Mirror, mirror on the wall, who's the most boneheaded bank of all?
Right now, that dubious title is hotly contested by some of the world's biggest banks. Other contenders are right behind them.
Why do we care? Because trust in big banks already stinks. Because many of these huge banks are embedded in the Tampa Bay economy as lenders and investors. Their bungling — be it corruption, greed or bad management — undermines our ability to grow and attract business.
Let's look at the contenders.
Britain's Barclays Bank was most recently caught manipulating a key interest rate known as "Libor" — an international interest rate banks use when borrowing from one another.
Is that serious? Well, Barclays agreed last week to pay nearly half a billion dollars to settle an investigation by U.S. and British regulators into allegations that traders manipulated those interbank lending rates for profit at the expense of customers. The bank's chairman has resigned.
Barclays may be the tip of the iceberg. Bloomberg News reports New York's Citigroup, Royal Bank of Scotland Group, Britain's Lloyds Banking Group and Germany's Deutsche Bank AG are among the banks regulators are also investigating. Asks Bloomberg: Did traders collude "to rig" interest rates? Did banks "bolster their perceived stability by hiding their true borrowing costs in 2008?"
A more familiar tale of bungling is growing bigger at JPMorgan Chase, where CEO Jamie Dimon in April pooh-poohed as a "tempest in a teapot" a newly found trading loss at its London office. At the banking company's annual shareholders meeting in May, which happened to be in Tampa, Dimon continued to stress that the trading loss —then pegged at $2.3 billion — was completely manageable. That loss now is nearly four times bigger and could hit $9 billion.
Finally, there is Bank of America, a bank whose reputation has been in free fall for years. The bank's too-clever purchase in 2008 of Countrywide Mortgage for $4 billion has imploded, producing a $40 billion expense to the bank in real estate losses, legal expenses and settlements with state and federal agencies. Shame on Countrywide's sloppy lending, and B of A's failure to do its homework.
"We believe this is the right decision for our shareholders, customers and employees," Angelo Mozilo, Countrywide CEO, stated when the B of A buyout of his firm was done.
And now, what do experts say of this transaction?
"It is the worst deal in the history of American finance," Tony Plath, a banking and finance professor at the University of North Carolina at Charlotte, told the Wall Street Journal. "Hands down."
Other banks made a run for most boneheaded, but their stumbles thus far put them behind.
Federal prosecutors, for instance, filed fraud charges last year against Bank of New York Mellon Corp. for manipulating the cost of millions of dollars in currency trades. The feds allege the bank overcharged pension funds — including some in Florida — and investment managers for certain foreign currency trades, and misled them about practices that generated $1.5 billion in revenues.
Who knew "most boneheaded bank" would prove such a competitive title?
Contact Robert Trigaux at [email protected]