How to Kill History's Greatest Empire
How Bumbling Idiocy, Conflict of Interest And
Continued Bad Loans Are Endangering America's Future...

Never loan money to scumbags.

Because they're always eager to demonstrate why you should never lend money to scumbags.

What's worse; it's not always scumbags that are eager to prove the point...

It's probably happened to you. I know it's happened to me. You loan money to someone because of an “emergency”...maybe a friend or even family...then before they pay you back, you see them out spending.

You might love the person. They might be your best friend ever. You might even have the same blood running through your veins. But as soon as you see him settling into that double cheeseburger and laughing with friends, you feel those pangs of contempt. If you could afford that cheeseburger...

Now just imagine how much worse it is when you start with scumbags...
Like Bank of America

That's right; scumbags. I'm sure I won't find much contention on that point.

But this is the part – ladies and gentlemen – where those of us with high blood pressure should probably stop reading...

Because a headline squeaked right by the mainstream media yesterday. With CNBC talking “cash for clunkers,” and other god awful ways to separate retail investors from their savings, we heard news of the SEC finally doing its job. Or at least something that resembles its job.

Remember those year-end bonuses that Merrill paid out? Some US$5.8 Billion to a group of “the world's finest” for the bang-up job they did at facilitating the bankruptcy of the country as a whole?

Remember how B of A lied about them?

I know, there's plenty of bailout news to keep up with these days...but the long and the sort of it was that B of A promised shareholders that those bonuses were off the table. Meanwhile, they hammered out a deal with Merrill and John Thain to ensure they'd be paid.

So they lied to shareholders. Kind of like Enron lied to shareholders.

But luckily for us, we live in a highly regulated financial system.

A highly regulated financial system that punished said criminal activity – lying to shareholders about US$5.8 Billion in undue bonuses – with a US$33 Million fine.

Now the numbers are huge these days, so look at it like this...the fine was roughly equivalent to .57% of the bonuses paid. Half a percent. Fifty basis points.

For you mathematicians in the crowd, this is proof positive that crime pays. At least as long as you've got a good lobbying effort.

But the lying isn't the whole story.
Government Owned and Operated

I'm sorry, but Bank of America is inarguably a government-owned operation at this point. Remember, we gave these jokers US$45 Billion because they were facing a frightful emergency.

“Impending doom!!” “Systemic Risk!!” ...So here's a huge wad of funny money. Nevermind the fact that you've been a loyal campaign contributor; I'm sure that has nothing to do with it.

US$45 Billion....probably twice as much in guarantees...and at least as much in lip service and free PR...for an abject, utter and total failure of a company. One that then lies to your face and rips you off for US$5.8 Billion.

So let me go ahead and be abundantly clear – lest any misled bankers are reading alongside you;

The days of private jets, ten-thousand dollar rugs and “fat-cat” bonuses to retain your “best talent” ...those days are gone my friend. Those days ended when – out of ignorance and greed – these guys drove their companies and our economy into the dirt.

What's more, the “talent” that they're “retaining” has proven itself capable of a scarce few things; gaming the political system, ripping off various individuals, and overlooking the very functions that are supposed to define their value to owners and clients...

Forget retaining 'em, set them free! These guys have got bright futures as politicians!

So I think of it like this; we'd all be irate if the postmaster general tipped himself a billion or two at the end of the year. But for pete's sake; at least they do their job. If he went on to lie about it to taxpayers...well, we'd all be calling for his head on a platter.

So why is this any different?

Well, the post office doesn't have any lobbyists. Nor has he subsidized the rising careers of generous politicians like Chris Dodd and Barack Obama. And I doubt the postmaster general is equipped with the skill set mentioned above, that makes these bankers such worthwhile assets as to justify billions in taxpayer-subsidized bonuses.

No two ways about it; you're getting robbed here.
Redundancy

In other news; Bank of America announced they might be looking to close 10% of their branches.

Now, I don't want to bring fair and unfair into this. Because it's simple mathematics; it's likely that “spreading the wealth [of $5.8 Billion in bonuses] around” will better stimulate the economy than paying a handful of bonuses.

But B of A could be in the right closing some branches.

Just think about it; they're equipped for bubble-era lending and spending. There are more bank branches in South Florida than there are Starbucks. So downsizing a bit...well, that's one of the first few promising things we've heard out of B of A in quite some time. After all, those branches might end up being redundant, possibly costing the owner [taxpayer/shareholder] more than they should.

But think about that for just a moment...

After all...the bubble's over. Golden days have come and gone. The lending orgy...well, let's say we're in the post-cleanup stage right now. So if it stands to reason that some of these branches are redundant...could it be that – bestill my beating heart – some of this “talent” is redundant, unnecessary, or otherwise a bad investment? Why not let them go.

As for “the sanctity of contract law,” I love the rule of law as much as the next guy. But failing the improvised bank bailout, every one of these losers would be in bankruptcy court right now. And in bankruptcy court, these retention bonuses would be called into question.

And if the owner's representative had the good sense of Carl Icahn, we probably wouldn't be talking about this right now. Instead, the judge would ask why the owner doesn't want to pay the retention bonuses.

“It's simple,” as Carl responded in a classic story, “It's because I don't want to retain them!”

Then the judge nods, the “talent” gets their just dessert, and Carl ends up with a company that's worlds better for it. Generally speaking, that's why we leave these things up to the market and the people in it. Good sense is always in short supply when you've got a conflict of interest.

That's your United States of America, hard at work.

Lending money – yours and mine, not theirs – to scumbags without recourse...then papering over it with a few empty press releases and a full-court press on healthcare and latent racism. God bless America, eh?

Why anyone would trust these guys to manage their personal savings – via the Federal Reserve, Treasury and U.S. dollar – is truly beyond my grasp at this point.

But at least one thing's for sure...those who can't see it coming are in for a world of hurt.