. “We have been attacked primarily not by government … but in fact by banks: banks from Dubai, banks from Switzerland, banks from the United States, banks from the UK. So yes of course we are continuing to release material about banks.”
Again, nobody really knows what Wikileaks might yet uncover, but it could get really interesting.
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