Responsible Bankers as “Rats”

The bigger question, of course, is why are responsible bankers treated as rats? This is hardly the first instance in which those responsible for vetting products had doubts. Even the recent case that led to the conviction of Goldman Sachs Group Inc. banker Fabrice Tourre illustrated that Tourre himself knew the dubious nature of the products he was selling.

No doubt that in the B. of A. case, the bank’s legal team is chagrined that the rats actually put their concerns in writing. In doing so, their concerns are a liability to the bank. The rats, these lawyers might muse, have brought a plague of lawsuits that will cost the bank potentially billions.

The irony, of course, is that these rats actually were working to save the institution from costly missteps. Rather than carrying an infection, they were the immune system that was fighting an infection, and they were simply overwhelmed.

The U.S. Justice Department is suing Bank of America and accusing it of defrauding investors by masking the risks associated with $850 million in mortgage-backed securities. Essentially, BofA packaged and sold loans to investors through third-party mortgage brokers without telling the investors that some of the loans were defaulting at high rates.

But as David Weidner notes in his MarketWatch column today, there were whistleblowers (or a single whistleblower — it’s unclear) who tried to warn underwriters about the toxic loans in the pool. Weidner calls them “rats” but of course, the whistleblowers were simply trying to save the bank from self-harm. This will probably end up how most of these lawsuits end up: The bank will settle, pay some fines, and go back to business as usual.

Photo: Susan Semonata


Support The Billfold

The Billfold continues to exist thanks to support from our readers. Help us continue to do our work by making a monthly pledge on Patreon or a one-time-only contribution through PayPal.

Comments