Bank of America

We hardly needed confirmation that a) Bank of America is a den of criminals and thieves, that b) its toxic $1.3 trillion mortgage division, better known as Countrywide, is an even scarier and more putrid den of criminals and thieves, and that c) it retaliates against anyone who dares to remind the bank that there are such things as laws, and the aforementioned criminals and thieves actually have to follow these. Yet this is precisely what we just got after the Department of Labor said that it must pay $930,000 to an employee who led internal probes of abuses at its Countrywide Financial unit and was fired in violation of whistleblower protections.  Bloomberg reports "the employee, who also must be reinstated, had claimed that people who tried to report fraud to Countrywide’s employee- relations department suffered persistent retaliation, the agency said today in a statement. He was fired after Charlotte, North Carolina-based Bank of America’s 2008 purchase of Countrywide, according to the statement." So is it possible that the general public can now get the documentation that said whistleblower was fired for attempting to bring to his retaliating superiors' attention? And just how damaging will this development be to a bank which is already embroiled in litigation with virtually every single entity that has every transacted in mortgages both in America, and now abroad?

While two weeks ago the notable feature in the NYSE short interest update was that it had grown by a whopping 1 billion shares, or the most in over two years, this week's highlighted feature is that in the second half of August evil "speculators" did not relent in their negative bias, and brought the total NYSE Group short interest to a two year high or 14.9 billion shares, a 484 million share increase from the prior week, and the highest since July 2009 when the market still was unaware that central planning was the name of the game, and being short actually meant taking on the Chief Printing Officer head on (and fewer still realized that being long gold was the only effective way to "fight the Fed"). And just like last week when we speculated that we can "expect some even more furious short covering sprees to send the S&P much higher on an intraday basis" courtesy of this massive short interest overhang (which will without doubt be used by stock custodians to create a rally if and when needed, just like back in March of 2009, by making recalling shorts in every name), the probability of a massive "face off" rally grows as more and more join the ranks of those believing that the US capital market still plays by the rules. Newsflash: it does not. And anyone trading stocks, on either the long or short side, is guaranteed to lose.

The irony could.not.possibly.be.any.damn.funnier; Just as Sgt. Obama had the not so lonely unemployed club band huddled around him to tell America to "PASS THIS BILL", literally that very minute Bank of America released a statement it is sacking 30,000. Because Banana republic is so 2010, we are now officially an Onion republic.

It was only a matter of time. A few weeks after every money losing firm in the US and the kitchen sink disclosed it would sue Bank of America in an accelerating attempt to salvage something through litigation, the worst case scenario for Brian Moynhian just got real. As of minutes ago, Norway's Government Pension Fund, which is another name for its Sovereign Wealth Fund, has just announced it is suing Bank of America for mortgage fraud. Not only that but it is also going after Countrywide, obviously, but far more importantly, is also suing KPGM, the auditor on the Countrywide transaction, and, drumroll, ole' Agent Orange himself. If US bank analysts were busy quantifying the damages from every bank in the US suing BofA, just wait until the calculation is expanded to included every firm that bought mortgages from Bank of America... ever...in the entire world.

Oddly enough, just two years after hiring Sallie Krawcheck from Citi, BofA has just made her into the first sacrificial scapegoat. Odder still, is that Lehman also fired a women scapegoat a few weeks before it filed for bankruptcy. Coincidence? Find out when Brian Moynihan is fired in a few short weeks.

And so it begins:

• FHFA Sues Barclays over mortgage securities over losses for $4.9 billion: RTRS
• FHFA Sues Merrill Lynch Bank of Americal over mortgage securities over losses for $30.85 billion: RTRS

Put a fork in Bank of Countrywide Lynch.

Trust Bloomberg's Jonathan Weil to put two and two together, and to remember that everything new is just well forgotten old. In this case Bank of America. And we are not talking comparisons to Lehman (or even SocGen) - those are boring. No, it is much more fun to compare the insolvent bank to another world con, in this case WorldCom. As Weil reminds us, the news that Moynihan's last stand was considering a tracking stock reported earlier by the WSJ, as a means to demonstrate to the Fed its "viability", is nothing short of the comparison of WorldCom's last ditch in kind method, which none other than a WorldCom director likened to, well, horseshit.

Looks like Wikileaks is not waiting to see how litigation with the Guardian turns out and is set on doing all it can to bring the world to the brink of, what's that word again, oh yes, war. And a free Zero Hedge hat to the first guy or gal (the latter gets a choice of ZH thong instead) to discover whatever it is that Wiki may or may not have had on Bank of America. Something tells us not many people will be sleeping at the Department of State tonight.

We have had a nice run here on (BAC), posting a profit of 20% in just one week. The stock market is now at the top end of a one month range, so I am going to cut back some risk. The big gainers are always the first to go on the chopping block.

We have had a great 130 point rally off of the August 8 capitulation low. The market is getting artificially ramped up to overbought levels by month end window dressing, as portfolio seek to hide the damage caused by the worst month in the equity market in ten years.

Oops:

• FDIC OBJECTS TO BANK OF AMERICA MORTGAGE-BOND ACCORD
• THE REASON FOR THE OBJECTION IS THAT THE FDIC DOES NOT HAVE ENOUGH INFORMATION TO EVALUATE THE SETTLEMENT

Time to sell the other half of that China Constricution Bank stake... And Merrill... and Countrywide (goodluck), and pretty much anything else that is not nailed down. But don't worry: it's a liquidity, not a capital issue, or something. In other news, the Buffett "Eureka alert" is on BathCon 1.

Bank Of America continues to desperately raise firesale capital (which it most certainly does not need).

• BANK OF AMERICA AGREES TO SELL 13.1B SHRS OF CHINA CONSTRUCTION
• BANK OF AMERICA SEES SALE GENERATING $8.3B PROCEEDS
• BANK OF AMERICA KEEPS 5% STAKE IN CCB
• BOFA SEES CUTTING RISK-WEIGHTED ASSETS BY ABOUT $16.1B BASEL
• BOFA SEES SALE GENERATING ABOUT $3.5B ADDED TIER 1 CAPITAL
• BOFA SEES GAIN $3.3B ON SALE

In summary: That's $13.3 billion in new capital in the past week that BofA promises it does not need. At all. As for the buyers: the same sovereign wealth funds that just bailed out the Greek banking sector for a few more days.

We are not sure how this is news, since it was announced weeks ago, but according to CNBC the bank that did not need capital, is following up yesterday's $5 billion capital raise with another $10 or so billion by selling "at least half of its 10% stake in CCB." That said, back on August 11, the FT came out with a report titled, "BofA faces struggle to sell CCB stake" in which we learn that "Bank of America is facing difficulties in selling its 10 per cent stake in China Construction Bank, partly because potential investors are expecting a deluge of rights issues, share sales and new listings from Chinese banks. But it might now raise less than than it had hoped. The BofA stake, once valued at $20bn, is now believed to be worth several billion dollars less, according to bankers. The US bank has approached sovereign wealth funds and other investors in the Middle East and in Asia, according to people familiar with the matter. The Kuwait Investment Authority was one potential buyer BofA approached, these people add, but the sovereign wealth fund already holds large stakes in ICBC and Agricultural Bank of China. “Right now, the KIA does not want to do anything more,” says one person with knowledge of the matter. “They think they have enough exposure to Chinese banks.” The KIA expects the two banks in which it already has shares to launch rights offers and the KIA intends to support those banks. "They will only look at CCB if the discount is high enough,” the person added...Potential buyers say the timing for BofA is particularly sensitive because, if CCB does launch a rights offer – as is widely expected – and BofA is still a main shareholder, it will be obliged to participate, using capital it can ill afford to part with." Stated otherwise, this must be one of those, "this time it's different" occasions. Next up: Bank of America does not, repeat NOT, need to sell its employee's blackberrys, but it will. Just because.

Earlier today, courtesy of the unbreakable bond between Warren Buffett and CNBC's Becky Quick, we learned that supposedly Warren came up with the idea to invest $5 billion in Bank of America (which really is $2 billion when accounting for the intrinsic value of the warrants, which in turn makes the dividend on his at risk investment a stunning 15% but we digress - more here) while in the bathtub on Wednesday morning. What is interesting, is that according to the just released Securities Purchase Agreement, between Warren's Archimedes moment yesterday, and the announcement this morning, here is what he contractually represents and warrants that he did...

This is just hilarious: According to Bloomberg, Bank of America’s main hesitation was taking Warren Buffett’s money when bank had said it didn’t need capital, CNBC reports without saying where it obtained the information. It adds, the symbolic value of investment worth boost to confidence; "$5b not lot to raise" - also apparently "Terms better than public market." Here is our retort: Bank of America could have told Buffet: "No thank you" and leaked it. Instead it confirmed what Zero Hedge has been saying since October 2010 - that it is absolutely desperate for capital. Also, as to the saying that "terms were better than the public market" - why of course they are - the bank has absolutely no access to the public market. BAC IS LOCKED OUT! But at least we will soon see just how efficient Dodd-Frank's bank insolvency contingency is in real life. Because we have a feeling the brilliant legislation penned by Barney Frank and Countrywide's senator, may fall just a little short...

And BAC retraces 50% from its pop. An 81 year old Buffett should really stick to washing himself while in the bathtub, flying in private jets with Becky Quick, and contemplating ways to have everyone in America pay more taxes, and maybe even consider retirement every now and then, than making "Long-Term" investment decisions.