The Fraudulent Bank of America Settlement

Another settlement between the Department of Justice and a major bank, the Bank of America in this case, was announced last month. The actual nature of the deal, versus its public-relations veneer, ought to make you think about the very legitimacy of American institutions, and poses the question of how the American people should react. If that seems too strongly put, here are the facts; tell me why I’m wrong.

Both the DOJ investigations and congressional inquiry have established beyond a doubt that the 2008 financial crisis—which resulted in 10 million American families losing their homes and was an utter social disaster for hundreds of millions more worldwide—was caused by irresponsible speculation and conscious fraud; in the case of Bank of America, knowingly selling toxic assets to investors.

In a press conference announcing the deal, U.S. Attorney General Eric Holder called it a “historic step forward in our ongoing effort to protect the American people from financial fraud” and claimed that it holds “accountable those whose actions threatened the integrity of our financial markets and undermined the stability of our economy.” Associate Attorney General Tony West also spoke at the press conference, managing, like Holder, to plaster on a look of grim determination as he made the claim that the deal showed “once again that no institution is either too big or too powerful to escape appropriate enforcement action by the Department of Justice” and that it “achieves real accountability for the American people.”

This kind of posturing as genuine servants of the public is an empty ritual performed almost every day, but what is really surprising is that these men managed to keep straight faces throughout the entire public relations stunt.

For openers, up to up to $11.63 billion of the $16.7 billion settlement will be tax deductible which means that it will pay about $4 billion less to the government after taxes. [1] Add to this the many billions it received in the course of tax-payer funded bailouts, quantitative easing, and zero-interest borrowing rates, all of which is being, and will be, charged to working people, the victims of the bankers’ criminal actions. Other provisions of the deal include “consumer relief,” which the bank has already been doing voluntarily because it is more profitable in the long term. This $7 billion component of the deal, then, is just an accounting gimmick. So much for the devastating-sounding sum. So much for the devastating-sounding sum. In effect, it amounts to a slap on the wrist and a mere cost of doing business.

Then, there is the claim that it holds “accountable those whose actions” caused the meltdown of the world economy. The fact is that no executive has in any way been held to account, criminally or otherwise, for their documented crimes. It is absurd to assert that the DOJ, in fining the banks, has held “those whose actions” caused the crisis; financial institutions are, after all, not the kind of entities that can commit crimes; only individuals are morally-accountable actors. But Holder himself has already granted individual bankers immunity from prosecution; in testimony before Congress about why no bank executives had been criminally charged, despite the overwhelming evidence of criminal conduct, he stated that, “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them, when we are hit with indications that if we do prosecute—if we do bring a criminal charge—it will have a negative impact on the national economy.”

As if the actions of these individuals didn’t have a negative impact on the national economy! And isn’t the failure to prosecute these crimes just an invitation to commit more? Of course, and especially so since this behavior has in fact been rewarded via massive profits made possible through bailouts and easy-money policies that have benefited only the parasitic financial aristocracy while leaving the great mass of the people worse off, in some cases much worse off, than before the crisis.

Nor is this is an isolated or atypical failure of a few major institutions; it is part of a pattern. It is behavior perfectly in line with the nature of all American institutions. The last thirty or so years have seen the position of the average worker deteriorate significantly while the elite has benefitted tremendously and with the assistance of the government, which it dominates. As even the most rabid nationalists now know, the country was dragged into the 2003 Iraq War through the most egregious lies; that war not only contributed massively to the national debt, which working people will be stuck paying off, but resulted in the deaths of 6,000 American soldiers (plus 10,000 wounded) in addition to 1 million Iraqi dead—and the horror is ongoing, as recent events in that suffering country show. Yet, like the Wall Street executives, the liars and war mongers go unpunished, free to continue to shape public policy and revise history to cover up their crimes.

What ought to be the reaction of ordinary people to such a deterioration of their institutions? To begin, we must recognize what has happened: a small wealthy “elite” has pressed the government and the economy into the service of its own interests. We must make the problem as widely-understood as possible so that working people and all people of good will can begin to work toward an alternative. That alternative could take many forms, but it is clear that both political and economic power, which today is concentrated in ever-fewer hands, must be distributed to the people.

Doran Hunter 

[This article was corrected from an earlier version to add the fourth sentence in the fifth paragraph, and to change "borrower relief" to "consumer relief" in the third sentence of the fifth paragraph.]

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