Bye Bye Bank of America

[seanD]

I was actually simplifying it and gave more of a summary for the sake of the novice. Your explanation was the detailed version.

Counterfeiting was admittedly my own spin on it (though this is an interesting article). We know there was obvious shadiness in regards to the handling of securities, no question about that. The question is how deep and rampant it was. Whether there is "shadiness" or not with MERS is more subjective and we'll have to wait and see (I indicated that it was in limbo in post #12). But if there was no shadiness involved with even the issue of MERS then there would be no litigation, State Attorneys (from 50 states) would not have gotten involved, the SEC would not have gotten involved, BoA would not have suspended the foreclosure process until it could get straightened out, and BoA would not have gone frantic with an attempt to cover up their tracks when they heard rumors that wikileaks would release information on how they handled the whole situation.

And though I thought this might be the fuse that lights the derivative bubble bomb and down the banks once again, they have many tricks and ways to guise bailouts as to avoid public scrutiny, so I'm not so sure now.

[JusticeMachine]

I guess, part of my issue, is the terminology you are using - Shadiness and incompetence are not the same thing - Shadiness IMO implies knowledge and will, were as incompetence is the opposite of that. There is enough inflammatory rhetoric bandied about the EVIL banks, and how they are taking advantage of the people. We need the EVIL banks, they make our economy move, demonizing them on serves to foment an environment the is counter to recovery efforts. If there is/was some nefarious activity, the it should be ferreted out and prosecuted, then regulations put in place to keep if from happening again. Right now we have a witch hunt for the banks and people hoping they will win the legal lottery and get a free house. What we have it the perfect storm of deregulation, a economic boom based on the very item the the deregulation destabilized, and a struggling economy, that if it weren't for the boom of the deregulated, destabilized item, it would never occured. (Interestingly enough, if you looked at our economy when the boom started and leveraged out real estate, we were in a recession then.)

BofA seems to be getting beaten up pretty good, when they were pressured by our government to buy the trouble assets from the failed CountryWide and.....Oh...I can't remember the name of the investement firm they bought....Oh well.

I don't believe the investors were mislead regarding the risk, else they all wouldn't have rushed to AIG to buy insurance policies (Credit default swaps) to cover the rear end.

I think BofA is on the hot seat because they are the biggest company left standing and that is who john Q public is venting their frustrations out on. AIG is gone, Goldmann is gone....etc

[seanD]

The bank that BoA took over you're referring to is Merill Lynch.

Credit default swaps weren't purchased by the investors, they are purchased by the banks. I think you're getting the concepts confused. Collateralized debt obligations (securities) and credit default swaps (insurance) are two different instruments, and though they often go hand in hand and are both part of the derivative paradigm, they are not specifically instruments I was referring to in this thread. Banks bought CDSs on the CDOs to sweeten the deal and make it look more attractive to investors. The problem is that he CDSs were often done under the table and didn't require the banks to have the collateral to cover it (a la the bailout of AIG). Whether the recent regulations changed all that, I'm not sure. Being that the derivative market is now anywhere between $600-1.5 quadrillion, I doubt it. When the next crisis occurs, there is no way these companies will be able to cover $600-1.5 quadrillion dollars.

Goldman Sachs committed fraud, thus their security deals were shady, and this was proven in the SEC investigation, but I pointed out in post #12 that this doesn't mean the other banks did the same thing they did (purposely packaging the riskiest loans and then betting that they would fail without telling their customers). Yet we do know BoA committed fraud by misrepresenting their securities which is why they settled with Fannie and Freddie, something I also pointed in post #12 (not sure why I have to keep pointing this out). Whether they committed fraud against Arizona, Nevada, Allstate and the number of other claims against them (and more to come I"m sure), we'll have to wait and see because these are pending. Nonetheless, It kind of follows that if Goldman Sachs can commit fraud in a deal they made $2 billion and only end up paying a quarter of that in fines with no crinimal charges, do you think this will set a precedence that they can get away with more fraud, or do you think they learned their lesson? And what sort of message do you think this will have in the financial industry as a whole? And if they get bailed out with tax payer funds every time their risky and reckless ventures go south, do you think they will learn to take more riskier ventures or less riskier ventures?

And I totally disagree. There is nowhere near the witch hunt against the banks like there should be, at least not in a publicity sense, mainly because most people don't understand this aspect of the financial sector. If people really knew what the banks did to cause the collapse of 2008, what their tax dollars were used for and why, and what the banks are still doing now then we would see the kind of reactionary and emotional rage leveled against them that we saw leveled against... say... the mosque in NY. We would see what we're seeing in the streets of Greece, France, UK, Italy. I haven't lost all hope though. Even though Americans, who are preoccupied with the irrelevant political circus and entertainment, are oblivious as to how they're getting screwed, I still believe the days of revolt are coming as the economy worsens and either more bailouts of the banks become an inevitable reality once again or talks of QE3 are proposed.

I'm not sure what you mean by AIG and Goldman Sachs being "done." Goldman Sachs is probably the #1 or #2 bank right now next to JP Morgan. BoA is most likely #3.

[seanD]

There are two issues with foreclosuregate: a) Individual mortgages; b) mortgage backed securities (MBSs, CDOs).

As far as the "evidence" for fraud, this is a very complicated issue, but the evidence is scattered throughout this thread and I tried to lay it out as concise as possible (guess I failed).

The former is currently being investigated. The question is: if the banks sell and resell mortgages on the open market without the deed or proof of ownership of the mortgage, or without carrying out the legal and proper procedures, do they have a right to foreclose? And if not, then who does and how do we know just who has the legal right if the mortgage was packaged and shuffled around from bank to bank, from investor to investor? Essentially what it comes down is that they're counterfeiting mortgages. In many cases, people are getting foreclosed even though they either paid off their mortgages to a different bank that already sold their mortgage to another bank or investor, or they adjusted their loan with a bank that no longer has their mortgage. In other cases, the homeowners who already paid off the house may not even really own the house if their was a mortgage on the house previously that was never legally settled. So it's a major quagmire that is in limbo right now with State Attorneys demanding an investigation (see post #4).

The latter is much more ominous and has to do with banks packaging mortgages into securities and selling those securities on the market. So far so good. In the case of Goldman Sachs and their Abacus product, however, they intentionally packaged the riskiest mortgages, knowing the security would go bust, got them Triple-A rated, sold them on the market as less risky instruments, and then bet against them (discussed here), in which an investigation ensued that merely resulted in them being fined about a quarter of what they made on the deal (strangely no criminal charges were leveled against them).

BoA seems to be getting a lot of heat lately than most of the other banks, or at least more press than the others. This doesn't mean that all the banks did what Goldman Sachs did, however, the accusation is that the banks advertised those securities as being less risky than they actually were, which is of course fraud, and is currently under investigation (here). Although I'm not holding my breath that an official government investigation is anything but window dressing, the litigation from other corporations and especially other states is what will take down the banks because the government has no control over this. So far, Arizona, Nevada, (possibly) New Jersey, Allstate, Federal Home Loan Bank, attorney Kathy Patrick have threatened litigation against BoA (which I guess is pending), which I have documented throughout this thread. In post #10, it was a clear case of fraud, thus Bank of America settled with Fannie and Freddie about 50% of what they actually owned on the security buy-back, in which the tax payers, who now own Fannie and Freddie (being a government subsidiary) will pick up the slack, hence some are even looking at that as a guised bailout in favor of BoA.

The point is, I think most investors who got duped find it a bit dubious going up against giants such as Goldman Sachs, BoA, JP Morgan, etc., yet if this litigation proves successful, then not only will this surely take down BoA (barring just another government bailout), but other investors who got duped will most likely jump on the bandwagon out of boldness and because of the publicity of the banks' liability.

Another issue is that the reason (I firmly believe) most of the states are in trouble now is because they used the money from municipal bonds they sold to invest in these securities that went bust when the housing market collapsed, instead of infrastructure. So being that the sates are in trouble, if they think they can win a case against the banks, you better believe they would consider this their only option of getting out of their mess.

Here's an example of why I used the hyperbole "counterfeiting."

"The Staten Island home was to be put up for foreclosure by U.S. Banks servicing company Ocwen Loan Servicing after the unnamed owner fell behind on the mortgage payments.

All was clear enough until Home123, the original lender, pitched in and said it owned the property.

U.S. Bank has fought back but did admit in court documents that ‘due to unforeseen circumstances, the original Assignment of Mortgage and Endorsement Note were lost before they could be recorded’.

Joseph Sant, the lawyer representing the homeowner said that U.S. Bank wanted to foreclose on a home ‘without proof that it owns the mortgage’.

‘That should not surprise anyone after the revelations of widespread robo-signing and document falsification in foreclosures,’ he said.

‘What does surprise me is that the bank admits that it lacks key evidence needed to foreclose, yet is trying to bulldoze through the legal process anyways’.

Across the U.S. there have been countless cases of banks wrongly targeting homeowners for foreclosure."

http://www.dailymail.co.uk/news/arti...=feeds-newsxml

[seanD]

Bank of America Legal Costs Dwarf GSEs'

So far on the list:

Arizona
Nevada
Allstate
Pimco
Federal Home Loan Bank
MetLife
New York Life Insurance Co
Dexia Holdings
TIAA-CREF

And this not including the State Attorneys demanding an investigation. This is exactly what I expected to happen. Investors are naturally reluctant to go up against a giant like BoA, especially when that giant has government backing. But once the litigation snowball starts rolling, it will grow and grow, because other investors who realize they got duped will become embolden when they see others stepping up to the plate. The ligation will just get bigger and bigger and I expect many others to jump on board. I also suspect more states who bought into these investment vehicles to jump on board, especially in light of the sinking municipal bond market. The government can guise bailouts through Fannie and Freddie, but they can't cover up the wrath of private investors.

One of two things will likely happen: BoA will sink and take the whole financial institution and derivative market down with it once again: or another bailout will be proposed. And if the latter occurs, put this in the perspective of an already jaded public, a sinking housing market, sinking employment, growing inflation, and talks of serious austerity cuts coming to America.

[seanD]

Arizona
Nevada
Allstate
Pimco
Federal Home Loan Bank
MetLife
New York Life Insurance Co
Dexia Holdings
TIAA-CREF
Michigan
Oregon
Fresno County Employees' Retirement Association

http://www.reuters.com/article/2011/...54465420110127

[seanD]

60 minutes did a good piece on foreclosuregate, which is far from over. This is only half of the scandal, the individual mortgages that was described in post #12, and that is still just unwinding, thus is another aspect that could deliver a blow to the banks and send them under once again...

http://www.cbsnews.com/video/watch/?id=7361572n

[seanD]

BofA is toast. And so here comes Buffet to the $5 billion rescue...

http://abcnews.go.com/US/wireStory?id=14383054

Only here's what's so funny, and I haven't heard one article cover this and I've read about half a dozen. In February, Buffet dumped a $53 billion package that contained BofA stocks, and this was when BofA didn't look half as bad as it looks now, at least obviously to the public (though we all know they were insolvent way back in 2008, and that never changed in spite of the bailout)...

http://www.dailyfinance.com/2011/02/...away-holdings/

Can you say "bailout." Or at least a psychological bailout to temporarily keep their stocks from plummeting, at least until Bernanke can institute QE

[seanD]

BofA is toast. And so here comes Buffet to the $5 billion rescue...

http://abcnews.go.com/US/wireStory?id=14383054

Only here's what's so funny, and I haven't heard one article cover this and I've read about half a dozen. In February, Buffet dumped a $53 billion package that contained BofA stocks, and this was when BofA didn't look half as bad as it looks now, at least obviously to the public (though we all know they were insolvent way back in 2008, and that never changed in spite of the bailout)...

http://www.dailyfinance.com/2011/02/...away-holdings/

Can you say "bailout." Or at least a psychological bailout to temporarily keep their stocks from plummeting, at least until Bernanke can institute QE

This was a really good article pretty much covering this, only in more detail. I didn't know Buffet was getting such a sweet deal out of it, which tells me BofA was in more trouble than even I thought. Basically Buffet is the loan shark and BofA is the crackhead who needed the cash for a quick fix.

http://www.123jump.com/market-analys...-Smells/45702/

[seanD]

BofA just cleared their balance sheets and offloaded a bunch of toxic mortgage derivatives onto to Fannie, and according to Issa and his implication, it's looking like another guised taxpayer bailout...

http://blogs.wsj.com/developments/20...ervicing-deal/

In any event, it's only $500 mil, so in the bigger scheme won't do much to save them from the flood of litigation. Although if you're a taxpayer, you should just love this.

[seanD]

Hurry, Bernanke, get that QE3 going. Your illusionary recovery can't afford a BofA chapter 11 at this point.

http://money.cnn.com/2011/11/29/mark....htm?iid=HP_LN

[seanD]

“This lawsuit should send another clear message that reckless lending practices will not be tolerated,” Bharara said in a statement. He described Countrywide’s practices as “spectacularly brazen in scope.”

It was just as much fraud four years ago as it is today. Yet the US government waits until now in order to use it as an obvious reelection ploy for Obama. What does that say about the complacency of the federal government in regards to the rampant criminality (Countrywide/BofA certainly isn't the only criminal bank that engaged in this activity) in the "too big to fail" banking system, where they only go after a bank if it serves their political agenda?

http://www.washingtonpost.com/busine...bc7_story.html