This excellent Daily Beast piece by Gary Rivlin catalogs the major crimes of the four biggest U.S. banks plus Goldman Sachs, a feat so daunting that the story runs more than 4,000 words on five pages—and there’s not much filler here.
It’s a portrait of a rogue industry, one that’s enriched itself (actually, further enriched. It was already wealthy) at the expense of the poor and middle class.
Rivlin is an authority on this, having worked the poverty-business beat and written the book Broke USA: From Pawnshops to Poverty, Inc. How the Working Poor Became Big Business.
Here’s Rivlin’s list of crimes and sins just from JPMorgan Chase: Rigging municipal bond auctions, bribing Jefferson County, Alabama, officials to do a bond deal that nearly destroyed the county, financed check cashers and payday lenders, directly and indirectly inflated the subprime housing bubble, screwed clients on Abacus-like CDO deals, overcharged mortgage bills to 10,000 military families, got tangled up with Bernie Madoff, etc.
And that’s just the last few years, folks.
Subprime Citigroup comes in for a much-deserved (and rarely given) smacking too:
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.
Yet the pain Weill inflicted on the world didn’t end with the role he played in the repeal of Glass-Steagall. There 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. But what did a few hundred million dollars in settlements matter when compared to the tens of billions of profits Citi was reaping? A top-five subprime lender, Citi made $38 billion in subprime home loans in 2006 alone, a year in which the bank reported $28 billion in profits.
What’s particularly valuable about this piece is that it puts collects most of the big misdeeds in one place (money laundering for dictators and druglords, like at Wells Fargo, doesn’t make the list, unfortunately, but hey, Rivlin only had so much space). Find me one other story about JP Morgan, for instance, that included this entire list of sins.
Day-to-day news coverage usually fails to put stories on new settlements or investigations in the context of the broad sweep of the banks’ past behavior. When you see it all in one place, the pattern of misconduct is much clearer.
Remember this story when writing about the banks’ next settlement. And they’re always settlements.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.