Exclusive: Earth-Shaking Banking Reforms Needed to Relieve Current Credit Crunch
by COLONEL KENNETH ALLARD (US ARMY, RET.)
September 26, 2008
This is the second in Col. Allard’s two-part series on the Credit Crunch. Click here for Part One.
It was a routine Sunday morning last spring as the congregation bid farewell to the chairman of the finance committee. But I couldn’t suppress a surprised snort when the minister mentioned that our brother-in-the-faith was leaving to accept a promotion to vice president in the Bank of America. One of my friends raised an eyebrow, so I leaned over to whisper a quick explanation: “I would rather have a sister in a cathouse than a brother at the Bank of America!”
Even close friends found it hard to believe what I had just been through with BOA: a high-stakes identity theft case on accounts I never opened; the studied indifference of law enforcement agencies (federal, state and local) as well as the banks themselves; and finally being cleared only after a lengthy court case that left me a step away from bankruptcy.
Today BOA is being touted as the White Knight of Wall Street, buying Merrill Lynch and exalted as a model of financial probity. Forgive my skepticism, but before forking over a cool trillion in taxpayer dollars, you might want to ask some basic questions: How are banks like BOA actually performing their core function of safeguarding our money (even when not busily squandering billions on bad loans)?
Other banks were involved in my case, but BOA was in a class by itself. Not only had they stiffed trial subpoenas but their credit hounds bayed day and night. BOA uses a common banking practice: selling delinquent loans at a discount to third parties whose sole motivation is recovering their investment. The result: neither they, their persistently unpleasant agents, nor BOA itself ever showed the slightest inclination to resolve the core issue of identity theft. With 37% interest rates on credit card debt, why even bother?
Core issues matter very little when compared to core values like usury, the name of the game throughout the banking industry. In the following months, I gradually became aware of cases eerily similar to my own – all involving questionable BOA security practices. Specifically:
- A missionary to West Africa left her BOA credit card in a safety deposit box, returning three years later only to find unexplained charges that she was physically incapable of making. Her brother is an attorney who took months to resolve the case, today describing BOA as “those devils.”
- A retired Air Force sergeant in San Antonio unwisely allowed a high school buddy to sleep in the same room used as a home office – where bank statements were stored. His BOA account was hijacked, over $25,000 in stolen goods charged to his account. BOA eventually exonerated him but the “friend” was never prosecuted, the funds never recovered.
- A semi-retired lady on a moderate income living in San Antonio, Texas had her BOA bank account compromised, with over $7,000 in fraudulent checks being deposited and withdrawn in a single day. She also claims that bank officials were uncooperative, reluctant to make their surveillance tapes available to police.
- Just last week, one of my UTSA business students asked for documentation of her class attendance to clear her name in an identity theft case. I knew the answer before even asking the question: the bank was BOA.
Those stories are anecdotal but BOA’s response was typical: referring me to their history of awards for good security. But the dirty little secret, there and elsewhere, is that bank security is becoming increasingly vulnerable to high-tech theft, either from garden-variety lowlifes or sophisticated criminal networks. Your allegedly private account passwords? For at least a decade, hacker software has made them as vulnerable as two-dollar locks. Ever log on to your bank account from your laptop? Many of those connections are insecure, meaning they can be intercepted with surprising electronic ease.
BOA opened my account using fraudulent information recorded in paper-less electronic data fields. Their lame explanation: more secure backups (like signatures or photographs) might impede time-pressed and credit-hungry consumers. Yeah, and such common-sense safeguards might cost more but could also prevent the consumer losses that seem like business-as-usual at BOA.
Government intervention will certainly be required to reverse the banking crisis, from potential bailouts to FBI investigation of the often gray line separating incompetence from criminal complicity with fraud. But fundamental, earth-shaking reforms of the banking system are essential – or else we will simply be paying billions to reinforce failures that will only get worse.
Copyright © 2008 by FSM and the Business Battle Lab, LLC.