CHAPTER 38


Your Friendly Banker as EHM

Over the next year, as Ecuador prepared to auction off its precious forests to oil companies, I wrote several blogs condemning Correa’s decision. Among the responses I received was one, in late 2011, from an executive at a Chase bank near where I lived in South Florida.

“You rant and rage,” he wrote, “about the horrible things happening in places like Ecuador. What about here, in your own country?” His e-mail ended with an invitation to an early dinner.

I joined him on the veranda of the River House in Palm Beach Gardens. Our table had a view of the Intracoastal Waterway and the parade of multimillion-dollar yachts heading south to spend the winter in the Keys.

“I read Confessions and I follow your blogs,” the banker said, while the waiter carefully poured wine into his glass, “and I have to wonder why you didn’t expose the things we bankers do right here at home. We use the same tools as you EHMs — on our own folks.” He proceeded to tell me that in recent years bankers had convinced clients to purchase houses that were beyond their means. “A young newlywed couple comes in,” he said, “and asks for a mortgage on a $300,000 home. We convince them to buy a $500,000 one.” He swished the wine in his glass and studied the residue. “We say, ‘You may have to tighten your belt a little, but soon your house will be worth a million dollars.’” He shook his head sadly. “They’ve been told to trust their banker. Used to be that people in my position would try to talk prospective debtors down, not up. We were supposed to do everything to avoid foreclosures. But that all changed.”

“What changed it?”

“I’ve asked myself that question many times. Not sure of the answer. It mostly happened in this millennium. Perhaps it had something to do with 9/11, rising oceans, melting glaciers, fear, our feelings of mortality. Make all the dough you can, as soon as you can, and screw everyone else.” He raised his wineglass. “Drink, dance, consume, and be merry. For us bankers, it was money, money, money. We tried to instill in our clients the idea that there is no tomorrow. Bin Laden will kill us all. So go into debt, buy that big house, fancy car . . .” He took a sip of wine. “When the bottom fell out of the market, the banks foreclosed, repackaged the loans, and ended up earning huge returns, while that young couple and thousands like them filed for bankruptcy.” He looked toward the Intracoastal Waterway and pointed.

A yacht was motoring past. In addition to two well-tanned blond women in minuscule bikinis and two weightlifting-sculpted men, it featured a bright red Mini Cooper on its deck.

“Kind of says it all, doesn’t it?” he asked. “You can bet that the guy who owns that yacht made his money by screwing other people out of theirs. It’s all built on debt.” He reached inside his briefcase and pulled out a manila folder. “Here’s an article about an associate of mine. I think you’ll find it interesting.”

He handed me a New York Times op-ed piece titled “A Banker Speaks, with Regret.” It described a Chase Home Finance vice president named James Theckston, who was quoted as saying that he and his team had written $2 billion in home mortgages. He admitted that some of them were “no documentation” loans, adding that “on the application, you don’t put down a job; you don’t show income; you don’t show assets. . . . That was crazy, but the banks put programs together to make those kinds of loans.”¹

Dinner arrived. As we ate, we talked in more general terms about the economic crisis that had recently enveloped the nation and much of the world. “You know,” the banker said, “the whole system stinks. From inflated home mortgages to college loans, it’s all about servitude to debt. Not that homes or a college education are bad. Of course not. The problem is that we all believe we should do anything to achieve the ‘good life.’ Anything for the American dream. Including burying ourselves in debt.”

I mentioned a woman who had recently attended one of my workshops. She’d just finished law school and said she’d intended to use her degree to defend homeless people and abused children. But when she discovered that she’d amassed more than $200,000 in student loans, she realized that she was going to have to get a job with a corporate law firm and devote years to paying off her debts. “After that,” I added, “she intends to follow her dream.”

“Intends,” he scoffed. “Truth is, once she’s in that system, she’s hooked. She’ll get married, take out a home mortgage she and her husband can’t quite afford, have a kid, more loans . . . get sucked in, sell her soul to the bank.”

By the time we parted, the night had turned dark. We stood under the lights of the parking lot and he held out his hand. “Look,” he said, “I sympathize with everything you write about Ecuador. I volunteered to clean up beaches hit by the BP oil spill. I’ve seen the damage. Please don’t get me wrong. I think Correa’s plan to sell the Amazon to oil companies is a huge mistake, a crime. My point is that it’s part of a disease that’s infected us here in America also. I just want you to include that in your writings.”

That meeting left me feeling sad, distraught, and — much as I hated to admit it — discouraged. I drove to a nearby beach. The moon reflecting off the water lit a path down to the ocean. I stood looking out over the breaking surf.

The image of my great-uncle Ernest, my grandmother’s brother, came to me. He had been the president of a bank in Waterbury, Vermont. During the 1950s, my mom, my dad, my grandmother, and I visited him and his wife, Mabel, every summer. Uncle Ernest would drive us around town and proudly point out the homes and businesses his bank supported through loans.

In the summer after I finished fifth grade, I read a book about the stock market. On the next visit to Waterbury, I asked Uncle Ernest about it.

“It’s a casino,” he snorted, “a gambling house. I want nothing to do with it. All our money comes from local people, and it all goes back into the local economy. Every single penny.” He told me that he viewed everyone who took a loan from his bank as a partner. “I give them the best advice I can. If one of them has problems making payments, I view that as a reflection on me, personally. I do everything I can to help out. We work together.”

I sat down on the sand and watched the moonlight ripple along the waves. For my uncle, it wasn’t just a matter of not wanting to foreclose. He believed that being a driving force behind the local economy was his job, his duty. It was also his joy in life.

My uncle and the banker I’d just met at the River House were both humans, both Americans, yet they represented two very different value systems. In Uncle Ernest’s view, debt was a means to an end, a partnership between creditor and debtor. For the modern banker, debt paves the road to windfall profits. It delivers people into the EHM system.

A chill ran through me as I thought about how I’d led the march of the modern banker. I could almost feel my uncle looking down at me . . .

Within months of that night, as if to punctuate the extent to which modern bankers are willing to go in order to profit off of everyone else, a huge scandal erupted. The 2012 revelations around the London Interbank Offered Rate, or the Libor, demonstrated that Barclays, UBS, Rabobank, the Royal Bank of Scotland, and other international banks were capable of ruthlessly betraying the public trust.

The Libor is used to calculate payments on hundreds of trillions of dollars’ worth of loans and other investments. It had been accepted as an objectively and mathematically derived benchmark for establishing interest rates. However, it now was revealed that the Libor had been illegally manipulated by the banks from 1991 until 2012. As a result, the bankers accumulated immeasurable sums of illicit profits. Once found guilty, the banks were fined more than $9 billion.² As of this writing, only one UBS trader, and not a single bank officer, has been indicted.