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Bank of America Corporate Center - Charlotte, NC

Reading the Wall Street Journal today, an article on the 3rd page caught my eye. Apparently, Bank of America has gotten into the business of home invasions and parrot-napping (NY Daily News).

Angela Iannelli, a 46 year old from the Pittsburgh area, came home to find her door padlocked, her house ransacked, and her 11-year old parrot – Luke – missing. A Bank of America employeed royally screwed up, believed her property to be vacant (it wasn’t, nor was she behind on her payments), and sent a contractor over to install a new lock and “secure” the property. I guess in Pittsburgh, the method of securing a property is to cut the power and water, cut electrical lines inside the house, damage floors, damage furniture, pour anti-freeze into the toilets, and take animals. Maybe the contractor should be lucky it was caught after the fact, because there is a good chance that somebody might have gotten shot.

When Ms. Ianelli returned home, you can imagine what went through her mind. The biggest thing to her was that her parrot was missing. She claims to have stayed with friends until he was returned.

Bad enough that the bank goofed, even worse was the lack of response or helpfulness from the bank when she called. They denied knowing where he parrot was, then eventually was told she could drive the 80 miles to the contractor’s office and retrieve Luke herself.

Needless to say, she is suing the bank for more than $50,000, and she rightfully should. If I had been her, I would’ve wanted to make sure that I received enough to repair all of the damage, pay my lawyer, give myself a little, and, most importantly, had them wipe away my mortgage. Why? Just as we are judged by trustworthiness by the bank (i.e. credit score), we need to have trust in the bank too. Just because they hold the lien doesn’t give them to right to waltz in and out whenever they please, especially when it involves damaging the property.

The bank issued an apology this week after the lawsuit went public. Too little, too late. I’m rooting for you, Ms. Iannelli. Did I mention I have a Bank of America mortgage too?

Citigroup Headquarters in New York

Citi announced today that it was going to run a new mortgage program. If you become unemployed and have your mortgage through CitiMortgage, you could have your payment reduced to $500 a month for 3 months. Not a bad deal, figuring $500 will get you into a rough apartment in most places across the country. And if after 3 months and you are still out of work, then they can consider continuing it or modifying your mortgage, on a case-by-case basis. The best part being when you find a job, you may also qualify for having your mortgage modified as well.

Now as much as I dislike Citi, this is a great idea. My question is, why couldn’t have someone thought of this a long time ago! At least in 2007, when the alarm bells were going off, the foreclosure rate was creeping up, and the economy was preparing us for this 15 month long (as of now) recession. Do you know how many problems we may have averted! It’s not pandora’s box by a long shot, but is definitely a critical piece of the puzzle that has been missing for a long time.

So if I like this plan so much, why am I criticizing Citi? Because I don’t question the plan, I question the motive. They have been bailed out 3 times by the government, and still may not make it. If my math is right, they are up to $70 billion, or Bank of America’s and JPMorgan Chase’s combined bailout. Given the fact that Citi is smaller than both of those two, it leaves you scratching your head.

I believe there are 2 primary reasons why this has been done. A) To save some face with the public, and B) the public now countrols 36% of Citi. Whose in charge now? Not because someone had a dirty concious, not because someone got smart and figured out nailing it to the guy in need is not going to solve the problem.

All in all, it is a step in the right direction. Too little to late to stem the crisis, but it may soften the blow. Hopefully other banks will move in the same direction. I know they currently offer “mortgage insurance” that eliminates payments, yet when I’m already paying a PMI, I feel I should already be covered.

However, thinking back to Citi’s 3rd bailout (and AIG’s), I think we need to assert an unwritten rule of thumb. Let’s limit them to three. In fact, three is too much, but we’ve already done it so we are stuck with that number. If they need more than three, and are too big to fail, then the U.S. needs to nationalize (yes, I said nationalize), long enough to break up the various pieces and sell them off to investors and other banks, to reduce the recoil felt in the industry.