WikiLeaks, that bane of organizations with secrets, after just releasing the inner-most communications between American diplomats and their wires with ranking officials in other countries, is at it again. This time, WikiLeaks founder Julian Assange said in an interview with Forbes writer Andy Greenberg, it will be a major U.S. bank that will be attacked by WikiLeaks over alleged corruption. Assange won’t go into details about which major U.S. bank, other than that it is a big one, and that he plans to release it in the early part of 2011.
Revelations regarding unethical behavior in American financial institutions is nothing new. A significant contributor to the Great Recession, as the most recent recession is being called, was due to alleged improprieties by financial institutions and the American public’s mistrust of the financial industry. As credit froze, and not only businesses but even consumers watched their credit limits being reduced if not outright canceled, the American public looked for scapegoats. They found many.
Already reeling from dropping home prices and predatory lending practices, people were affronted by the alleged activities of Countrywide Financial prior to their acquisition by Bank of America, after falling from grace and being investigated for securities fraud. Daniel Golden released an article in 2008 that alleged Countrywide offered high-ranking Congressional members low- or no-cost loans with very favorable terms and less stringent loan qualification, as “Friends of Angelo,” the former head of Countrywide.
While Golden didn’t accuse congressional and Bush Administration members of any wrong-doing, he pressed his case that these people received very preferential treatment and they were in a position to oversee Countrywide’s activities, and didn’t rein Countrywide in when the chance was available. By this point in the recession, the public was already used to economic scandal, and the impact, if any, was minimal.
Credit Card Reform
Prior to the Wall Street Reform and Consumer Protection Act, the credit card industry was awash with allegedly unfair acts. Some banks caught on that by setting arbitrary cut-off times, with some companies exacting a late fee of as much as $40 even before the mail arrived. Others sent out credit cards to those with marginal or bad credit, already maxed out with fees. The Dodd-Frank bill was supposed to curb these practices by capping annual fees at 25 percent of a card’s credit limit, in addition to other fixes such as informing customers as to what the payoff time will be if only minimum payments are made, and eliminating interest based on average two cycle daily balances. Consumer groups cheered, but this was short lived.
Faced with the prospect of less profit, banks immediately adapted. Candice Choi of the Huffington Post writes that First Premier Bank, a lender to those with bad credit, dropped its annual fees of $256 on a card with a $250 credit limit down to the required maximum of $75, but increased the interest rate it charges to a whopping annual rate of 79.9 percent! Other banks have followed by hiking interest rates because these weren’t capped by the reform. The message? When profits are on the line, companies will find a way to outsmart anything Congress can throw at them.
The Financial Bailout
The Troubled Asset Relief Program, or TARP, was meant to be a safety net for the American financial system, which was in free-fall immediately prior to its passage. To prevent the failure of major U.S. banks, insurance giants, and the auto-industry, and possible collapse of the world financial system, the U.S. government stepped in and provided money to companies to shore up their finances. These were secured loans, and companies such as Citibank, Bank of America, GM, etc. gave the government partial ownership, usually in the form of stock.
Two years later, TARP has been claimed to be a success by Federal Reserve Chairman Ben Bernanke (Jacksonville Daily Record, 2010). The Congressional Budget Office now reports that the $700 billion “bail-out” will now only cost taxpayers $25 billion, thanks to loan repayment and stock price appreciation, according to Ben Rooney of CNN Money.
Nevertheless, congressional Democrats paid a heavy price during the mid-term elections, partially due to the public’s perception that Wall Street was favored over Main Street. The ramifications of this election will be felt for the next two years as Republicans press for a smaller budget and decreased regulations.
As for WikiLeaks’ latest actions of releasing diplomatic wires and its new threat to release information that is meant to reveal unethical behavior at a major US bank, organizations may already be working to silence Assange. In a fragile economy, the last thing the United States, or, indeed, the world, needs is the collapse of another of America’s largest financial institutions.
Two days after his interview with Greengberg, Julian Assange is now being sought worldwide on rape charges in Sweden. Are the allegations true, or did Assange mess with someone with real power?
Greenberg, Andy. (2010). An Interview with WikiLeaks’ Julian Assange. Forbes.
Golden, Daniel. (2008). Countrywide’s Many ‘Friends’.
Choi, Candice. (2009). 79.9 Percent Interest Credit Card from First Premier Bank Skirts New Regulations.
Jacksonville Daily Record. (Nov 9, 2010). Ben Bernanke:’We succeeded in avoiding the financial meltdown’
Rooney, Ben. (2010). TARP Cost Estimate Cut to $25 Billion, Says CBO.