Like so many other major financial players, Bank of America (BAC:NYSE) has an office in Washington D.C. I don’t mean a branch office, but rather a shop full of sharp guys and gals dedicated to assuaging various regulating agencies and occasionally promoting the bank’s agenda to the White House and on Capitol Hill.
We are told that this was a sleepy little outfit a few years back – mostly just accountants and out-of-favor MBA types sentenced to a relative hinterland. The real action, the place to be for any up-and-comer looking to cut a swath back then, would have been the main headquarters in Charlotte or on Wall Street.
Back then, the Washington office would receive maybe two calls a day from legislators or their staff interested in the fine details of finance.
That Was Then…
But that was before the great crash of 2007/2008, wherein our banks discovered that their vaults were full of the same crap they had been peddling to the masses... and the great coup attempt that followed it, wherein a triumvirate of those same Wall Street bankers tried to take over the country.
Now that Washington owns a big chunk of some 600 American banks, the phones at Bank of America’s Washington office – and most every other major finance outfit to boot – are ringing off the hook with calls from pushy little Pooh-Bahs, apparatchiks with axes to grind, and ward heelers looking to score debating points in the next election.
From our friends at Bloomberg, we hear that Sen. Charles Schumer (D-N.Y.) personally called to excoriate Citigroup for withdrawing credit from a New York mall developer. Rep. Elijah Cummings (D-Md.) called to object to American International Group (AIG:NYSE)’s contractually obligatory bonuses.
And then, of course, there are all the peremptory summons Government Motors CEO Fritz Henderson gets these days about unjustly closed dealerships in various home districts.
Don’t like the interest payments on your passbook account? Figure that the 2010 Chevy Farrago ought to have fins and a chrome spotlight on the roof? Need $18 million for a new Facebook page? Just call your man in Washington – he’ll be glad to hook you up.
This is how we roll in America, now that America itself owns and operates a big chunk of industry and finance.
And how is it all working out for us, this grand experiment of operation by PTA committee? About as well as could be expected, really.
Case in point: Morgan Stanley (MS:NYSE) is trying desperately to wiggle out from under the Commissat’s rusty iron thumb by paying $10 billion in TRAP [sic] funds back to Washington.
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…This Is Now
Problem is, amid that whopping big check to Washington, payouts on its private bond financing, ongoing real estate losses, and a massive set aside (72% of quarterly revenue) for employee pay, benefits and bonuses, the investment bank is declaring a loss of $1.26 billion, a slide of some 219% from the same quarter in 2008.
Morgan Stanley CFO Colm Kelleher whines that if one would only be so kind as to completely discount all that overhead and miscellaneous charge-downs, “core earnings swing quite significantly into the positive.” But with practically the very same breath, Kelleher conceded that such losses were likely to continue on into the indefinite future.
In the end, I suspect that MS will be forced back to Washington’s poisonous teat again and again – either by blatant need or by royal fiat – as this story continues to unravel. I’m sure Kelleher et al. wonder in the late hours of the long, dark night as to how they lost control of their destinies like this.
Idiots.
Yours truly,
Adam
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