New York Times Runs PR for Bank of America’s Headcount-Cutting Profiteers

It might behoove a publication that styles itself as the newspaper of record to do some basic fact checking rather than take dictation from parties with an obvious axe to grind and publish it as news.

I’m going to give the disgraceful New York Times story, “Outsiders’ Ideas Help Bank of America Cut Jobs and Costs” a long form treatment, not only because it may help readers recognize PR masquerading as news, but also because the bits of this story that the Times didn’t bother to probe help illuminate how the retail banking industry became predatory and how some of the mechanisms to transfer wealth to people at the very top are well hidden from the great unwashed public. Thus, this post is a companion piece to our piece today on the rise in poverty and continuing destruction of the middle class in the US.

The New York Times piece is hagiography about the cost cutting process at Bank of America, in which the Charlotte bank will shed 30,000 jobs, more than 10% of its workforce. It starts with the misrepresentation of calling the belt-tightening a “turnaround plan.” That implies that the business of the bank is in trouble and the headcount reduction measures can save the day.

This is utter bunk. Bank of America was already a very cost and efficiency driven bank, to a fault. It botched its acquisition of the private bank US Trust by imposing its stingy ways on customers who had every reason to demand a bit of cosseting. It went so far as to impose ATM fees on a customer base that typically held 6 to 7 figure balances in checking accounts.

Banking expert Chris Whalen has called the cost cutting effort “criminal”. He points out the obvious: there is nothing wrong with the bank’s operating businesses. The threat to BofA’s survival comes from litigation on its mortgage backed securities business, and the bank would do better to preserve the fundamental value of its business by declaring bankruptcy.

While I encourage you to listen to this entire segment, take particular note of Whalen’s comment at 2:25: “They’re trying to throw things out of the balloon, if you use the metaphor, to save their own careers, Brian Moynihan and the people Ken Lewis put in place.”

So what is this New York Times story about? It’s to legitimate a unnecessary cost cutting process. And the ugly part, which the article perversely tries to present as a plus, is the role played by the consultants. In a remarkable display of a lack of basic fact gathering, the Times never mentions that they get a piece of the action. Indeed, not only does the Times fail to mention their pay arrangements, it compound the error by emphasizing an ungalmorous meeting, which creates the impression that their pay demands might be modest too (pizza, after all, is a staple of college kids and programmers):

As Bank of America executives prepared last week to announce the first phase of their turnaround plan, a group of consultants hurried to complete their recommendations for the overhaul, called Project New BAC.

The 44 senior bank managers and roughly two dozen consultants assigned to the initiative worked through lunch, barely pausing to enjoy the pepperoni, sausage and vegetarian pies that had been ordered from a pizzeria….

The consulting firms enlisted to help with Project New BAC — EHS Partners and the Promontory Financial Group — are what are known in the industry as bank doctors. Financial firms often turn to these specialists in periods of crisis, seeking out their recommendations on deep and wide-ranging cuts to bolster revenue and eliminate unnecessary expenses.

The idea is that outsiders can find thousands of small savings and inefficient processes that insiders may miss.

Promontory and EHS both have long ties to Bank of America, and to each other.

Eric Holder, who is leading EHS’s work on Project New BAC, and Neil Smith, Promontory’s head consultant on the project, were both members of a team from Tandon Capital Associates that helped the Fleet Financial Group with a similar effort in 1994.

On that project, called Fleet Focus ’94, Mr. Holder and Mr. Smith worked with a team of 50 internal managers known inside the bank as the “Nifty 50.” One of those 50 managers was a budding young lawyer named Brian T. Moynihan.

The ordering pizza in is a nice “gee we are all ordinary, roll up our sleeves” types, but don’t be fooled. The people at that table are raking in very big bucks for getting people fired.

Tandon Capital Associates is named for Chandrika Tandon, who was a partner at McKinsey. Neil Smith and Eric Holder also worked for McKinsey (I know Chardrika and Neil; Eric joined after I left the firm).

McKinsey has long done cost cutting work, and at least when I was there, in the mid-1980s,the firm was plenty ambivalent about it. In downturns, clients were most interested in that sort of project, and they were not difficult, anyone in the firm could do them (they were considered “process” studies: you followed a playbook). And in service firms like bank, all meaningful costs relate to headcount, so these studies were all about firing people. A lot of consultants, including partners, didn’t like firing people. In addition, there were mercenary reasons not to like firing people. Some of them would be senior, and would find new jobs. Anyone who had been given the heave-ho as a result of a McKinsey project would be certain to oppose the use of McKinsey at their new employer.

In the 1980s, some members of the financial institutions group focused more on pricing and cost related work. “Pricing” was often what Elizabeth Warren now calls “tricks and traps”, it’s the reason a standard credit card grew from one page as of 1980 to a full 30 pages (when all the relevant sections are included) in language Alan Greenspan has said he can’t parse.

The working oar on the first pricing study, for checking account products at Citibank, was a former econometrician, Zosai Mucha. It made the bank $30 million, an enormous amount of money in those days. A consultant named Paul Allen took that sort of work further and eventually left McKinsey to start his own firm (Chandrika, who brought the cost cutting expertise, and Paul Allen originally were partners; they later split up)

As CEO pay became more stock price related and top executives started to care more about meeting earnings expectations than growing businesses the old fashioned way, cost cutting was a much easier and faster way to boost bottom lines than developing new products. That provided the impetus for Tandon Capital and other headcount cutting specialists, such as Mitchell Madison, another group of ex-MckKinsey types that focused on saving costs in the purchasing area (this was a particularly shrewd focus; purchased goods and services account for 20% to 35% of most big firms’ total spending. You cut costs not by firing people at your client, but by squeezing vendors).

It is important to understand the business model of these firms. The predecessors of EHS and Promontory, meaning Tandon and Paul Allen’s firm (and to a lesser degree Mitchell Madison, since firms like EHS and Promontory also now look to reduce costs of major contracts), used pre-set pricing formulas in which they got a high percentage of the amount saved as their fee. Central to the approach of both firms was to have the whole project accounted as a restructuring, with their compensation buried in the total.

To give an sense of how large the fees might run, Chandrika’s firm had landed an assignment with the old Chase in the mid-late 1990s. The project was canceled as a result of a merger, but the contract was still valid and they payout was on the order of $100 million (my understanding is this was a breakup fee). Similarly, a guesstimate by an informed source is that the fees on a medium-large project, say $400 million in savings, would be 5% or $20 million. Fees presumably scale down as deal sizes increase, so the $5 billion BofA assignment would presumably be set at a lower percentage. By contrast, the going rate for bona fide restructuring specialists like Houlihan Lokey or Gordian Group (remember these deals are accounted for as restructurings) are in the 0.75% to 1.5% range.

The major consulting firms, such as McKinsey, Bain, and BCG, also do this sort of assignment for normal consulting fee, which results in a much lower price tag. So why do these specialists get hired? The boutiques did, and probably still, take a much more active, hands on approach than is typical for most consultants. Paul Allen once approached me about working on one if his project, and he and his entire team would move to the client’s head office for the duration of the project, which could run from five months to as long as a year. They would act as part of the senior management team which would give them board and senior
executive visibility that traditional management consultants would almost never have. This would likely produce a higher level of execution of the proposals made.

But the downside is creating client dependence. I joked that the goal at McKinsey was to invade at the fingertip and go for the brain, and these focused firms have done a much better job at it. One former Mitchell Madison partner has an ongoing relationship with one major financial services firm that spans 20 years, back to his days at McKinsey. That’s longer than the life expectancy of most marriages.

Now let’s see how this is dressed up by the Times. It starts with a sanitized account of the history, discussing the deal that put Tandon Capital on the map, for Fleet Financial:

At Fleet, the consultants recommended cutting Styrofoam coffee cups that cost the company $48,000 a year. Name-brand toner for Fleet’s laser printers was replaced with a generic toner to save $200,000 a year.

In all, Fleet cut annual costs by $300 million and laid off 3,000 workers. The changes helped Fleet’s bottom line and set the stage for an eventual takeover.

This is straight dictation. The Times gives two examples that total less than 0.1% of the total. There is no amount of painless styrofoam cup level ideas that will get you to $300 million in savings. In the case of the Fleet study, the team recommended (and got paid on) cuts that were too deep; the bank had to reverse some of them due to adverse side effects.

Moreover, it is unlikely that these ideas came from the consultants, as the article headline suggests. A standard practice in this type of work is for client teams to identify and rank savings ideas (this then begs the question of why you need consultants, ex to provide impetus and de politicize the firiings; I lived through Sumitomo Bank’s regular kaizen, and it pushed very aggressively for staff to come up with cost saving ideas. I’d defy any bank to run leaner than Sumitomo did; it went so far as to take five months to reimburse employee travel expenses!). And this is confirmed by the story in the case of the current Bank of America project:

Bank of America declined to comment on the two firms, and a spokesman said many of the changes made in Project New BAC had come from bank employees rather than from outside consultants…. In phase one, roughly 150,000 ideas were submitted by Bank of America employees, and the best were presented to Mr. Moynihan and his management team.

So given the failure to probe how this normally hidden business works, does the article do any actual investigation? All I could detect was on gossip. Holder and Smith, along with Jeremy Eden, had founded EHS Partners, but Smith and Holder had not gotten on and Smith had split to form the team at Promontory Capital (which is headed by former Covington & Burling partner and OCC chairman Gene Ludwig). So the one bit of sleuthing the Times does is on whether a pair that separated on bad terms is getting on in this big stakes project. Needless to say, they didn’t get much of an answer.

The Times completely misses any one of a number of possible real stories here: to what extent are these studies really successes (Fleet, after all, was eventually acquired)? Are the rich fees warranted? Given the Whalen argument, that Bank of America’s operating units are healthy and the cost cuts are all to delay the day of reckoning for Moynihan’s and the C level executives, aren’t these consultants enablers of and participants in looting (using gimmicks to report exaggerated profits and suck out more than is warranted in pay until the enterprise goes bankrupt)?

Ultimately, the Times missed the opportunity to look at cost reduction, which is really firing people, as one of the mechanisms for transferring income and wealth from ordinary people to the top 1%. But the Grey Lady is only occasionally willing to shoot at fellow members of the elite, so predictably, it gave the Charlotte bank and its hired guns a free pass.

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  1. ArkansasAngie

    MSM is responsible for the practice of lying to America being acceptable.

    It’s all about animal spirits and confidence.

    1. jake chase

      All you have to know about management consultants: creeps, criminals, toadies, bullshit artists. As for the NYT, when was the last time it published anything but propaganda? You won’t begin to solve any of this until after the next crash, and then only if it is a really big one. It is heartbreaking to read through the painstaking analyses and explanations of what is basically looting. My plan is to just keep playing golf and let your children worry.

  2. F. Beard

    Our banking system ultimately hurts everyone – first savers, then borrowers, then the general economy and tax revenues and ultimately the banks themselves. And it does no good to try to regulate the banks because to make them more stable impairs growth which leads to cries for less regulation. Our banking system thus cycles between unstable and ineffective. And there is no happy medium, I would bet.

    1. liberal

      “…because to make them more stable impairs growth…”

      Perhaps true if you mean “growth of collection of economic rents by the FIRE sector”.

      1. F. Beard

        The banks are the ultimate “rentiers”. They rent us our money supplies, both government and private. They have given us a form of progress though – at very great social cost.

    2. steelhead23

      “There is no happy medium”, Beard says. Well, why the hell not? This is fatalism – as in immutable, unchangeable. Yves can tell you – there is nothing immutable about management. We regulated the banks pretty well between 1940 and 1980 – then we lost our way due to regulatory capture. I abhor fatalism. We are not stupid. We can fix this. We choose not to. We choose not to because TPTB frighten us.

      The truth is that even management consultants focus on the short term. (Sorry Yves, no intent to tar you). They have the skills and tools to look longer term, but that is not where management and ownership wish to go. I worked at a Boston-based engineering consulting firm that went bust in 1999. They underwent a similar cost-cutting program when a hostile takeover was attempted. A large number of long-term employees, some very near retirement, were canned, while the CEO was rewarded handsomely. Think about it for a second, does a CEO who is pulling down millions each year, have the same incentive for long-term corporate health as a journeyman employee who is heavily invested in the company’s ESOP? Oh, hell no. I learned two things by this experience – never assume that a firm that has been around for 100 years will be around tomorrow – and never trust a CEO.

      1. F. Beard

        Well, why the hell not? This is fatalism – as in immutable, unchangeable. steelhead23

        How much theft of purchasing power is “just right”? And if we could get it “just right” wouldn’t we have figured it out by now 317 years after the BoE was founded? Instead we are in danger of Great Depression II and maybe worse.

        1. steelhead23

          First, the U.S. supplanted England in 1940 and tossed out the Bank of England around 1779, so I miss your point. Yes, it is true that the heirs of the banking elite in 1780 are still kicking us all around, but I would argue that we could fix that too, if we had the will. I strongly disagree with the premise that regulation slows growth. Show me. Of course, TPTB often argue that regulation impairs growth – because it is their profits, their income, that is pared. They lie. Besides, much like investing, economic stability beats volatile growth hands down for most of the population.

          Mr. Beard, I agree that the antics of finance can hurt us. I simply refuse to believe or accept that we cannot fix it. I also happen to agree that regulation alone is a weak approach to this fix. I happen to believe that if a stable financial services industry is desired, then we must eliminate profit-seeking behavior. You see, finance is a utility function in the economy – a very basic utility. If we wish for that utility to function in the public interest, the public must control it. Hence, I have been harping on this site for about a year that the solution is simple – only offer FDIC-based depositor insurance to institutions established under a not-for-profit charter (e.g. credit unions). Regulations would still be needed but the need for aggressive policing of those regulations would be reduced because the motivation for circumventing them would be eliminated. Of course, investment banks that operate without FDIC protection would still need to be watched like the wayward children they are. I suspect such institutions would shrink dramatically – and we would never miss them.

          Yes, we can fix this, with regulation if preferred, or through eliminating the profit motive, we only need to see this as doable and needed – and then do it. It is NOT impossible.

          1. F. Beard

            How can a true Progressive be for a money system that enables the so-called “credit-worthy” (who are typically rich) to steal purchasing power from the “non-credit-worthy” who are typically poor?

            Give it up. You’ll never make government-backed theft from and oppression of the poor work properly unless God is mocked (and He isn’t!)

  3. Jim Haygood

    ‘The predecessors of EHS and Promontory … used pre-set pricing formulas in which they got a high percentage of the amount saved as their fee. Central to the approach of both firms was to have the whole project accounted as a restructuring, with their compensation buried in the total.’

    This is really surprising. Plenty of consultants were used in non-financial industries where I worked … but solely on standard hourly billing plus overhead contracts.

    I suppose the idea of percentage-based fees is to provide incentive, but as mentioned by Yves, such an incentive works to encourage excessive cutting. Why stop, when a portion of every cut falls straight to the consultant’s bottom line? Off with their heads! Let them work in Tent City, N.J.!

    Now for the sequel: cost-cutting won’t help the Old Grey Lady. Its 19th century business model is failing from the top line down. Here’s some free consulting advice for the NYT: the sooner you liquidate, the more value you preserve!

    I’ll bid on Kurgman at the liquidation sale. He would make a fine lawn man, if he can learn to drive a zero-turn mower.

  4. Jane Estes

    I have been blogging for weeks about how bad a shape B of A really is in and has been for some time. Their reserves are scary weak, thus selling everything that is not bolted down, and they are very close to being the next poster child for “too big to fail”. This information comes from a very high placed person inside their mortgage operationa who says it is tons worse than anyone thinks.

    1. Yves Smith Post author

      My view is a bit more dire than Whalen’s. I think they have some capital problems independent of the mortgage litigation problems, specifically, their second liens. However, at least through 2008, Meredith Whitney was going through all the major banks’ assumptions re housing price falls (as in assumptions of bigger housing price declines meant their financials were more conservative). BofA had the biggest HPA declines baked in of all the major banks.

      But your information is vague, and your sources may in fact be referring to underreserving for mortgage litigation losses. That would make perfect sense, given that the $8.5 billion private settlement appears to be falling apart, the $10.8 billion AIG lawsuit, the amended Nevada lawsuit, and the FHFA suits, for starters.

      And if BofA is as badly underreserved as you suggest, they should have been cost cutting way before now. The panicked action seems to support Whalen’s view, that they are cutting to shore up the stock price, and the stock price has taken a beating as a result of the bad news on the mortgage litigation front.

      FYI, Whalen gets the FDIC tapes and runs them. This is much better data that the public financials.

  5. Lyle

    I recall during my career with oil how when I started in 1976 coffee was not furnished for free, and how it came and went with the economic tides after that. IMHO (I drink soda and so had to pay) there should not be free coffee in general, cut it out. Or perhaps as the government needs revenue lets investigate not taxing free coffee as a tax expenditure.

      1. JCC

        Still one of my all-time favorite movies. Alec Baldwin had another great set of lines that are apropos to BoF and the rest:

        “We’re adding a little something to this month’s sales contest. As you all know, first prize is a Cadillac Eldorado. Anybody want to see second prize?

        Second prize is a set of steak knives.

        Third prize is you’re fired.”

  6. Social Outcast

    It sounds like the restructuring has nothing to do with the soundness of the banking business, and everything to do with restoring the share price. Wall Street expects to see payroll cutting in a restructuring story.

    1. chad

      I think a big problem is “soundness of the banking business” and “share price” are equivalent these days.

  7. zebulon

    nytimes is insolvent. they ‘downsized’ half their journalists over the last few years.

    they need revenue from advertising. the banks supply that money stream. the msm is beholden to the big banks.

    you want non-obviously biassed news, don’t go to the msm.

    i think that much is clear by now no?

  8. Namazu

    Ten will get you twenty a firm like McKinsey did the strategy study laying the groundwork for the pizza eaters, capped off by a team dinner at Daniel (charged to the client).

  9. kravitz

    Ad revenue is Ad revenue. Why should NYT care unless checks stop clearing.

    The paper is known to run what are called ‘advertorials’ for prominent advertisers. This story smells like one.

  10. justanotherobserver

    “hagiography”: the writing and critical study of the lives of the saints

    “it went so far as to take five months to reimburse employee travel expenses!”

    which is wrong. reduce the amount of travel, don’t stiff your employees for expenses incurred on the travel that they’re making for the company. That’s a great way to kill morale.

    there are two things that really stand out to me:

    1 the accepted as fact idea that these companies are run by some sort of mythical executive who’s just looking for “efficiency” and are not simply being run by a bunch of greedy jerks who are looking for a bigger paycheck and in fact ARE NOT TRYING TO RUN THE BUSINESS ANY BETTER.

    notice the complete lack of articles, and information in this article, written about CEO compensation and how their packages work.

    2 the complete lack of knowledge that these “financial” writers have. I see the same things in articles which have a scientic angle – only then it’s much worse. There’s generally at least one glaring error and many obvious signs that the writer doesn’t understand the subject matter , and more importantly, hasn’t tried to.

    1. Yves Smith Post author

      Sumitomo was really brutal. You are assuming staff could travel freely. What a joke. Any travel had to be approved IN ADVANCE by the General Affairs department, which was MORE powerful than any of the line businesses. Even cabs to meetings in Manhattan were to be approved in advance. The bank was on top of that slow to reimburse to maximize float. Get this: the second biggest bank in the world was using float from its own staff to improve its bottom line.

      I once needed to buy a $100 book that had all the composition of the factories (as in type of equipment by plant) in a particular industry. We’d already been retained and the client was very specific as to the type of facility it wanted to buy. This book was critical to completing a deal and the client had agreed to reimburse expenses.

      I sent a guy in my dept. to General Affairs to get the book purchase approve. The guy in General Affairs said, “There is no budget in your department for books.” My guy had a copy of the engagement letter and said, “The client wiil pay for this, and it is one of the bank’s richest and most important clients.” The General Affairs guy said, “There is no budget in your department for books.”

      This went on for, I kid you not, 20 minutes (my guy was very stubborn and well trained).

      The General Affairs guy then pounded the table and said, “You do not understand. Organization is more important than customer.”

      1. Capo Regime

        Indeed! At the Gray Lady, Organization and access to power are more important than the truth.

        The book to read is Starr (at Princeton) Political Origins of the Media. the notion of objectivy in media was a turn of the century marketing ploy. The origins of the media were to serve poweful interests. The peculair american idea that media is objective and serves the interest of the public is well peculiar and no evidence supports it. Will the Washington Post report on the scam of online education (no Kaplan feeds them), will NYT report on Carlos Slims dealings….See also Menckens Diaries for his experiences with the Sun Papers…..Dictation, dictation, dictation.

        1. Ray Phenicie

          The key trait, from my humble observation point, of many if not all executives, is the slowness with which decision making arrives at an outcome. During a stint with a small publisher of orchestral sheet music I struggled for 18 months as in inside sales rep with a horrific company policy of “No returns”. The policy had been in place for about five years when I began dealing with it. The owner of the company was suspicious that folks would buy the sheets, copy them and then beg to return.
          The customers finally won out and returns on merchandise were finally allowed; but only after six -seven years of screaming by the angry customer.

          A key trait of all organizations is the attempt to keep an identity and the top executives always attempt to force issues on the rest of the structure without listening to the rumbles from the angry base until it may be too late.

  11. craazyman

    it’s this kind of stuff that makes me really think attempter is correct.

    what a pathetic bunch of bozos, including the NY Times, which is good for picking up your dog droppings.

    But if I were a dog poop consultant, I’d recommend cancelling the NY Times subscription and just using paper towels.

    OK, OK, I guess not all consultants are useless. hahaha ahahaha ahah

    1. skippy

      Being correct is not enough, its flame can engulf comrades in arms in the heat of battle, death grip on the trigger thingy.

      Skippy…always check your six o clock.

  12. Guy_Fawkes

    @Chris Whalen: I was a fan of yours until now.

    You fucking have continued banking with these criminals? You just lost credibility with me today.

    Fuck YOU!

  13. Cheyenne

    Absolutely EPIC. Thanks for all you do, Yves. I know a few Times loyalists who’ll be receiving this post like Mae Clarke got Cagney’s grapefruit.

  14. Hondo

    BAC hasn’t a clue when it comes to client service especially to high net worth clients. What you mention they did to US Trust is similar to what they did (as Nations Bank) to Boatmen’s Trust Company (the old St. Louis Union Trust Company). A very profitable operation in which BAC (NB) hadn’t a clue on how to run or manage.

    1. sgt_doom

      Oh Geez, Nations Bank, with those thugs they hired and referred to as tellers, doesn’t even enter the picture where customer service is concerned.

      It is simply the super-rich family which owns the Nations Bank Corporation, and with deft financial manipulation and strategy with Goldman Sachs (Hank Paulson at the time), Mellon Bank (or NY Bank Mellon Corp. or whatever they’re called now), and DB Shaw hedge fund, which BofA gave an open $1.5 billion loan to for Russian bonds, then said bonds defaulted, that Nations swooped in and bought the vulnerable BofA. (I believe the term is swindled and screwed?)

    2. theadr

      I remember Fleet Focus. They spent 12 months figuring out who to cut. I suggested that they just cut the team as they obviously weren’t important to production. They ended up cutting the people who were close to be vested in the defined benefit plan. They had a rule of 85, adding age to years of service. Many sued individually, and got some sort of settlement, of which they were not allowed to discuss. No one got a raise for another 18 months. Then lower scale employees got a check for about one weeks pay for sticking it out. Additionally, the remaining employees got a cash balance supplemental retirement plan based on age and years of service, to which the company added incrementally. It amounted to a bean compared to the bean stalk the defined benefit plan provided. It was all a way to cut the living pension plan.

  15. Acadiana

    If you’re anti-bank, don’t you want fewer folks employed in the banking industry?

    And if you’re anti-BofA, don’t you want them to do something that will hurt their long-term viability?

    Regardless of how the NYT frames the story, it seems like these layoffs would be favored by the anti-bank, anti-BofA crowd.

    1. Cheyenne

      Wow. Way to completely whiff on the entire pinata.

      Tell you what. Rather than behead thousands of retail-level heads, we instead prune say 6-12 paychecks with names like K. Lewis and B. Moynihan on them down to what they’re worth, which is $0.00? See, that way, we save thousands of jobs at the expense of 2 pricks in their Panthers box seats.

      Out of curiosity, who cuts your own check?

      1. Cheyenne

        Yes. If it’s proven beyond a reasonable doubt that said CEOs committed a crime. We are supposed to be a nation of laws. This dates back to 1215 and is nothing radical. The failure to observe and enforce law is what’s making a breathtaking mockery of this once-great country, which without law is excrement.

        Are we not better than that?

        1. Mike S.

          Still a nation of laws?
          Quickly we are becoming something else than that.
          Where are the prosecutions?
          If you want to see cases decided on “beyond a reasonable doubt”, then we’ve got to have some things aired in court, which we cannot seem to be able to do.

          Do you doubt there is enough evidence to file charges?
          Do you seriously believe there have been a host of as yet unmentioned grand juries which have looked at the state’s evidence and decided that it was insufficient to have a trial, time and again?
          Recently This:
          HUD put together a huge trove of evidence re: reinsurance kickbacks and gave it to DoJ, DoJ simply sat on it, took no action. How’s that for rule of law?

          1. Cheyenne

            “Do you doubt there is enough evidence to file charges?”

            No. There’s more than enough evidence to file. What’s lacking it will, or, in the parlance of our time, balls.

            “Do you seriously believe there have been a host of as yet unmentioned grand juries which have looked at the state’s evidence and decided that it was insufficient to have a trial, time and again?”

            No. They looked at the evidence, saw there was a slam-dunk case, and then they got bought off because they’re mere cowards.

          2. Cheyenne

            Mike, man. While I love engaging people, and exchanging ideas and all that, you need to learn how to ask a fucking question competently. That 2nd question is a disaster.

  16. Capo Regime

    aren’t these consultants enablers of and participants in looting (using gimmicks to report exaggerated profits and suck out more than is warranted in pay until the enterprise goes bankrupt)?

    Ives–well yes. Its seems its SOP since the 90’s. Do recall McKenzie had an army at Enron (it was their largest engagement as I recall) and of Course Arthur Anderson. Curious as to how McKenzie escaped unscathed from the Enron debacle–should have been a leading piece in the McKenzie Quarterly or HBR!

  17. Maximilien

    Twenty years ago Noam Chomsky began the disrobing of the NYT with his book/video “Manufacturing Consent” about the NYT’s non-coverage of atrocities in East Timor.

    Then came their Judith Miller and her “WMD”.

    Then came their Andrew Ross Sorkin, his sycophantic articles, and his Hank Paulson hagiography “Too Big To Fail”.

    Soon (hopefully) the NYT will stand naked before the world, all its faux-liberal garments around its ankles, exposed as the Wall Street/Big Business/Establishment creature it really is.

    Posts like this one hasten the process. Thanks Yves.

    1. Maximilien


      I shouldn’t be quite so hard on the NYT. If you read carefully (and sometimes between the lines), the Opinion section can be a source of great amusement as the various writers contort themselves trying to stand in two different places at the same time.

  18. Francois T

    So, if I understand Chris Whalen correctly, the Armani suits are firing tons of people that get paid a misery just to avoid bankruptcy and save their miserable asses?

    Jesus Christ! The ego of these criminals is limitless.

    1. Cheyenne

      Yes. You understand Whalen correctly, who happens to be correct.

      “Limitless” is a good concept to ponder.

  19. Typing Monkey

    Sorry, Yves, but I’m a little dense here.

    Was this story encouraged by BAC (to shift blame for all the layoffs), or was it encouraged by the PR firm to drum up business?

    If the latter (which is what your headline seems to suggest), wouldn’t other companies generally frown upon their PR firms advertising their relationships, and therefore be discouraged from Promontory and EHS in the future?

    I’m just trying to get a handle as to the motives for spinning this.

    1. Cheyenne

      This is straightforward. BAC hired the writers. Get it? That’s a yes/no question.

      I love the white-collared tendency to manufacture bullshit issues when there are none.

      1. Typing Monkey

        BAC hired the writers. Get it? That’s a yes/no question.

        No, I don’t get it.

        Did you actually read the NYTimes article? How does BAC gain from the story?

  20. Slade Smith

    _The Times gives two examples that total less than 0.1% of the total._

    Well, in partial defense of the Times re: that example, the reader is given all the information needed to make that calculation. We are also told that 3,000 job cuts were made– it doesn’t take a genius to realize that the job cuts are obviously a much more significant part of the total than cheaper toner or cups. An inference could be taken from this passage that the cups and the toner were’t very significant cuts– it depends on how you read it. Elsewhere in the piece, the reader is told about how these cost cutting efforts can boil down to mostly job cuts:

    One project led by EHS, a 1999 revamp of the Union Bank of California that was called “Mission Excel,” saved the bank hundreds of millions of dollars and increased profits. But those savings included cutting 1,400 jobs, and the project was reportedly renamed “Mission Expel” by some employees.

    So, I don’t feel overly deceived by the article as far as the large role that job cuts are playing in the cuts. Certainly the piece could have been made stronger in a variety of ways.

    As far as the pizza thing, I doubt that they ate pizza just for the benefit of the Times. And they did call them “pies” from a “pizzeria”– which makes it sound like they got the good stuff… nobody I know calls Dominos or Pizza Hut a pie.

  21. Elmer

    Say Doc

    I suggest you listen to the Sept 14th ‘On point’ on NPR. The whole show was dedicated to BAC and the layoffs.

    They had some bubble headed female NYTs reporter say -“If Bank of America vanished, there would be no place for people to do their Banking”

    Fortunately she was cut down by one of the other guests. Everything out of that woman’s mouth was fox news type generalizations with no factual underpinning.

    Seems like NYTs has gone to the dumb dogs.

  22. Brett

    Yves, this is another piece that I must disagree with some of your analysis. While I agree, the NYT piece is crap (omg these Galtian heroes barely ate their modest pizza while they did their job!!!!), I do think BAC is forced to do these layoffs. BAC does face an enormous liability a few years into the future with the MBS lawsuits, and if BAC does successfully reduce expenses by $5 billion per year while not significantly harming its revenues (which remains to be seen), it’ll be a wise move.

    The goal is to build up a capital buffer to deal with the threat over time. It is difficult to convince me that a bank that employs 280,000 is running efficiently. From my experience, I know a fair number of people that work at BAC and in my opinion they are useless. They know very little about finance and spend most of their time surfing the web for NFL news, chatting on Gmail, watching YouTube, etc. These are people that BAC could easily get rid of, and they make decent salaries.

    For example, one of my good friends who quit his job at BAC recently told me the other day that BAC was sending him a surprise check. Apparently BAC had been contributing every paycheck to a pension for him that he wasn’t even aware of. Since he had worked there for over 3 years, he was “vested” and could receive the money. He was surprised cause he didn’t even know about this — such examples suggest that either my friend is dumb or BAC is overpaying people when they could get away with less. But if my friend is dumb, why did BAC hire him in the first place, simply to watch Youtube all day (until they blocked it a year or so ago)?

    I agree with your assertion that it’s a crime for the top executives to fire people while continuing to pay themselves extravagantly. That is a common problem at every U.S. firm (for the most part), and it’s sad and corrupt part of our culture. But still they need to do something, not stand like a deer in the headlights as the bills mount. Layoffs are necessary, asset sales are necessary — pretty much anything to raise capital should be on the table right now. And I don’t think you can expect them to declare bankruptcy as good Samaritans, unless you are talking about declaring bankruptcy on Countrywide — which would be a good move.

    So in sum: Yes NYT reads like a PR piece, Yes maybe BAC shouldn’t be paying these firms exorbitant fees to just fire people, Yes firing people but paying yourself millions is unethical and wrong, but No, I don’t agree that layoffs are not necessary given the trouble BAC is in. They can still earn their way out of this mess, but it requires cost cutting as much as possible.

  23. Glen

    Very, very, very good post. In a way, BoA has become a microcosm for the failed American Wall St bailouts and what it will do to America. BoA is now destroying it’s real assets to protect the people at the top who are responsible for this mess, just as the Bush/Obama bailouts are one of the root causes for America’s economic self destruction. Letting the banks fail was always the right answer.

  24. Fiver

    Couple of thoughts:

    1) When was the last time NYT even attempted to ruffle a truly powerful feather via solid investigative reporting? Cripes, even going back to the Pentagon Papers, they published well AFTER the peak of broad public opposition to the War. If NYT was the sole source of “information” we’d always be light years behind the real curve of events.

    2) I agree with Yves that the second liens loom huge for BoA (and a couple others) not least because to fix the situation involves breaking something else. I’d also suggest Chris Whalen is far too comfortable with off-balance sheet crap, and regulators’ willingness to look the other way.

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