Mother Jones: Why Is Obama Siding With Bank of America Over American Seniors?
March 26, 2009, 10:08 am
Filed under: Ian | Tags: ,

Writing in Mother Jones, Stephanie Mencimer notes how Bank of America has turned many senior’s Social Security benefits into their own private cash cow:

Bank of America, like many banks, processes checks so they bounce more often, using software that changes the order in which checks clear. The result: Instead of one big check bouncing, lots of little checks will. This maximizes the number of penalties the bank can levy on its customers. When collecting these sorts of fees, banks don’t have to abide by any of the debt-collection laws that apply to other businesses. Because they’ve already got your money, they just take it. But the accounts in the Miller case contained Social Security and federal disability benefits automatically deposited by the government. California state law prohibits banks from seizing money from these protected funds, and the California class action threatened to put the brakes on some of these practices.

But nickel-and-diming customers like this is a $17.5 billion a year business for the nation’s banks. That’s why the industry has fought the California verdict tooth and nail. To that end, in 2004, BoA sought help from its friends in the Bush administration, primarily in the Office of the Comptroller of the Currency, a banking regulator funded by banks themselves. The OCC is notorious for its long legacy of helping big banks squash state efforts to crack down on predatory lending over the past decade—efforts that could have helped head off the current financial meltdown. Not surprisingly, the agency was happy to help BoA fend off the class action. On behalf of the OCC, the Justice Department filed a brief in support of BoA’s appeal arguing that federal bank regulations enforced by the OCC preempted California’s consumer protection laws.

Of course, everyone knows that George Bush is a snake, so it’s not like his Administration’s position in this case is surprising.  Here’s the twist:

Now, the Miller case is headed to the California Supreme Court for oral arguments on April 7. But this time, it will be the Obama Justice Department carrying water for the bank, and not just in a brief. The Justice Department’s civil division filed an application last week to present oral arguments in the case during time allotted to the bank.

On March 19, the plaintiffs’ lawyer, James Sturdevant, wrote Sen. Patrick Leahy (D-Vt.) asking him to hold a hearing on the Justice Department’s appearance in the case. He told Leahy that he suspects the administration is essentially on autopilot and simply proceeding along with Bush administration litigation positions largely because it has not installed key personnel at Justice or the OCC. Sturdevant believes that the Obama administration in general does not support the previous administration’s stance on preempting state consumer protection laws. Indeed, in testimony before the Senate banking committee last week, FDIC chair Sheila Bair said, “Abrogating sound state laws, particularly regarding consumer protection, created an opportunity for regulatory arbitrage that frankly resulted in a ‘race-to-the-bottom’ mentality” in the banking industry.

In his letter to Leahy (PDF), Sturdevant noted, “It seems unlikely that the position of the Bush Administration advanced in the Miller amicus briefs, supporting the Bank of America’s predatory banking practices, would be adopted by the Obama Administration at the expense of millions of elderly and disabled Americans who subsist on their monthly social security and other public benefits.”

The problem, as I understand it, is that the Obama Administration has not fully staffed itself, so many jobs, like the Deputy Assistant Attorneys General who would normally supervise career attorneys and make sure they don’t maintain Bush-era positions which are not in the American people’s interest, aren’t filled.  As a result, no one is watching to make sure that DOJ abandons many of the most abhorrent positions it adopted in the Bush era.


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