Don't Trust The Government To Protect You
In September, I filed a complaint with the Comptroller of the Currency about Bank of America's spectacular laxness in their fiduciary duty to guard customers' money, personal data, and privacy.
For those who are newcomers here, their tellers, on seven separate occasions, gave away a total of $12,000 of my money to thieves with ONLY a fake driver's license in my name with the wrong expiration date. No signature was checked. No bankcard was demanded. No PIN was required. None of that "what's your mother's blood type or your granny's maiden name?" Nope, they just handed it all over. And I've had people run tests and heard from others that they've experienced the exact same spectacular laxness.
And when Bank of America refused to give me videotape of the thieves, as Mari Frank tells me is my right under the law, since I couldn't go after and catch the thieves like I did my car thief, I started investigating the bank instead. What I found is shocking. It seems that every California consumer banking customer of Bank of America, and perhaps every consumer banking customer in the country, is in increased danger of identity theft because B of A didn't spend the money to connect the computers from bank to bank to bank when they bought or merged with all these banks.
Meanwhile, I made my complaint to the Comptroller in September, and they've been sitting on it ever since. I just got a letter, dated December 2, saying they're, uh, looking into it. And I probably only got that because I called and complained several times, and said I'm not the average citizen with a single beef against the bank; I'm a journalist who's done months of investigation and tests of their security (or rather "security"), and this is a serious issue that possibly or probably affects MILLIONS of people.
And I also complained to the Senate Banking Committee, the House Finance Committee, the FCC, and the FBI. Not a peep out of any of them. Oh, did I mention the guy who is the Comptroller himself used to be a banking lobbyist?
Accordingly, in the WSJ, Holman Jenkins, in the wake of the Madoff scandal wisely warns people not to expect government to protect them from financial ruin. I would add the mortgage debacle to that argument as well. Jenkins writes:
Where was the SEC? Such is the plaint lofted in the wake of the Bernie Madoff scandal.Huh?
When has the Securities and Exchange Commission ever found a fraud except by reading about it in the newspapers? Anyway, who said the agency was supposed to prevent investors from losing money or relieve them of having to perform due diligence?
Mr. Madoff's many honorable and accomplished clients chose to deal with their man outside the institutional checks that come from, say, a heavily regulated bank or a highly transparent mutual fund, perhaps one whose parent is also publicly traded and doubly subject to the checks of a watchful stock market. That was their choice.
It is common to wax nostalgic for a time when a man's word was his bond, business was done on a handshake, etc. This is poppycock. It has always been a client's job to sort out the dealer who could be trusted from the one who couldn't. Personal connections may give comfort, but are no substitute for true institutional checks or true experience of a man's character, which many of Mr. Madoff's clients seemed not to have.
Instead, they went on "reputation," which is to say they acquired their faith in Mr. Madoff more or less the way people acquire their faith in global warming and many other things, from people equally as ignorant as they.
What makes the Madoff story interesting, though not evidence of systematic failure of the regulatory or legal system, is that Mr. Madoff and some of his clients had dealt on a basis of trust for more than a generation. True Ponzi schemes, in which early investors are paid a "return" out of funds deposited by later investors, tend to falter at the first market downturn. Waning investor enthusiasm dries up new funds required to pay off earlier investors. The scheme collapses.
In all likelihood, Mr. Madoff was not running a pure Ponzi scheme, but had real assets. He was operating a blind pool, in which investors had no real idea what they owned or how it was performing, relying on Mr. Madoff who reported metronomic returns, brooked no nosiness into his methods, and seemed always willing to pay off investors who wanted to withdraw their money.
He may have been casual from the start about what money he used to pay withdrawals. It is almost inconceivable, though, that he could have built a true Ponzi scheme to a height of $50 billion, in which there were never any real assets, just his superhuman 40-year juggling act to ensure new investors were recruited as needed to provide funds to meet withdrawal requests from earlier investors.
If so, he is a genius who should immediately be put in charge of the Social Security and Medicare trust funds.
...There are costs and benefits to everything, including the cumbersome apparatus of firms that subject themselves to intrusive monitoring and conform to standards of transparency. Mr. Madoff's clients chose to avoid those costs. For that matter, they chose to forgo lower but safer returns, as many rich people do, by entrusting their fortunes to T-bills.
The herding automatons of the media can never encounter lawbreaking in the financial markets without concluding that it demonstrates the necessity of more laws against lawbreaking. Congress, now in the process of convincing itself it should run the auto industry, no doubt will see in Mr. Madoff proof that Congress is needed to manage rich people's money and ordinary people's too. Then we'll all be in the same position as Mr. Madoff's clients.
McArdle has good and similiar thoughts. See here and go backwards.
Crid [cridcridatgmail] at December 17, 2008 7:01 AM
As someone who works for a bank, let me say, "That sucks!" I think that at this point, BofA should apologize, give your money back plus some, and vow to make changes in their core bank systems that would allow for all of their banks to access the same system.
That said, my real comment is about the OCC. They generally do not investigate your complaint. Their job is to facilitate a dispute resolution process between you and the financial institution. When the OCC receives a complaint they will forward the complaint along with any supplemental documentation provided by the customer to the bank. The bank then has a set timeframe (around 60 days) to respond back to the OCC. Generally, a bank will investigate the dispute, determine if any error has occurred, make corrections (if necessary) and communicate all of this to the customer. That way their response to the OCC can be, "We've investigated this dispute, we corrected our error and the customer is satisfied with our response." Then the OCC basically considers it case closed unless they hear otherwise from the customer.
If the OCC is delaying it's response to you, then it's most likely because they have not received BofA's response yet. Just keep hounding them.
I know that's not too comforting, but I wanted to let you know a little bit about what is going on behind the scenes that you may not have been aware of.
bankgirl at December 17, 2008 7:12 AM
Luke Ford (see Amy's links at left) has some good thoughts on Madoff too
Crid [cridcridatgmail] at December 17, 2008 7:20 AM
Amy Alkon
http://www.advicegoddess.com/archives/2008/12/17/dont_trust_the.html#comment-1614318">comment from bankgirlThanks so much, bankgirl. They told me when I called and called that they (the OCC) is still investigating, and then when I called in late November, that there were other cases in front of mine. I emphasized the seriousness then (to Deidra Chandler at the OCC – Nov 26) and I guess this lit a tiny fire under them (ie, told them I wasn't likely to go away without an answer). I keep telling them I got my money back; it's other people who are in danger of being victimized that I'm concerned with; and from my investigation, I have reason to believe that many B of A customers are sitting ducks for identity theft, and they need to investigate and see if that's the case.
Amy Alkon
at December 17, 2008 7:21 AM
Well, it may seem futile, but bank examiners (OCC) do take into account consumer complaints when they do their routine examinations. And with the new FACTA guidelines out, examiners will be ramping up on all things Identity Theft. So hopefully, this will at least make them scrutinize BofA's policies and procedures more in-depth than they might have otherwise.
bankgirl at December 17, 2008 7:46 AM
Congress makes this guy look like a piker. Just wait until they need to draw down the Social Security Trust Fund surplus and find a drawer full of IOUs.
When they give one to me, do you suppose my bank will take it to cover the mortgage payment? It's backed by the credit of the US government. That has to be worth something, right?
Good luck with those grand plans, President O. We're broke. That's not a change, but you can believe it.
MarkD at December 17, 2008 8:23 AM
I just read where the judge hearing Madoff's case gave him a new ankle bracelet and a curfew. We'll see how well that works.
Flynne at December 17, 2008 9:17 AM
MarkD, heh! When I heard about Madoff's case, the first thing I wondered was, if he going to jail why not also our entire Congress?
Pirate Jo at December 17, 2008 12:08 PM
Another good article - all this guy's articles are good though:
http://seekingalpha.com/article/110913-how-we-can-avoid-another-tragic-ponzi-scheme
Pirate Jo at December 17, 2008 1:41 PM
This is a stupid question, but have you called the Better Business Bureau?
NicoleK at December 17, 2008 2:50 PM
Also, you should try contacting your local media.
NicoleK at December 17, 2008 2:51 PM
Amy Alkon
http://www.advicegoddess.com/archives/2008/12/17/dont_trust_the.html#comment-1614439">comment from NicoleKThe Better Business Bureau is not what it seems to be. Members pay dues and the BBB's loyalty actually seems to be to the members - there's an article on this that's great, in Business Week about the reality of the BBB. I'm rushing now, or I'd go find the link. Almost put the reality of the BBB in my book.
Also, I got Propublica to do a story and then they dropped it. I was extremely disappointed - the reporter did his "reporting" in the style I refer to as "on your ass reporting." He was in New York and just did it on the phone, trying to get tellers to talk. You have to be out here and meet people. Steven Engelberg, the editor of Propublica, who I initially pitched the story to (drove downtown on my deadline night to meet him when he flew into town for two hours for a meeting at the LA Times) PROMISED me, that if they didn't do the story, he'd see it landed elsewhere, and even when I reminded him of that, he never came through. There's somebody else I have in mind for it, but his decks won't be clear for another few months; also, he's doing a story he's worried he might not come back alive on. And rightfully so. If he lives, I think he'd be a great person to do this.
P.S. I also pitched it to Byron Acohido and Jon Swarz at USA Today (talked to Acohido, Swarz never responded), and Gretchen Morgenson at the NYT who never even called me back. Sadly, there are no investigative reporters left at papers. All the LAT's great people went to Propublica, the NYT, etc., or are out of the business (Orenstein, Weber, Sack, Alan Miller, etc.)
Amy Alkon
at December 17, 2008 3:04 PM
How about the Federal Trade Commission? Could you get BofA up on charges for false advertising, since you have piles of evidence their security is NOT all they say it is.
Melissa G at December 18, 2008 9:47 AM
The Advice Goddess has it absolutely correct:
Bank of America doesn't even answer subpoena's for records, warrants...they just stall forever..
We can no longer trust the banks unfortunately as Georges Marciano has discovered. His own accountant is suspected of opening over 200 bank accounts without his knowledge and withdrawing thousands if not millions of dollars from his bank in cash...…Bank of America not only did not check with him to verify that this person could withdraw funds but they allowed over 200 accounts to be opened….you think that would have been enough of a red flag…. One of the most rediculous things is that Bank of America has on its website the audacity to offer identity theft protection on a fee basis. Are they kidding? They are ranked one of the top two banks in the country for identity theft.
Georges Marciano Co-Founder Guess
http://o8justiceforall.wordpress.com/
Justice For All at January 15, 2009 7:31 PM
I feel your angst. I never had any luck with this kind of thing, either. So glad to find out I'm not by myself!
Sunanda Venkatesh at June 1, 2011 6:27 PM
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