The Conspiracy Behind the B of A “Mistake”

By James Kwak

Some very clever people deep in the bowels of Bank of America’s accounting and regulatory compliance departments came up with a clever strategy to show, once and for all, that their bank is too big to manage. On Monday, the bank admitted that it had misplaced $4 billion in regulatory capital because of an error in accounting for changes in the value of its own debts. Coming less than two months after Citigroup misplaced $400 million in cold, hard cash in its Mexican subsidiary, this latest mixup is clearly part of a concerted campaign by employees of the big banks to definitively prove that their top executives have no idea what is going on.

This shadow lobbying campaign can be traced back to its origins in the LIBOR scandal (“Let’s rig the world’s largest market and see if Vikram Pandit notices.”) and the London Whale trade (“Let’s make a colossal bet on the relative values of different corporate bond indexes and see if Jamie Dimon notices.”). The only possible explanation for this seemingly never-ending stream of embarrassing disclosures is the existence of a conspiracy, orchestrated by some of the smartest bankers in the world, designed to broadcast to the world the message that regulators and politicians somehow failed to take from the financial crisis: the Masters of the Universe can’t even figure out what’s going on four floors down in their own buildings. The Bank of America accomplices even managed to miscalculate the bank’s regulatory capital for five full years before tipping off their bosses, showing the premeditation behind their scheme.

Or, the other possibility is that the banks are both incompetent and unmanageable. But that can’t be true, can it?

6 thoughts on “The Conspiracy Behind the B of A “Mistake””

  1. The Masters of The Universe are anything but a master. This is greed, old fashioned style. These top banks aren’t providing any kind of real service for their size and we would do just as well (and going by historical facts we’d do much better) if we had 50 big banks rather than six or seven.

  2. This reminds me of when I worked at AT&T (then SBC Communications) in Houston in the early 2000’s during the big degulatory and competitive push by regulators. We kept screwing up orders from all these small competitors. I was in a conversation with a friend who worked at one of those companies and he railed about the evilness of SBC in screwing over the little guy. My response: “We’re not actually evil. We’re incompetent. It just looks evil from the outside.”

  5. Annie – They heard of it allright just forgotten … Debit is the side nearest the window !
    James I think you’ve nailed it.

  6. Bank of America has over 150,000 employees. The sheer size of these organizations would lend themselves to “irregularities”. It’s not that senior managers are incompetent, they are surrounded by incompetency. Senior management is generally supported by individuals who will generally avoid bringing their boss bad news. Those of us who work or worked for large organizations all know that the boss doesn’t like hearing bad news. “No one loves the messenger who brings bad news.” ― Sophocles, Antigone. So the problem is that even if the senior managers have a genuine interest in managing well, they will be stymied by their underlings. I know very little about human resources, corporate governance and all that stuff. But I do know something about people. Give them a chance and they’ll hide a problem. Unfortunately, the more we hide it the more likely it is to surface when we least want it to. This has happened so many times over my working career, it’s hard to believe that bank management doesn’t learn. That’s the real problem, they are not incompetent, you just start to believe that they are just plain old dumb.

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