Pull the Other One

There has been a lot of uproar over the last week over some of the current Administration’s more fantastical anti-immigrant policies in the Southwestern United States, with the Federal government going so far as to dispute whether people born in this country were actually born in this country, revoking passports from U.S. citizens without trial or evidence of wrong-doing, and demanding obscure documents – some of which have never been required to obtain any government license or permission before – in order to prove the bearer is actually a citizen. There are even cases where people born in this country have been rounded up and sent to deportation centers, again without benefit of a hearing. It’s difficult to see what, if anything, our current “Leadership” (and I use that term loosely) expects to gain from these activities. What, exactly, a bank would gain from copying them is anybody’s guess…

Regrettably, it would appear that this is exactly what Bank of American has been doing over the last year, however. You can pick up the original story from the Sacramento Bee website, or take a look at the American Banker magazine article about the backlash if you’d like to. The really bizarre aspect of these actions, at least from where I’m sitting, is that the Bank has been claiming that there have been no changes to any of its policies regarding consumer accounts, and they have been requiring exactly the same documentation for decades now. That is, the claims are bizarre because some of the affected customers have been doing business with B of A for decades, and there has never been any problem with their accounts until now…

We should probably note that there is no legal requirement that you must be a U.S. citizen to open or maintain a bank account in this country. You could understand why the bank might be having problems with someone who was using one of their accounts to commit a crime, or even using the funds in one of their accounts to finance criminal activities, but the only “crime” being alleged here is that the account holders may not be U.S. citizens. Moreover, given that banks make most of their money through commercial loans, in which they are using their depositors’ funds to earn interest from other parties, any action that annoys and offends people enough to make them close their accounts and change banks would make no financial sense even if those people were committing a crime…

I don’t believe that Bank of America has done anything quite as spectacularly stupid in recent years as, say, United Airlines having a passenger violently dragged off of an airplane because they had decided to give the seat he was already sitting in to a deadheading crew member, or Wells Fargo opening millions of fraudulent customer accounts. But stunts like trying to foreclose on people who never had a mortgage with them in the first place, ignoring court orders to compensate people for idiotic illegal foreclosures, and playing fast and loose with Federal fair lending laws have not given B of A the best public reputation. In fact, the only thing I can think of off the top of my head that would be worse would be implementing a blatantly racist and apparently opportunistic policy that wouldn’t net them any additional money even if it was successful…

There’s a great tradition in this country known as “voting with one’s feet,” where people will stop doing business with a company that they feel is behaving in a way so stupid, greedy, bigoted, and fraudulent that it isn’t safe to maintain that business relationship – or just maintaining business practices that annoy them more than changing banks would. Bank of America may believe that they are “too big to fail,” but considering what happened the last time someone started implementing criminal business practices based on that belief, now might be a good time to sell off any stock you have in the company – and move your accounts to another financial institution, before this one goes under or just freezes your funds…

Borrowing a Vacation

I’m still not sure how I feel about the article in Market Watch about new services that are offering to allow people to finance vacations. That’s fair, I suppose, because I’m also somewhat ambivalent about the business transactions they’re talking about. Paying for things on credit – charging airline tickets and hotel fees on your credit card, for example, and paying them off once you get home – is a fairly normal part of travel these days. In fact, post-9/11 it can be almost impossible to purchase a plane ticket, rent a car or even reserve a hotel room without a credit card. Credit card interest being problematic isn’t news either; unless you are going to pay off all of your bills in full as soon as you get them, the interest can very quickly become a bigger problem than the things you purchased in the first place. But throwing a new form of consumer lending into the mixture just makes the whole subject even more confusing – and I don’t think the linked article is helping as much as they think it is…

The attraction of financing a vacation – assuming that you have the option of paying for it in some other fashion – is said to be that there are no hidden charges or fees involved; you know exactly what you are going to pay upfront. It is also apparently possible, depending on where you want to travel (and, presumably, your credit score) to obtain lower interest than you can usually get from a credit card company, which could be a major savings. The reason for all of the qualifiers in this post is that they also occur in the article. All of these conditions appear to vary depending on who is traveling, who is paying, what terms they want, how long they will need to pay off the trip, and what level of credit card interest they already have…

Confusing things even further is the fact that the Market Watch reporters bring up the idea of low-interest introductory rates, special deals, loyalty club and credit card rewards programs, and other limited opportunities that can, but won’t necessarily, reduce the cost of the vacation and/or the cost of the financing enough to completely change the financial implications of the situation. Some of these may be practical – financing anything at a special deal of 12% makes more sense than using a credit card to do the same thing at 28% interest – but not all of them are. In particular, applying for a credit card solely because you want to purchase something expensive during the three months you have a trial low interest rate is asinine unless you can pay off the entire trip in those three months. And if you can do that, you’d almost certainly be better off taking the trip three months later and just paying it off as soon as you get back…

The point I’m getting at here is that it isn’t clear from the article whether these programs are actually lower-cost consumer lending options or are just programs that make money on people who are unable to understand their credit card agreements or on people who are bad at math. All of the examples of other ways to finance your vacation that appear in the text struck me as one-off, specialized, unlikely, counter-productive, or just ways you could try to game the system that will almost certainly turn out for the worse. It’s possible that you could get a better interest rate from a company that just makes vacation loans than you could get from your credit card company, but if your credit is sufficiently good to do that you could probably just get a better credit card rate or a short-term bank loan that would do the same things for much less; that’s how consumer credit works…

Once Bitten

I’ve been avoiding the whole cryptocurrency issue for a while now, partly because I think there’s already enough chatter about it flying around, and partly because I’ll admit I don’t completely understand the stuff. The basic idea is simple enough – you buy something in the hope that its perceived value will rise and you will be able to resell the thing for more than what you paid for it. It’s the principle behind the (mostly apocryphal) story of the Dutch Tulip Bulb crisis, or the Beany Baby fiasco in our own time. As long as the price of whatever it is keeps rising it will remain possible for each dealer in turn to resell the things at progressively higher prices, regardless of what actual value (if any) the thing might have. The problem is, these conditions won’t continue forever…

If cryptocurrencies have any intrinsic value, no one has been able to explain to me what it might be so far, not that it really matters in cases like these. Certainly, the Beany Babies were never worth more than a few cents worth of fabric and filling, plus the labor to design them, name them, make them, ship them, inventory them, and sell them. Every time one of these artificial markets finally pops – generally because somebody finally asks “Why are we paying $10,000 for a stuffed animal worth $9.99 retail?” – the people who end up losing the most were the last ones to buy whatever commodities were involved. It is understandable that anyone with items still in their possession would want to keep the market going, at least until they could unload whatever they had left; where the situation becomes completely revolting is when someone is manipulating the market to drive the spot price higher…

Unfortunately, it seems as though that is exactly what happened during 2017’s Bitcoin boom. According to a CNBC story posted yesterday, Dr. John Griffin at the University of Texas investigated the rise of Bitcoin and discovered that some party or parties (currently unidentified) were using other cryptocurrencies to stabilize the Bitcoin market during the boom, in much the same way that fraudsters have artificially inflated stock prices by placing artificial buy orders – the classic “pump and dump” scheme. The difference in this case is that since cryptocurrencies are not connected to any real-world property, there’s no way to prove that they are over-valued the way there would be with a stock issue – and since they aren’t regulated by anybody, there is no authority you could complain to if somebody was manipulating the market…

The CNBC article goes on to say that the price of Bitcoin has been plummeting over the last few months, losing around three-quarters of the value it had at the peak – which means that someone who bought a Bitcoin at $20,000 has now lost close to $14,000 on the deal, assuming they can sell it now. Of course, the more people dump these things onto the market the more the price will drop, and the cycle will continue. We’ve all seen cases of stocks dropping from hundreds of dollars per share to a few cents per share, and people who held onto them for just a few hours too long and lost everything; this is the same idea, except that in this case there is no SEC you can complain to. Or, more accurately, there is – but they can’t do anything about it…

The lack of regulation and oversight was one of the original selling points behind cryptocurrencies – the government can’t tell you what to do with them, the Federal Reserve can’t interfere with their interest rates, and there were no issues with national economies imploding or currency conversion rates. But even if cryptocurrencies themselves really are foolproof and incorruptible (which still remains to be seen), the market for them would of necessity respond to the laws of supply and demand, just like any other free market – and that means it is susceptible to manipulation, just like any other commodity, equity, debt or currency…

I’m not saying that any of the people you may know who made money on Bitcoin during its rise and fall are crooks, even if they made very large amounts of money, and even if they aren’t able to explain to you how the whole thing works or how they did it. I’m just pointing out that, unless evidence to the contrary surfaces, it would appear that this latest form of get-rich-quick scheme has turned out the way most of them do…

Start Paying

People my age who are reluctant to dive into new technologies and new products are frequently accused of getting more conservative and/or cautious with age, but the truth is that I wasn’t a particularly early adopter of new products or technologies when I was young. Today, after witnessing any number of new ideas that looked wonderful right out of the box but took years to fully mature, it has become second nature to me to wait and see what happens to a product before I consider buying one. The first few generations of mp3 player had issues, for example; it wasn’t until three or four years later that an iPod version appeared that was actually reliable, and the same could be said for most types of smart phone, tablet, or even laptop computer. So when Apple Pay came out, offering to provide you with a revolutionary new way to buy things (“Store all of your credit cards in your phone!”) I was immediately skeptical of the idea. Now it appears that Bank of America, Citigroup, Capital One, American Express, Chase, and several of the other “Launch Partners” who got in on the ground floor with Apple’s new service are wishing they’d been a little more skeptical, too…

You can find the New York Times article here, if you want to, but it appears that thieves have been stealing credit card numbers and using Apple Pay to charge things on the linked accounts at an amazing new rate – estimates go as high as 6% of all Apple Pay transactions, compared to 0.1% for traditional credit cards. Or, to look at it another way, $6 out of every $100 on Apple Pay versus ten cents per $100 on traditional credit accounts; more than sixty times the “usual” rate for identity theft. One might reasonably expect all of the affected banks to be screaming bloody murder at Apple, or at least demanding that the company do something about the situation. But the really interesting thing about this case is that not only are the various financial institutions bending over backwards to avoid angering Apple, but it might not be Apple’s fault this fiasco is occurring…

As near as I can tell, all of the financial institutions in this story were so worried about being left out in the cold under Apple Pay that they failed to require anything more than basic credit card information (the kind that identity thieves steal every day in job lots) before allowing a user to upload credit card information onto their phone. Even the sort of security questions, billing address and telephone information, or passwords normally used for online transactions would have made a difference, but none of those measures were used. Even worse, when the issues with Apple Pay began to emerge, several of the banks detailed general customer service call centers – rather than actual fraud prevention teams – to deal with the situation. As a result, there have been numerous reports of thieves actually calling in themselves to tell the banks not to flag an account that is being used in another state or country (the old “we’re on vacation this week” scam repurposed for a new generation)…

Now, I don’t mean to suggest that the original oversight wasn’t completely understandable; new technologies and methods for separating consumers from their money that actually work don’t come along every day, and if Apple Pay ends up being as pervasive as some of their other products and services then any financial institution would have to be crazy not to try to get in on the ground floor. What is less excusable is failing to implement industry standard security measures at the same time, or at least devote appropriate anti-theft and anti-fraud support, although both would have been better. It seems highly unlikely that Apple would have objected to greater security, given that they also have a vested interest in getting as many people to use Apple Pay as possible. And, in fact, now that this story has gotten out and people are having second thoughts about the whole concept, Apple has started working with the banks to provide more account information and security measures…

Maybe once the technology companies and financial institutions get all of the bugs worked out, I’ll look into Version 3.1 or 4.3 of Apple Pay, or however many iterations it takes before the risks involved are no higher than any other form of credit card account. In the meanwhile, I may still be coming off as a grumpy and conservative old man, but at least I’m not having to call my credit card provider and demand to know why I am being billed for $12,000 worth of kumquats purchased in a country into which I have never set foot…

Not Again…

Somebody told me once, years ago, that the definition of insanity was doing the same thing over and over while expecting a different outcome. I’m not sure that’s true, but I’ll admit that I can’t think of any other explanation for a story I saw in the Los Angeles Times online about the so-called “Buy Here, Pay Here” auto sales companies. If you’ve never encountered one of these operations, they’re defined as used car dealers who require customers to finance the vehicles they purchase (no cash sales; they literally will not do business with you except on credit) and also require the purchaser to come to the dealership each month and make all payments in person. They’re notorious for offering people who couldn’t get credit any other way payment plans at interest rates two or three times higher than credit card interest – and repossessing the cars on the first missed payment…

If this is sounding familiar, it’s almost exactly the same business model that resulted in the housing collapse of the past few years. Mortgage offers of this type are generally referred to as Predatory Lending, and the principle is the same: sell people property they can’t afford on terms they can’t possible pay, then foreclose on them and sell the same property to the next sucker in line. In real estate many of the buyers rationalized these decisions as “investments,” believing that they could “flip” the houses and make money on the deals, and many of the lenders assumed that if the original buyer defaulted there would be dozens of other gullible, credulous or greedy customers who would purchase the foreclosed property and start the cycle over again. But as silly as this all looks in hindsight, what really took down the economy was the process called “securitization” of the mortgages…

When future historians look back on our time, I’m not sure how they will explain how otherwise sane people could have believed that speculation in packages of loans was a good idea in the first place. Granted that companies buy up loans all the time – it’s how you start out with a car loan from GMAC and wind up making your payments to Chase, the way I did – you’d still expect someone associated with the process to question if packages of mortgages that the borrowers couldn’t possibly pay off were really investment-grade securities before buying millions of them. The fact that loans secured by real estate have traditionally been relatively safe is no excuse; history tells us about any number of artificially-created bubbles like this one, and all of them have ended exactly this way. But while the securitization of these loans was idiotic, and the classification of them as anything other than junk securities was inexcusable, neither of them really compares to doing the same thing less than four years later with property that depreciates every mile you drive it…

I know it’s hard to believe, but as far as I can tell the Times story is correct; companies are actually bundling up dozens or hundreds of these crap-level car loans and trading in them as securities. I could understand trading shares in the used-car operations themselves; the companies may be scummy, but there’s no question they’re wildly profitable. And, as previously noted in this space, if Congress ever outlaws making money off the gullible, the economy will probably collapse. But these aren’t consumers or inexperienced newcomers; the companies involved are the same ones who caused the collapse of 2008 with exactly the same greed and stupidity. Except that, unlike a house (which may return to full price years or decades down the line) a car is going to end up in a junkyard in a few years – if the next buyer doesn’t just abscond with it and never pay off their loan…

So is it madness, or just short-sighted greed? I’m not sure how we could tell the difference at this point, but I worry about what will happen to our economy if we have a few more economic disasters like the last one. You think there’s unrest in the streets NOW – what do you think will happen if the bubble pops again?

Another New Record?

I sometimes regret that people don’t keep the same kinds of statistical records for business ventures that they do for sporting events and teams. It’s not that we don’t, really; but unless you have access to several proprietary databases and advanced statistical analysis software, the only way you can see any of them is to read about the Fortune 500, the Forbes 400, and so on. Even then, what we’re talking about is usually limited to things like gross income, net income, stock price, and a bunch of financial ratios that even the Economics students don’t really think of that highly. It would be much more entertaining if people actually kept statistics on the most hated company in America, for example, or the one with the worst customer service, the most worthless products, or the most heartless consumer policies. Although given some of the recent news items, it seems possible that Bank of America might be contending in more than one category…

According to a story in the Daily Mail online, a widow started receiving calls from Bank of America (B of A) collections people as often as 48 times each day, immediately following the death of her husband. She explained the situation to the Bank, and sent them copies of all of the documents as requested, but the collections calls kept coming, and when called on it, B of A had mysteriously “lost” all of the documentation, exactly the way they do in every news story where any legal action or billing situation has the possibility of charging more interest during a delay. Now, you and I have no way of knowing how much of this story is true – the Daily Mail is a tabloid, and not everything you read on line is going to be 100% correct anyway. What strikes me about this story is how easily you and I (and, to judge from the comments, thousands of other net citizens) accepted that it was true…

The fact is, there have been a lot of stories regarding this sort of atrocity staring Bank of America, and if only those cases where the Bank later confessed to the actions cited and promised to make things better are true, then B of A has some laughably bad public relations – and management in general. What seems to get overlooked in all of the consumer-advocate outrage and Internet reader glee is that even if all of these stories are absolutely true, they still represent only a tiny fraction of the company’s total customer interactions in any give year. Bank of America lays claim to literally tens of millions of customers, which means that for even one-tenth of one percent of its customers to have a horror story, there would have to be hundreds of thousands of such news items every year. Yet the actual number being reported appears to be more on the order of dozens, or perhaps hundreds…

The problem is, in the Internet age, anything you do wrong can be noted down and repeated by news organs and bloggers all over the globe, whereas anything you do right is likely to attract no attention at all. Bank of America could have perfect customer service 99.99999% of the time, and still be a complete failure dozens or hundreds of times each year –and thus wind up being humiliated in the press and excoriated online. The days in which a company could just cover all of its public relations disasters with several layers of customer service drones (none of whom can take responsibility for anything or accomplish anything, no matter how many times you ask) are gone; to survive in this strange new interconnected world, we are all going to have to try a little harder than that…

Although, at this rate, it seems as though B of A might also set a new record for how long it is taking them to figure all of this out…

The Ethics of Loan Modification

I was reading an interesting piece about loan modification on one of the AOL discussion sites the other day, and it struck me that while the authors were framing it as a question of economics, there is also a significant question of ethics involved. One of the problems with recommending fantastical fixes for a national problem – like a stalled economy – is that most of the suggestions are going to involve other people’s money, and however rational those ideas might seem to the person suggesting them, they’re going to look very different from the point of view of the people being asked to give up millions of dollars to achieve this social aim. Or, in the case of loan modification proposals regarding the current real estate slump, $71 million USD or thereabouts…

In case you haven’t run across this idea before, the basic concept is that if the various banks were to lower the amount of all of the “underwater” mortgages (ones where the amount owed exceeds the amount the property is actually worth) down to the amount those properties are currently worth, people would be able to start obtaining loans, buying and selling houses, and constructing new one. This would create somewhere between 500,000 and 2,000,000 jobs (it depends on who you ask) and could potentially result in hundreds of billions of dollars in profits for the banks alone, and considerably more than that for the country as a whole. And the best guess as to what it would cost is around $71 billion as of this week – or roughly half of what the American banking industry paid out in annual bonuses to its employees in fiscal 2010…

It sounds simple, doesn’t it? All the banks have to do is pay their super-wealthy executives half of last year’s bonuses this time around, and they can jumpstart the economy, rescue millions of people from bankruptcy, create millions of jobs, and benefit their own self-interest down the line by raking in billions of dollars in future mortgages. In fact, considering that many of our major banks are still in business only because of government bailouts made using our tax money, you could argue that they owe it to the country that saved their bacon to return the favor. Unfortunately, as usual, the actual situation is not nearly that simple…

Consider for a moment that most of these financial institutions are publicly-traded companies, which means that they are owned by individual investors – people just like you. If you had invested your money in a bank, how would you feel if people started calling for that company to drop half of its available funds down a rat hole in order to save the economy? Would you be okay with that, or would you start thinking that maybe other industries (like oil, or insurance, for example) that are recording record profits and have also benefited from government support over the years should chip in their share, too?

Then there’s the question of how many of the people holding underwater mortgages actually deserve to be rescued. Certainly, no one is disputing that there are a lot of innocent people who have been hurt by the situation, but we know that there are a certain number of real estate speculators in that number who were just trying to get rich quickly using other people’s money – effectively yours, if you’re a U.S. taxpayer. Should all of the people who were just trying to make a lot of money by buying and reselling houses without knowing what they were doing (a practice I have compared unfavorably to juggling lit chainsaws) have their fortunes repaired at the expense of bank personnel and investors who haven’t actually done anything wrong?

One could argue (as several commentators have) that the Federal government could impose such a program, or if that’s too onerous, just pay off the difference in the mortgages using governmental funds, but here again, that’s your money they’d be giving away (assuming you pay taxes), and a lot of people who don’t deserve it would benefit from their doing so. Given all of these problems, are loan modification programs actually a viable way of restarting the U.S. economy, or are they just a pie-in-the-sky scheme with no more connection to reality than mice belling a cat?

It’s worth thinking about…

Bulldozers for the Win!

A few days back there was a story online about Bank of America bulldozing a bunch of houses in Cleveland. With thousands (and possibly millions; nobody really knows for sure) of homeless people in the United States, and millions (possibly tens of millions; nobody really knows for sure) of people one paycheck or less from being foreclosed out of their homes, this seemed almost perverse. People were making appropriate (and mostly appropriate) comments at the bottom, ranting and raving about how cruel and heartless this action was, and how its another thing we should all hate B of A for doing – thus completely missing both the facts of the case and the point of the exercise…

First off, the story also indicated that the bank had donated over a hundred houses to the City of Cleveland for low-income housing; they’ve also donated over 150 buildings in Detroit and are now planning to repeat this program in nine other cities. That won’t end the housing crisis in America, but it’s a good start – and they certainly don’t have to do any such thing. If you read the story carefully, you’d also notice that once B of A gets done bulldozing the selected properties, they’re also going to donate the land underneath them to the City for use as green space (parks and whatnot), although Cleveland could easily sell the land to developers (to raise money) or use it to build public buildings of various kinds (including more low-income housing). But that’s not really the point either…

The actual point of these operations is that the houses being destroyed are ones that the bank owns but can’t give away, let alone sell, usually because they would cost more to repair to a point where you could actually live in one than they would be worth if you did. However, these properties cost B of A money every day they’re carried on the books, and they have the potential to cost the bank a lot if someone were to break into one and injure themselves (to take only the most obvious annoying possibility). Bulldozing the structures eliminates the liability issues, and donating the property should remove the carrying costs; if they do it right the resulting tax credits might even cover the company’s expenses in foreclosing on the mortgages in the first place. But this still isn’t the point…

The laws of supply and demand state that it isn’t possible to charge as much for something that is in vast supply as you can for something rare. If people can obtain a house just by asking for it, they are unlikely to pay money for one, which means the housing market will just get worse. Lowering the supply of anything has the effect of raising the price by an amount proportional to both the reduction and how much people want the item in question, which in this case means raising the price people will pay for a house. Granted that this will also result in people wanting to take our home loans, which will benefit Bank of America, it will also benefit anyone in the country who owns real estate or builds, repairs, buys or sells houses – and anyone who does business with those companies and people…

I’m not saying that Bank of America is comprised entirely of angels looking out for the good of the country; I’m not even saying that you shouldn’t hate Bank of America if you want to. I’m just saying that if you’re going to do so, you might want to select something they’ve done that is actually bad…

You Got Lucky

Over the past few years we’ve been hearing a long litany of abuses (if not outright atrocities) committed by the banking industry against various homeowners as the housing bubble burst and lenders of all types began trying to cut their losses and cash in on the possibilities. For a lot of people these abuses seem particularly egregious because not only did the banking industry bring the housing market disaster on itself through business dealings that a six-year-old could have identified as idiotic, but they then went crying to the Federal government to save them from their own disaster and were given the better part of $1 trillion to fix the problem. If you tried such a thing you’d be sued, jailed, berated by your neighbors, and mocked by scruffy bloggers all over the world for years to come, but you can’t, because you’re an individual and not an industry whose loss to bankruptcy would probably have caused our entire economy to collapse. For that matter, if you tried to foreclose on a property which you did not own and in fact had no interest in whatsoever, you’d probably be charged with fraud, arrested, and vigorously sued – and if you ignored the judgments against you, you’d be jailed for contempt of court and then have the damages against you increased…

Unfortunately, none of those things seem to have happened to any of the banks that have been trying to foreclose on people who don’t have loans with them; not even Bank of America, which has been repeatedly exposed for doing this and then mocked on the Internet (and vigorously sued). In one of the more recent cases, the company somehow became convinced that a Florida couple who had paid cash for their house and did not have a mortgage with Bank of America or anyone else was behind on their mortgage payments, and tried to foreclose on them. The bank dropped the proceedings last February when it became clear they had no legal basis for the case, but apparently decided that they also didn’t have to abide by the judge’s ruling that they had to pay for the couple’s legal bills (a common judgment in such cases). For the past four months, the company has just ignored all communications on the subject, subjected the couple (and their attorney) to miles and miles of stonewalling, and assumed that nothing would come of it. Which worked out well enough until the couple and their attorney decided they’d had enough and called upon the local Sherriff to foreclose on the nearest bank branch…

You can read about the case in the if you want, but basically the plaintiffs got to enjoy what the newspaper calls a foreclosure victim’s fantasy by walking into their local Bank of America branch with a court order, two large Sherriff’s deputies, and a moving van standing by, and demanding that the company either pay up or lose the contents of the branch (which would be sold at public auction). After a brief but no doubt intensely satisfying standoff, the branch manager wrote a check for the amount in question and the heroes of our story were able to go on their way. I’m sure it was an unpleasant morning for the branch manager, and having the whole thing splash across the local media (and the Internet) can’t have been good for the company’s increasingly tattered reputation. But as bad as this was, I still can’t help thinking that things could have been much, much worse…
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For starters, consider that the bank really was in contempt of a legal court order, and could easily have been fined for every day they failed to comply with the judgment. This could easily have gone much higher than the $2,534 they were refusing to cough up; even a token fine like $100 per day would have reached nearly $6,000 by now, and if the judge had been really incensed, she could have upped it to $1,000 ($60,000) or even $10,000 per day ($600,000). Then there’s the possibility that the couple could sue the bank for punitive damages – and given this laughably incompetent handling of the case by Bank of America, it’s possible they’d win. That could run into millions of dollars, especially if the bank annoyed the trial judge enough (as ignoring a court order is wont to do). Now multiply that by the literally dozens of such cases that have popped up over the past few years, and you’ve got a crisis to rival the original housing crash…

Of course, Bank of America would just go running back to Congress for another bailout. But if it was just them, and not the entire industry, it would be a lot harder to get the Federal government to play along – and if they keep doing this, it’s always possible that sooner or later their friends in Washington will just let them meet the disaster they keep courting. For the moment, they’ve been lucky, but as the old saying goes, if you play chicken with a train you’ve got to be lucky every time; the train only has to get lucky once…