WikiLeaks

The Bank of America Email Leaks: What We Know and What We Don't

Richard Eskow — Mon, 14 Mar 2011 16:52:52 -0400

After a big buildup, the hacker group Anonymous released its first batch of whistleblower emails regarding Bank of America. The result was ... confusion. Maybe they're real, maybe not. (We assume they are.) Maybe they're a letdown. Maybe not. Here's what we know and what we don't know so far.

Let's start with what we don't know:

We don't know if these emails are authentic, although Adrian Chen at Gawker has sources within Anonymous and he says they are.

We don't know if crimes were committed. There's widespread skepticism that these emails provide evidence of that, which is the position that Business Insider took. Yves Smith, on the other hand, said things look "ugly" and described ways in which this could be suggestive of criminal behavior. As David Dayen says, "Just because something has a lot of anecdotal evidence behind it doesn’t necessarily mean the specific case is true. But the forced-place insurance scam has been part of other servicer lawsuits, so it definitely exists."

We don't know if there are more leaks to come, but Anonymous says there are and so that seems likely.

We don't know if Julian Assange and Wikileaks have made plans to release the information they say they have on Bank of America.

Here's what we do know:

We know that this is already a textbook case of how not to roll out supposedly damning evidence against a powerful corporation: a big build-up followed by ambiguous information that's confusingly presented. (The frequent service interruptions didn't help, either.)

We know that the leaker didn't work at Bank of America itself, but at a subsidiary named Balboa Insurance that providesmortgage protection insurance. That lends itself to potential conflicts of interest - and potentially to some very nasty business.

We know that servicers have behaved very badly, leading to the force-placed insurance scandal that Felix Salmon described so well last November. Some of the illegal and immoral shenanigans include the backdating of insurance policies ( which means collecting premiums even though they know nothing bad happened), and charging far more for the policies than they're actually worth. (The primary victims of force-placed insurance are investors, although homeowners can also be victims.)

We know that the personality of the anonymous leaker is getting on a lot of people's nerves. Business Insider called him (his writing reads like a "him," although we don't know) "whiny," Yves Smith griped about his writing style, spelling, and inaccuracies, and I'm certainly finding him hard to decipher. It's like listening to some drunk guy at a bar trying to tell you something about how the art of great quarterbacking died at the same time that rock and roll became corporate, but then he's also going on tangents about hair dye, short chicks, and space aliens. Maybe he's got a point, but you sure wish he'd get to it.

To their credit, however, we also know that Anonymous has a subtle sense of humor. Their leak site is called "bankofamericasuck.com" - no "s" at the end of "sucks" - which is a jab at bank management for buying up what they imagined were all the possible URLs that could be used against the bank, including URLs that included the names of even minor bank officials.

And we know that when it comes to Bank of America, we shouldn't put anything past them. Here's what else we know about BofA:

We know that Bank of America's been a pretty egregious violator of the HAMP program's legal requirements.

We know that CEO Brian Moynihan is indefensibly arrogant, given his bank's substandard performance in so many critical areas, and that he's needlessly abrasive. He was especially sarcastic about the foreclosure crisis when he said this about fraudulent paperwork: "We'll go back and check over our homework one more time."

We know that Bank of America received nearly one trillion dollars in assistance from the US taxpayer.

And we know that Bank of America has drawn headlines like these:

We also know that we haven't heard the whole Bank of America story yet. But we'd like to. We really would.

This post was produced as part of the Curbing Wall Street project.

Yes Megan, Bankers Break The Law

Zach Carter — Wed, 01 Dec 2010 09:44:14 -0500

I frequently disagree with Megan McArdle, but her WikiLeaks post yesterday on struck me as simply delusional. The basic argument: megabank financiers haven’t committed any crimes, because if they had, we’d already know about it. There’s a kind of efficient-market-hypothesis ring to this, and like the efficient-market-hypothesis, it has no basis in reality. As a result of this reasoning, McArdle doesn’t think that the upcoming WikiLeaks release of bank documents will spark much in the way of criminal prosecutions. Here’s Megan:

Prosecutors have been trawling through their internal documents pretty heavily, looking for something that might help them run for higher office make a case against malfeasant bankers. They haven't found much, which is why one of their most high profile cases fell apart. You can decide for yourself whether this is because there was no criminal activity, or because bankers have had a decade of prosecutorial aggression to learn not to write anything down.

This is just wrong. Prosecutors are not trawling heavily through the internal documents of major banks. Most prosecutors aren’t white-collar crime experts, much less financial crime experts. To nail a bank, they need help from federal banking regulators. And while the SEC has slightly stepped up its enforcement game, it isn’t recommending cases for prosecution. Literally. It has recommended a grand total of zero cases for prosecution against big banks and their executives—even though the SEC itself believes that banking executives have committed some truly egregious crimes.

How do we know? From the SEC’s civil fraud suits. In finance, criminal fraud is essentially identical to civil fraud—you just need more evidence for a criminal conviction than you do to win a civil lawsuit. The SEC has brought civil cases against Goldman Sachs, Citigroup, Bank of America and Barclays and settled them all with slap-on-the-wrist zealotry. The Bear Stearns hedge fund case that McArdle links to is small potatoes compared to the accusation the SEC levied against Citigroup: lying to its shareholders about billions of dollars in subprime exposure at the height of the subprime meltdown. The penalty for Citi CFO Gary Crittenden was $100,000—roughly one-half of one percent of his $19.4 million pay in 2007.

The SEC is not alone in its inaction. As of March 3, 2010 bank regulators at the Office of the Comptroller of the Currency and the Office of Thrift Supervision have also failed to recommend a single case for criminal prosecution.

And what happens when regulators actually do turn over cases to the Justice Department? Well, the banks get away with it anyway. Wachovia got caught laundering $380 billion in Mexican drug money, a clear violation of federal law. But what happened to Wachovia? A “deferred prosecution agreement” in which the too-big-to-fail behemoth escaped indictment in exchange for a $160 million fine. No individual is currently being prosecuted in the case. And the U.N. thinks that several other major banks were doing the exact same thing in 2008 as liquidity dried up.

We’ve also had congressional hearings on Lehman Brothers’ Repo 105 scam, mortgage fraud at Washington Mutual, a damning ProPublica investigation into self-dealing in the CDO market, and Felix Salmon’s discovery of abuses in mortgage bond due diligence and disclosure. How can anybody stare at these cases and really, truly believe that banks just never actually committed any crimes? After the savings and loan crisis, more than 1,100 bankers went to jail for financial crime. Can anybody seriously believe that after a crisis several orders of magnitude greater, no major banks or their executives engaged in criminal fraud? Apparently McArdle can.

What’s more, the Government Accountability Office says that bank regulators weren’t even looking at the foreclosure process until this fall, when massive frauds began to be uncovered. If regulators aren’t even looking, they can’t recommend cases to prosecutors.

So essentially, McArdle has assumed away the problem, and in order to do so, she’s ignored dozens of major financial headlines from the past couple of years. For a financial blogger, that’s a case of massive self-delusion.

Sure, prosecutors can make a name for themselves by going after big banks. But they can also have their careers and personal lives totally destroyed by doing so. Sometimes aggressive prosecutors end up like Eliot Spitzer. Just as often, they end up like Eliot Spitzer. It’s much, much safer to target individuals and institutions with less political and economic clout than a major bank or its executives.

None of this proves that WikiLeaks has a set of smoking guns that will take down Bank of America. They might, and they might not. But to believe that a political system almost entirely captured by Big Finance has performed rigorous criminal investigations into Big Finance is ferociously naive.