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TARPed, RETARPed, And Then DETARPed

Tyler Durden's picture





 

 Tonight we learned that the FHFA, on behalf of Freddie Mac and Fannie Mae, are suing Bank of America, Merrill Lynch and Countrywide plus 27 individuals who were signatories to the individual RMBS prospectuses at issue.

The entities and individuals are being sued for making false and materially misleading statements, material misrepresentation, and common law negligent misrepresentation and in the case of Countrywide and Merrill Lynch common law fraud (one wonders if this opens the door for AG’s to charge any of the entities with criminal fraud) in connection with $57.4 billion of RMBS sold to Fannie Mae and Freddie Mac. It is worth noting that the allegation of common law fraud allows the Plaintiff to seek punitive damages. Further, there are allegations of material omissions made by the Defendants such that the Plaintiffs were not able to conduct proper due diligence on the securities.

The suit alleges that the entities and individuals lied (materially misrepresented) just about everything to do with these securities, from defective loan origination, to defective securitization.

We are truly shocked that 3 years after Fannie and Freddie were made wards of the state that the government is only NOW discovering the lies involved in this whole process. One wonders where they were in 2004, 2005, 2006.......? From the FHFA filing against Merrill Lynch pg.95

Former Merrill Lynch CEO John Thain accurately described the problem to the FCIC in September 2010:

 

"when you have a system where you pay someone for originating mortgages simply on volume and nothing happens to them if the credit quality is bad, and nothing happens to them if the borrower is fraudulent on his loan application, and nothing happens to him if the appraisal’s fraudulent, then that’s probably not a very smart system."

We ran a rough estimate using what the FHFA is seeking from UBS (the only lawsuit to date that quantifies the amount the FHFA is seeking). In UBS, the suit was based on $4.4B billion in RMBS in which the Plaintiff is alleging approximately 20% losses on the securities at issue and asking to for $900m.

If we apply those metrics to the BAC/ML/CFC entity, the total value of securities involved is $57.4B which equates to approximately $11.48B in loss damages alone. In addition the Plaintiff is seeking punitive damages from ML and CFC. Bank of America is a mere $1.2B of that total damage amount, Merrill Lynch $4.97B and Countrywide is $5.32B.

Alternatively, using generic cumulative loss thresholds of around 45% based on Fitch estimates for 2005-2007 vintages, and applying a conservative 60% loss severity to defective loans, implies $25.8 billion loans are defective, with total Bank of America umbrella losses of $15.5 billion.

This is virtually the entire worth of the company's stake in the China Construction bank. And this is to settle just with the FHFA alone!

Not to poke holes in the “buy” thesis of Dick Bove who does not seem to understand that BAC's deposits are actually a liability, and who at 60+ years old still does not know the difference between a stock (which incorporates something called "liability assumption") and asset purchase, we can’t help but wonder when BAC will again claim with a straight face that they don’t need any “new capital”. We do speculate that that the man who just last week purchased 7% of the company for $7 a share won’t be taking any baths in the immediate future.

From Bloomberg:

Some of the firms sued today had asked the Treasury and the Fed to slow the process so they could settle the claims out of court, according to a person briefed on the private conversation who spoke on condition of anonymity. The impending lawsuits were one subject of an Aug. 10 meeting at Treasury between Bank of America Chief Executive Officer Brian Moynihan and Treasury Secretary Timothy F. Geithner, the person said.

We have no doubt that the “investment” by Mr Buffet and the sale of  their CCB shares in the last ten days were all pure coincidence, as clearly BAC  was not aware of any events on the horizon necessitating the need for “fresh capital”.

While the most damaging deal to the BAC franchise was the purchase of Countrywide, the brilliant idea of Ken Lewis (and no doubt about 3 dozen investment bankers), Merrill Lynch was not the sole idea of Ken Lewis, not by a long shot.

The first time we asked whether it was appropriate to hold Ken Lewis responsible for the mess that is the purchase of Merrill Lynch was back in February of 2010. We suggested that is might also be worth looking at Ben Bernanke and Hank Paulson as culpable parties given that  they basically told Ken Lewis he had to do this merger for the good of the country. A couple of days after the initial piece we posted this which outlined the strong armed tactics that Hank Paulson employed so Ken Lewis would not use the MAC clause to get out of the "Merrill Transaction".

We use the walk down memory lane to demonstrate, that the same government that begged, lied, and basically broke the law to get Ken Lewis to buy Merrill Lynch, is now suing this entity possibly all the way to bankruptcy court (if one believes that TBTF can actually, you know, fail).

Incidentally, if any of the shareholders of BAC wish to trace the ultimate guilty party for the downfall of Bank of America, they should focus their ire not so much on Moynihan, who was merely the planted fall guy, nor so much his predecessor, Ken Lewis, although his purchase of Countrywide is now the single worst M&A transaction in history, but the man who broke every fiduciary law imaginable and then some, and who forced Bank of America to bite off ten times more than it could chew, all while operating under the pretense of prosecutorial immunity on grounds of "saving the world."

It is time someone finally put an end to this farce on and handed a summons to Hank and his "crony communism" buddies, who ended up bailing out mother Merrill's multi-millionaire stakeholders and managers, at the expense of hundreds of billions in wiped out Bank of America equity value, and soon to be, deposit impairments, as America's biggest bank is first taken to edge, and then, beyond.

At a minimum there is a real human cost to this mess in that a total of 30,000 individuals  are to be layed off in the coming BAC "rationalization" process as the bank attempts to starve off oblivion, from the Charlotte observer:

The Charlotte-based bank could potentially shed 25,000 to 30,000 jobs over several years, the sources said. The bank hasn’t said how many jobs will be eliminated in the efficiency campaign, although some reports have said the number could reach 10,000. Executives are still working on final plans........A 30,000 reduction would equate to a little more than 10 percent of the employee base.

So to sum up: first the taxpayers were asked to save Freddie and Fannie, then they were asked to save the banks, now when it is politically expedient to do so, the first entity which is still being saved ($200B of taxpayer funded capital injections later) is suing the second saved entity. In the interim, on a day when job growth in this country was essentially ZERO, we are going to lose another 30,000 private sector jobs.

Finally, it is worth mentioning that these lawsuits are suggesting that Fannie Mae and Freddie Mac were semi-clueless when it came to the mortgage securitization process. Something that may be a tad difficult to prove given that they were major players in the mortgage markets.

If readers are confused, they are not alone.

h/t Lizzie363

 


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Sat, 09/03/2011 - 01:22 | Link to Comment Deepskyy
Deepskyy's picture

It will cripple the Charlotte area, but I still say it couldn't happen to a nicer group of cocksuckers.  (TPTB, not the employees who will pay the price ultimately)

Sat, 09/03/2011 - 01:57 | Link to Comment TheMerryPrankster
TheMerryPrankster's picture

Seems like they could use all those "excess" employees to certify and validate the foreclosure docs, instead of robosigning and forging mortgage documents.

Isn't it crazy how the banks have stopped being honest and no one seems to care?

to wit: "

It’s clear that the banks aren’t much chastened by the foreclosure scandal that erupted last fall and which threatens to cost them tens of billions of dollars.

An American Banker investigation today shows that several banks are still fraudulently backdating documents to foreclose on homeowners. And it’s not the first to show this. Last month, an outstanding Reuters probe by Scot Paltrow (a former neighbor of mine and Dean Starkman’s at The Wall Street Journal) showed similar behavior (ADDING: The Associated Press had a similar piece earlier that day, as commenter JenniferM points out).

These stories raise serious questions for the Obama administration and states attorneys general led by Iowa’s Tom Miller who have been rushing to settle and release the banks from liability for fraud. How can you release folks who’ve repeatedly shown that they’ll ignore the law and even recent settlements promising they’ll obey it?"

http://www.cjr.org/the_audit/the_foreclosure_scandal_contin.php

Sat, 09/03/2011 - 02:20 | Link to Comment JB
JB's picture

"Isn't it crazy how the banks have stopped being honest"

THERE IS NO SUCH THING AS AN HONEST BANK. PERIOD.

There hasn't been one since the day some devious goldsmith realized that he could issue more paper claims to the gold in his vault than he actually held.

Fractional reserve banking is dishonest to the core, and always has been.

Sat, 09/03/2011 - 04:34 | Link to Comment spiral_eyes
spiral_eyes's picture

the real problem is global fragility to black swans... the more we TARP, the bigger the swan.

http://azizonomics.com/2011/09/03/the-shape-of-global-parasitism/ 

Sat, 09/03/2011 - 07:11 | Link to Comment FEDbuster
FEDbuster's picture

Crazy Uncle Warren will be taking a bath, only it will be a different type of bath.  Maybe this is just his twisted way of giving back to society before he dies?

Sat, 09/03/2011 - 07:39 | Link to Comment rufusbird
rufusbird's picture

I can't help wondering if Uncle Warren would have receved the same media coverage if he had been sitting on the crapper when he got his idea to invest in B of A?

Sat, 09/03/2011 - 08:12 | Link to Comment Oh regional Indian
Oh regional Indian's picture

I wonder what would have happened if Unc had been handed a plugged in toaster in the bath. For opening a new account with BAC. Would have sent him BACk, quick. 

BACky Quicky.

All the moves, the sudden legal actions, this smells like the classic liquidity vaccum creating circumstances harking back to 1929. Tells you clear as day that teh same kind of engineered crash is around the corner.

V

http://aadivaahan.wordpress.com/2011/09/02/first-print-and-some-amazing-reading/

Sat, 09/03/2011 - 10:44 | Link to Comment FEDbuster
FEDbuster's picture

Let's not overlook the recent moves against the HFT firms.  .gov may take the algos out somehow?  One way would be to put a penny a share tax on all buy/sell transactions, it would at least slow them down a bit.  The tax could be dedicated to funding the SEC (I know trany porn, etc...), but at least it would fund some sort of watchdog over the Banksters.

Sat, 09/03/2011 - 11:24 | Link to Comment QQQBall
QQQBall's picture

Why is the solution always another tax or fee? Why must regular traders and investors pay the HFT bullshit? Grow a fucking brain dude.

Sat, 09/03/2011 - 13:32 | Link to Comment AldousHuxley
AldousHuxley's picture

HFT doesn't matter for long term investors like income taxes dont' matter for Buffett. If you buy and hold a stock 50 years, you don't really care what happens in between.

 

feds are cracking down on banksters' prop trading so they are writing laws. Well workaround that is to invent a new kind of trading that is not specified in those laws and that is HFT. Wait 10 years and goldman sachs will be back with majority of their operations consisting of HFT as they phase out regular trading operations. That's how wall street always worked. Make money on loophole in the system until they get caught and activities are outlawed.

Sat, 09/03/2011 - 11:31 | Link to Comment Breaker
Breaker's picture

As much as I hate taxes, a penny per order would remove much of the order-based gaming reported on this site by the HFT's. But as long as the HFT's keep floating the market up on a regular basis, I can't see any real action against them. As soon as they start floating the market down, watch out HFT's.

Sat, 09/03/2011 - 15:46 | Link to Comment RockyRacoon
RockyRacoon's picture

Interesting item from latest issue of The Privateer:

UK Times newspaper, written almost exactly 100 years ago...illustrate the fundamental problem now confronting the world with stark precision.
“The greatest tyranny has the smallest beginnings. From precedents overlooked, from remonstrances despised, from grievances treated with ridicule, from powerless men oppressed with impunity, and overbearing men tolerated with complacence, springs the tyrannical usage which generations of wise and good men may hereafter perceive and lament and resist in vain. At present, common minds no more see a crushing tyranny in a trivial unfairness or a ludicrous indignity, than the eye uninformed by reason can discern the oak in the acorn. Hence the necessity of denouncing with unwearied and even troublesome perseverence a single act of oppression. Let it alone and it stands on record. The country has allowed it and when it is at last provoked to a late indignation it finds
itself gagged with the record of its own ill compulsion.”
(The Times - August 11, 1846)

Sun, 09/04/2011 - 11:53 | Link to Comment WonderDawg
WonderDawg's picture

A lot of very wise men have made the same observation over the centuries. In a nutshell: All that is necessary for the triumph of evil is that good men do nothing.

Sat, 09/03/2011 - 23:33 | Link to Comment trav7777
trav7777's picture

but Fannie and Freddie were?  They are abominations

Sun, 09/04/2011 - 04:33 | Link to Comment Poetic injustice
Poetic injustice's picture

No, it dates back to time when ancient people made electrum coins (silver+gold). This forgery could not be revealed using that time methods, only couple of thousand years later. Paper was next, yes.

Sat, 09/03/2011 - 03:49 | Link to Comment JB
JB's picture

...

Sat, 09/03/2011 - 03:50 | Link to Comment JB
JB's picture

stupid phone.

Sat, 09/03/2011 - 09:15 | Link to Comment centerline
centerline's picture

Funny.

Sat, 09/03/2011 - 12:39 | Link to Comment Problem Is
Problem Is's picture

That is just the NSA surveilling another ZH poster...

Sat, 09/03/2011 - 02:24 | Link to Comment Fish Gone Bad
Fish Gone Bad's picture

Just the other day, I think it was on CNBC's website, there was some headline stating that Goldman Sachs was going to stop robosigning.  WTF? They are going to stop now, not months and months ago when all the news was making the rounds. 

The people of the United States live in a very scary country.  Perhaps in 3 years when the statute of limitations is about to let Goldman off the hook, Obama will finally go after them.

Sat, 09/03/2011 - 07:45 | Link to Comment rufusbird
rufusbird's picture

"It had been a good bank if it had somebody there to shoot it every minute of it's life."

(Paraphrasing the Misfit in Flannery O'connor's "A Good Man is Hard to Find")

Sat, 09/03/2011 - 08:11 | Link to Comment max2205
max2205's picture

Where's Mr orange. Mr tan man. Is he off the "hook

Sat, 09/03/2011 - 19:07 | Link to Comment Problem Is
Problem Is's picture

Tangelo is off the hook + Wall Street CEO bonus sized severance... $65 million I think...

Tangelo will be comfortablly in Orange-Man-Tan for the rest of his natural...

Sat, 09/03/2011 - 12:02 | Link to Comment Kali
Kali's picture

Statute of Limitations may be 3 years, but people's memories are long.  There will be a different "law" in effect when people get hungry and desperate enough.  That time is not now.  Maybe soon.  When I see all these funemployed not driving around in their cars all day, and instead have to dumpster dive for food, then that time will be soon.

Sat, 09/03/2011 - 10:43 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

The operative word in all of this is fraud.

NY State statutes authorize executive clawbacks if there is fraud involved in a transgression.  Not otherwise.

Reducing future bonuses is one thing and that would result from forcing them to spend the money to no longer robosign.  

But recovering bonuses already paid out . . . that's a clawback.  THAT should be the goal of all prosecutions.

Sat, 09/03/2011 - 12:09 | Link to Comment Fukushima Sam
Fukushima Sam's picture

After thinking about this move for several hours, at first surprised that the Feds would decide to go after the banks like this, I now think the reason they are doing so is to put the whole thing to bed as cheaply as possible.

The Obama administration knows the people are pissed, he wants to get re-elected.  So they make the pretense of going after the banks for what seems like a large sum of money.  But in reality this is no different from any other slap on the wrist fine these banks have gotten in the past.  Just that due to the very large sums involved in the fraud the slap on the wrist fine looks large.

So, Obama looks tough, the banks put the fraud behind them, and ultimately the people get screwed again.  Because if you look at the size of the fraud perpetuated then you will see that the amounts being pursued by these lawsuits are fractional pennies on the dollar.

Sat, 09/03/2011 - 12:50 | Link to Comment Problem Is
Problem Is's picture

+1... Accurate Analysis

This is simply:

CREEP -- Committee to RE-Elect the President playing populace hero to the Amerikan Idiot (in honor of Billy Joe get tossed off a plane) public...

Kabuki Theater: All For Show
Has Eric "Empty Suit" Holder done anything in the last 3 years?? And DOJ is doing something now?

As job performance and approval rating of Obama Bin Lyin' is falling off a cliff...

Load Up the Teleprompter
Fake claims of dealing with fraud on Wall Street and hilarity will ensue...

Sat, 09/03/2011 - 23:35 | Link to Comment trav7777
trav7777's picture

It's Eric "Place" Holder.  That is his nickname, as bestowed by the Washington City Paper during his tenure as US Atty here in DC.  They are barely to the right of the village voice

Sat, 09/03/2011 - 02:52 | Link to Comment Captain Planet
Captain Planet's picture

@deppsky

Until then, the new peasants will be going hungry, homeless and depressed. Not suffering? 

Take a walk through your nearest ghetto and tell me whose paying the price. The 6 train gets you there nicely. 

Sat, 09/03/2011 - 09:51 | Link to Comment Deepskyy
Deepskyy's picture

Most of the people in the Charlotte area who will be affected by this, probably have family who live in those ghettos, and only recently got out of them themselves.  I'm not siding with BAC by a long shot, I hate the fuckers.  I just lament for the poorly paid low level workers who will be devastated because of the greed and hubris of the front office.

 

Sat, 09/03/2011 - 04:30 | Link to Comment A.W.E.S.O.M.-O 4000
A.W.E.S.O.M.-O 4000's picture

"... the same government that begged, lied, and basically broke the law to get Ken Lewis to buy Merrill Lynch, is now suing this entity ..."

Gee Tyler, thanks a million for pointing out once more how the evil government is taking advantage of innocent bankers who are just trying to do "God's work."

 

Sat, 09/03/2011 - 07:50 | Link to Comment goes211
goes211's picture

A few things.

1) The single worst M&A transaction in history was not Countrywide. It was Wachovia's purchase of Golden West Financial which single handedly destroyed that bank.

2) I was wondering if anyone else thinks that BofA might get less help because they are outside the Wall St clique. If they do go down I find it quite a coincidence that both Charlotte banks take the hit and the main Wall St banks effectively win by eliminating competition.

Sat, 09/03/2011 - 11:33 | Link to Comment Arrowflinger
Arrowflinger's picture

Absurd.

FIrst Union, appropriately FU, was the worst bank in the USA. It bought a huge bank, Core States, and the customers hated FU so much, they left in droves. Then FU bought the Money Store for $billions had it 2 years and closed it down for a total loss. FU had FU'd its reputation so bad, that it bought the wonderful Wachovia for its good name alone. OF COURSE, the Wachovia chieftans were fired and the FUers retained to run da joint.

After getting FUed, Wachovia pled nolo to: laundering $380 Billion of Mexican Drug trade, knowingly participating in a forged check scam against seniors, and selling $8 billion in Auction Rated Securities as being money good.

Wachovia got FU'ed and the FU people destroyed the bank, but finished it off with the Golden West deal.

Anyone within the first 4 levels at the FU'ed Wachovia should be forever ostracized from financial employment.

 

Sat, 09/03/2011 - 23:31 | Link to Comment trav7777
trav7777's picture

FNM and FRE are jobs programs for blacks.  Each of them is about 50% black employees.  Go figure, huh?  Who could have predicted that these entities would be the worst-run financial institutions ever?  As an aside, I had the "pleasure" to work with a senior project manager out of Freddie, fitting their dominant demographic.  Incompetent does not even begin to describe her

Sun, 09/04/2011 - 12:17 | Link to Comment WonderDawg
WonderDawg's picture

If incompetent doesn't describe her, allow me to try:

If we could discern that she actually had any aspiration, it would be that she aspires to the bottom rung of incompetence.

Close?

Sun, 09/04/2011 - 12:33 | Link to Comment trav7777
trav7777's picture

no...she thought she was the bee's knees, man, seriously.  Blacks in no way lack self-confidence or self-esteem; they think they are god's gift to the earth, the master race.  But, she expected everyone else to carry her water for her, just like the rest of them. 

Sat, 09/03/2011 - 02:43 | Link to Comment lolmao500
lolmao500's picture

Citigroup should be at center of this too...

Basically from ``The Guy`` himself... 60%+ of mortgages sold by Citi in 2006 were FRAUDS... and in 2007-2008 (at least) 80%+ of the mortgages sold by Citi were FRAUDS.

This is admitted UNDER OATH by the guy running Citi... and NOBODY GOES TO JAIL...

Under oath :

http://www.google.ca/url?sa=t&source=web&cd=1&ved=0CBcQFjAA&url=http%3A%...

These mortgages were sold to Fannie Mae, Freddie Mac and other investors. Although we did not underwrite these mortgages, Citi did rep and warrant to the investors that the mortgages were underwritten to Citi credit guidelines.

In mid-2006 I discovered that over 60% of these mortgages purchased and sold were defective. Because Citi had given reps and warrants to the investors that the mortgages were not defective, the investors could force Citi to repurchase many billions of dollars of these defective assets. This situation represented a large potential risk to the shareholders of Citigroup.

I started issuing warnings in June of 2006 and attempted to get management to address these critical risk issues. These warnings continued through 2007 and went to all levels of the Consumer Lending Group.

We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And defective mortgages increased during 2007 to over 80% of production.

 

Edit : link working now.

Sat, 09/03/2011 - 02:04 | Link to Comment Milton Waddams
Milton Waddams's picture

 

take a bath (on something)
Sl. to accumulate large losses on a business transaction or an investment. (Alludes to getting soaked, a slang expression meaning "being heavily charged for something.") Sally took a bath on that stock that she bought. Its price went down to nothing. I'm afraid that I will take a bath on any investment I make.
Sat, 09/03/2011 - 01:49 | Link to Comment TheMerryPrankster
TheMerryPrankster's picture

Interesting take on debt forgiveness:

"Currently we are mired in a “new normal” and calls for “austerity” which are nothing more than the delusional efforts of a status quo to avoid the consequences of its own error and fraud and to profit evermore. So bedazzled by the false wealth created by debt multiplication and its concomitant fantasy of ever-higher returns, this status quo continues to be stupidly amazed that people are not spending and that the economy is not picking up. But how could it be otherwise?

Productive wealth has been trapped in a web of parasitic theft, counterfeiting, liability evasion, non-regulation, and prosecutorial non-accountability. All the fundamental attributes of a functioning exchange economy have been warped to reward creative criminals. I spoke extensively about this in my posts from 2008. ( Imaginary Worth, Empire of Debt: How Modern Finance Created Its Own Downfall (October 15, 2008)

The unsustainable nature of debt

Two observations: 1) Fabricated/parasitic so-called “wealth” destroys value by diluting the value of productive wealth. 2) Debt/credit that cannot be paid back is never an asset and is always a hot-potato liability (needing to be foisted to a greater fool to garner “profit” and transaction fees):“The models [modern debt are] based upon had no contact with reality. They assumed unlimited growth and ability to pay. When matched against the reality of people paying ten times their salary for mortgages that actually added more money owed to their principal (i.e. with negative amortization), required no money down, and set up “balloon payments,” large step-ups in payments after a few years) there is no possible way they could NOT default in a predictable span of time.” ( Part II: How the Credit Default Swap Scam Works (October 13, 2008)Systemically, all debt that charges a percentage (“usury”) originates in delusion. Debt grows exponentially indefinitely, growth (income and otherwise) cannot. This leads to a widening condition where the fruits of productive “growth” devoted to interest payments increase until those fruits are entirely consumed. (The Elephant In The Room: Debt Grows Exponentially, While Economies Only Grow In An S-Curve (Washington’s Blog)

Once this happens, stores of wealth (hard assets) begin to be cannibalized to make up for the difference. You see this in Greece with its sale of public assets to private companies, and in middle-class America where people are liquidating retirement accounts to pay for their cost of living.

This problem is compounded by a private Federal Reserve that lends money into circulation at interest, and then allows the multiplication of this consumer debt-money liability through fractional reserve banking. The money in circulation today could pay only a small fraction of the total private and public debt. That fact alone is evidence of a kind of systemic fraud. “If you just work hard enough, save, and make sensible decisions, you can get out of debt” could only physically work for a bare fraction of the population, given the money-to-debt ratio. The rest would have to simply default to clear the boards.

This is why debt forgiveness makes not only moral but rational, mathematical sense. Finances require balancing to be coherent. There must be some way to redress systemic imbalance. One has to be able to “zero the scales” to get an accurate weight of value and to re-establish healthy value creation."

http://markets.financialcontent.com/pennwell.ogj/news/read/19381704/endg...

Sat, 09/03/2011 - 02:32 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Productive wealth has been trapped in a web of parasitic theft, counterfeiting, liability evasion, non-regulation, and prosecutorial non-accountability

Yup. They finally did it. They blew it all to hell. The ugly taboo reality is the US economy is just a hollowed husk, cannibalized of most of its sources of wealth (and even its natural resources). There will be a gradual decline punctuated by spooky, sickening legs down until equilibrium is reached in a much smaller, low-growth economy that will never be self-sustaining again. There are plenty of examples of this throughout history. 

Sat, 09/03/2011 - 09:20 | Link to Comment centerline
centerline's picture

It will be self-sustaining again.  But likely not in our lifetimes.  My children will hopefully see it through.  Between here and there, there will be much pain.  Collapse of Roman Empire style x100.

Sat, 09/03/2011 - 03:33 | Link to Comment blunderdog
blunderdog's picture

As obvious as it is, it's so painful to be reminded that so few understand.

The simplest way to think about it, in my view, has always been that if any given institution controls more "money" than the value of every "hard asset" on the planet totaled up, there's simply no way for the system to work.

How long ago was it that we passed that point?

If "the masses" awoke to this kind of realization intuitively, I don't think any aspect of the system would ever work again. 

"Finance" would just die. 

It would take awhile before people got distracted/forgetful enough to permit it to exist again.

Sun, 09/04/2011 - 12:24 | Link to Comment WonderDawg
WonderDawg's picture

The Fourth Turning does a pretty good job of describing how generational cycles allow us to "forget" our mistakes, and inevitably repeat them in some form or fashion.

Sat, 09/03/2011 - 08:37 | Link to Comment ArkansasAngie
ArkansasAngie's picture

Excuse me -- Let's line up in orgination chain order:

The people who took out the loan,

the people who gave them the loan,

the person who sold the securitized package,

the people who vouched for the "quality" of the securized loans.

Now ... take these folks money first and then come ask me for my money.

Debt forgiveness?  Horse manure.

BTW:  Buffett isn't worth $50 Billion.  That's our money thank you very much. 

Sat, 09/03/2011 - 09:23 | Link to Comment PMakoi
PMakoi's picture

"This is why debt forgiveness makes not only moral but rational, mathematical sense. Finances require balancing to be coherent. There must be some way to redress systemic imbalance. One has to be able to “zero the scales” to get an accurate weight of value and to re-establish healthy value creation."...

It does, but the moral clarity needs to be refined.  All, or perhaps just most, of us that have worked hard and honestly, and have paid our debts and kept up our mortgage payments, and maybe even pre-paid to reduce the principal will, no doubt, ask/demand for some sort of fair play to themselves.  That's the rub. 

Sat, 09/03/2011 - 10:10 | Link to Comment ArkansasAngie
ArkansasAngie's picture

Excuse me again.  I do not owe any money.  I did not take out a loan via misrepresentation.  I did not lie, cheap or steal.

I am at the bottom of the chain in terms of cupability.  In fact most Americans aren't in that chain of culpability.

I have no moral responsibility to maintain Warren Buffet in the lifestyle he is accustomied to.  However ... take his money away and I have no problem with him going on standard government assistance.  And ... if it's good enough for Warren Buffett it's good enough for everybody else in that before mentioned chain of fraud.

Sat, 09/03/2011 - 16:22 | Link to Comment RockyRacoon
RockyRacoon's picture

There is something to be said for simplification of a problem, Angie, but there is danger in oversimplification.   Finding that nuanced, balanced, equitable spot is the tough part.   Don't fall into the trap of thinking you have eliminated all other factors with your pared-down analysis.   There is a fine line these days between the "law" and established moral hazard.   Stay open and flexible on the matter and consider other views, especially those that may clash with your own.   Just sayin'....   

A fellow Arkie.

Sat, 09/03/2011 - 01:52 | Link to Comment Maybe-Not
Maybe-Not's picture

No matter what anyone says, even Tyler.... Ken Lewis bought CW! I can't even type enough words for the stupidity of that!

Sat, 09/03/2011 - 10:58 | Link to Comment optimator
optimator's picture

Stupidity?  I learned a lot about banksters a few years ago while negotiating a CD rate.  I was doing the numbers in my head while the bank manager was doing it on her calculator.  I corrected a calculation for her to which she replied, "I'm not very good with numbers". 

Sat, 09/03/2011 - 02:04 | Link to Comment AUD
AUD's picture

What I don't get is where does FHFA think the money will come from, if it wins its case?

It was Freddie Mac and Fannie Mae who 'created' the 'money' in the first place in their role as quasi central banks, monetising mortgage debt, backstopped of course by the Fed & then the US government & ultimately US taxpayers.

Perhaps the new Central Bank of Libya will meekly accept & roll over ad infinitum UST's as payment for Libyan oil?

Sat, 09/03/2011 - 10:50 | Link to Comment unununium
unununium's picture

It would appear that, at long last, at least some of it will come from BAC bondholders.

Sat, 09/03/2011 - 02:06 | Link to Comment Missiondweller
Missiondweller's picture

Simply stunning.

Sat, 09/03/2011 - 02:08 | Link to Comment YesWeKahn
YesWeKahn's picture

Don't worry, someone will do God's work with tax payer's money.

Sat, 09/03/2011 - 02:19 | Link to Comment Greyzone
Greyzone's picture

30,000 bank jobs? F*** them. They can go straight to hell, all 30,000 of them.

Sat, 09/03/2011 - 02:41 | Link to Comment lolmao500
lolmao500's picture

Yep. Whoever works for these people deserves to go to hell. I don't give a flying duck if you have a mortgage and kids. HAVE A SPINE AND INTEGRITY FIRST. You don't have that, you don't have nothing. And your kids will admire you for it, if they don't, they are on the grade of Ken Lewis, low life scum.

Sat, 09/03/2011 - 03:55 | Link to Comment blunderdog
blunderdog's picture

It's all good in principle, but come on.  A lot of these people who "deserve hell" really don't have a fucking CLUE what they're doing.

If you put the average guy in the right position and anaesthetize him and talk pretty to him and promise him the future, he'll cut off his own legs and balls and serve them to his kids for dinner.  Realizing you can do that, think for a second how much easier it is to get him to cut off someone ELSE'S legs and balls.

He literally never dreams for a minute that he could be doing something "bad."

Sat, 09/03/2011 - 04:10 | Link to Comment lolmao500
lolmao500's picture

And that is why I am for a test before people can vote. The idiot guilible people won't be able to vote. GET A BRAIN, MORANS!

Sat, 09/03/2011 - 06:21 | Link to Comment Medea
Medea's picture

Is this intentionally ironic or unintentionally ironic. Either way it's hilarious, and possibly a little sad.

Sat, 09/03/2011 - 06:36 | Link to Comment Global Hunter
Global Hunter's picture

I worked in a bank for a few years but I got out because I didn't like how dirty I felt.  No sympathy at all.

Sat, 09/03/2011 - 06:57 | Link to Comment Medea
Medea's picture

How self-congratulatory of you.

Sat, 09/03/2011 - 09:13 | Link to Comment Global Hunter
Global Hunter's picture

edit: I will delete my response to you Medea, you're a fucking troll.  Fuck off dickhead.

Sat, 09/03/2011 - 13:21 | Link to Comment blunderdog
blunderdog's picture

This isn't a failure of the American version of "democracy."

If you structure society in such a way that people who control the money control the power, AND that the people who fuck over the most other peope in the most effective way are rewarded with the most money, this outcome is OBVIOUS.

Capitalism trumps political autonomy every time.

Sat, 09/03/2011 - 06:39 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

He literally never dreams for a minute that he could be doing something "bad."

Indeed, and that's a crystal clear illustration of "the banality of evil."

Sat, 09/03/2011 - 13:47 | Link to Comment blunderdog
blunderdog's picture

Right.  You can't fix a sick society by punishing a few individuals.  Even if you convince people one at a time, new "evildoers" are created faster than you can cure them because the foundational values are all fucked up.

Sat, 09/03/2011 - 16:27 | Link to Comment RockyRacoon
RockyRacoon's picture

Whooop.  Right to the solar plexus.

To those who would believe that the homeowners should take their medicine because they signed the paperwork on shitty loans, I would say that you will also have to accept the fact that 30K employees of said financial institution get to apply for unemployment because they worked for the shitty bank that made the loan.   Each of them could have, in actual fact, changed course at any time.   Eh?  No?  If not then 'splain the difference to me.

Sat, 09/03/2011 - 07:07 | Link to Comment Moe Howard
Moe Howard's picture

Before the problems in 2007 I was at a job fair and there were a couple of booths with young men in their early 20's for mortgage companies. I spoke to them, explained I had no experience at all in that industry. They told me, no problem, they didn't either. That's when I knew beyond doubt that the housing industry was going to blow up in a very short time. This was in the early spring of 2007.

My point? Two. All the signs were there, only a drunk or an idiot couldn't see it. Second point, any reasonably intelligent person knows in a short time of working somewhere if it is a fraud or con game. Anyone who claims otherwise is a liar. Like all those housewives who sell real estate and claim not to "see" any problems with the home or property they are getting a commission on, or a telemarketer who buys a list of senile old people who will buy anything. They are just as bad as the Tony Sopranos of the world IMO. Nobody has to be a con man or a fraud to make a living in this world, to claim otherwise is a lie itself.

Sat, 09/03/2011 - 07:44 | Link to Comment smlbizman
smlbizman's picture

a friend of mine used to work for greentree financial, the largest mobile, wait manufactured housing  lender....he felt the stigma of working for this industry. so he went and got a job at AAA mort. company....within 2 weeks he regreted his move...his most told to use tool was white out, so he could fix those aps that weren't quite approvable.....

Sat, 09/03/2011 - 02:31 | Link to Comment ItsDanger
ItsDanger's picture

Back in the day, I was involved in securitization in the financial industry.  It amazes me to read and hear so many in the various media that have no clue what they are talking about on this issue.  That is a big reason why this mess occurred in the first place.

Sat, 09/03/2011 - 11:15 | Link to Comment Sequitur
Sequitur's picture

"Monetization" and "securitization" are, in my view, quite often synonymous with outright fraud. I've been on the front lines fighting just a small portion of it (truth). I saw firsthand how companies and their bankers sought to "monetize" failing businesses by marking-to-market a hundred years of phony "profits" at some failing business unit -- that's right, predicting decades of profitability and accounting for it today. And just like that, boom, company turns some piece of shit business into a $500mm-$2billion "asset" on the books (by pulling forward decades of utter bullshit "profits" and then marking it to the market, allowing a journal entry on the balance sheet).

Same thing on the debt side. Got a steaming pile of shit you want off-balance sheet? Great, invoke accounting rule FASB 140 and "monetize" it. How do you do that? Easy. The way it was done is to get a crooked Wall Street bank take a piddling equity investment in the "asset" to be "monetized," typically 3% equity interest in the asset. Whammo, invoking FASB 140 + 3% outside equity investment = steaming pile of shit "asset" now is off-balance sheet. Bank, meanwhile, will make fifty times its investment in debt issuance fees for "helping" the company monetize its shit.

These practices were rampant. Truth. Yet this was only the tip of the iceberg -- this shit went into OVERDRIVE during the housing boom and mortgage securitization business. Securitization = another goodamn fraud whereby banks take shit loans, sell them to dopes, earn enormous goddamn fees on the transaction, and the banks clear their balance sheet so that they stay within market and credit risk limits to take on even more Goldmanesque "shitty" deals. That's all that matters: clearing the credit limit desk so you can do more and more deals, earn more and more fees, without blowing up the bank's credit lines. Of course the banks fucked up, which is why Lehman failed and many others desperately needed cash, a la Goldman and Citi.

As used by the banks and companies: fuck monetization. Fuck securitization. Monetization and securitization are rotten to the core, and the banks, companies, accountants and lawyers were all in on it, earning enormous fees turning shit into gold. Again, I saw this firsthand and was on the front lines combating a miniscule portion of it. Anyone who says otherwise = liar. Because I know.

PS any bankers, companies, accountants who approved and lawyers who wrote opinion letters, if you are reading this, you know it's true. And my message to you is: go fuck yourselves. You are responsible for destroying the financial system.

Sat, 09/03/2011 - 12:00 | Link to Comment tom a taxpayer
tom a taxpayer's picture

 

Sequitur - Thank you for insight into the far-reaching fraud and rot of "monetization" and "securitization" gone wild.

 

Sat, 09/03/2011 - 11:48 | Link to Comment ItsDanger
ItsDanger's picture

Your comment just proves my point.  Securitization isnt bad in itself, its how the process is executed.  Key steps in the process were diluted, eliminated or just ignored without fear of damages.   Done properly, its a useful tool, but it needs regulation and restrictions.  Everybody along the chain had every incentive to maximize bonuses and had virtually little risk of personal loss.

Sat, 09/03/2011 - 16:33 | Link to Comment RockyRacoon
RockyRacoon's picture

Monetization and securitization are rotten to the core, and the banks, companies, accountants and lawyers were all in on it, earning enormous fees turning shit into gold.

The alchemists of yesteryear would be jealous as hell!  They were just mixing up the wrong elements.  The catalysts of greed, hubris, avarice, and ego can't be bottled.

Sun, 09/04/2011 - 11:47 | Link to Comment SilverDosed
SilverDosed's picture

What an amazingly simple but beautiful statement, +1884 and repeated for emphasis.

 

Monetization and securitization are rotten to the core, and the banks, companies, accountants and lawyers were all in on it, earning enormous fees turning shit into gold.

The alchemists of yesteryear would be jealous as hell!  They were just mixing up the wrong elements.  The catalysts of greed, hubris, avarice, and ego can't be bottled.

Sat, 09/03/2011 - 02:34 | Link to Comment rollercam
rollercam's picture

It's like a hungry man who starts to eat himself.

Sat, 09/03/2011 - 02:37 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Since it's becoming clear that all roads lead to bankruptcy for BAC (and probably others), I've advanced the theory that that is in fact the plan. A stealth nationalization in the form of a probable pre-packaged BK. The .gov now has plenty of experience with this (AIG, GM). And such action will be endorsed by many. There really is little choice left. BAC is putting systemic risk back on the table. And at a time that's way more dangerous than even 2008. 

Sat, 09/03/2011 - 05:34 | Link to Comment cossack55
cossack55's picture

Yes, and I noticed GM and GE are on the list.

Sat, 09/03/2011 - 09:21 | Link to Comment centerline
centerline's picture

I think you are right on the money here.

Sat, 09/03/2011 - 02:37 | Link to Comment alexwest
alexwest's picture

thanks tyler

 

# doubt that the “investment” by Mr Buffet and the sale of their CCB shares in the last ten days were all pure coincidenc

 

cant wait for someone actualy have THE BALLS and drag old fag buffet into court and ask him simple questions about his talks w/ white house and OMAMA

 

alx

Sat, 09/03/2011 - 11:27 | Link to Comment Sequitur
Sequitur's picture

I submit this is the real QE3.

Ten Trillion And Counting, Frontline

http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/

At the 4:50 mark, video of Treasury's debt auction room. And who are they? None other than the Bureau Of The Public Debt.

 

Public debt bureau:  http://www.publicdebt.treas.gov/index.htm

All of it is beyond frightening. Watch the Frontline video, it will scare you into gold and silver if you have any ability to do math and have eight-grade level accounting skills.

Sat, 09/03/2011 - 16:34 | Link to Comment RockyRacoon
RockyRacoon's picture

Well, there goes two-thirds of the populace...

Sat, 09/03/2011 - 02:43 | Link to Comment alexwest
alexwest's picture

no need to be in worry

# on a day when job growth in this country was essentially ZERO, we are going to lose another 30,000 private sector jobs.

 

BLS SAYS ALL THOSE VERIZON WORKERS ARE BACK TO WORK  SOON and some more..

 

alx

Sat, 09/03/2011 - 02:43 | Link to Comment Religion Explained
Religion Explained's picture

Okay, this is how it works. Europe is going bye bye, so to help them, we unleash some bank problems of our own and we take the pressure off of Europe. Simple.

Sat, 09/03/2011 - 10:57 | Link to Comment unununium
unununium's picture

Close. Actually each side waits for the pain of the other, to lessen the impact of it's own disasters.

Sat, 09/03/2011 - 02:45 | Link to Comment lolmao500
lolmao500's picture

What probably gonna happen...

The FHCH will win the lawsuits. Then the banks will ask for a loan from the FED to pay. Then the taxpayers will bail out the banks to pay the loan.

Sat, 09/03/2011 - 02:46 | Link to Comment pitz
pitz's picture

Just burn the fucking "economy" down already, let it collapse, shoot the bankers and their supporters, and get on with putting the real creators of value, scientists and engineers, back to work. 

Sat, 09/03/2011 - 05:08 | Link to Comment lolmao500
lolmao500's picture

The banks wouldn't be the problem if they were alone. Alone they are nothing. They still stand because of their supporters. Shoot the supporters and the banks will fall on their own.

America (and the world) needs a worldwide civil war to clean it from the scum... a worldwide purge of the slave minded people.

Sat, 09/03/2011 - 06:24 | Link to Comment Medea
Medea's picture

"real creators of value"

 

So stupid.

Sat, 09/03/2011 - 02:55 | Link to Comment Shineola
Shineola's picture

There is one reason, and one reason alone, that the government is suing these institutions.  They want to control the process. 

It's controlled a demolition of the housing sector.   Think building 7!   The banks, who, the government actually answers to, are being cast as "Al Quaeda". 

Sun, 09/04/2011 - 13:04 | Link to Comment RSloane
RSloane's picture

I feel dirty for agreeing with you. But I do agree.

Sat, 09/03/2011 - 02:56 | Link to Comment Moon Pie
Moon Pie's picture

Go long Liberty.

Short Tyranny.

Sat, 09/03/2011 - 03:51 | Link to Comment pcrs
pcrs's picture

"first the taxpayers were asked to save Freddie and Fannie, then they were asked to save the banks"

Tax payers are never asked, they are ordered, this makes it sound like there are multiple answers to this 'question' possible. Try to answer 'no' and see how that works out for you.

Sat, 09/03/2011 - 06:27 | Link to Comment Medea
Medea's picture

This is a good point. Semantics, but how we phrase things matters.

Sat, 09/03/2011 - 07:09 | Link to Comment Moe Howard
Moe Howard's picture

We said no at 80% and they did the opposite. We know what's up.

Sat, 09/03/2011 - 08:37 | Link to Comment Bob Sacamano
Bob Sacamano's picture

It's the way of the central planning left - they know what is best for you.  Most didn't want Obamacare, but we got it. 

Sat, 09/03/2011 - 04:38 | Link to Comment sudzee
sudzee's picture

And some people here wonder why gold bugs prefer honest money. If its on paper it will be manipulated. If you ain't got gold now its too late.

Sat, 09/03/2011 - 05:09 | Link to Comment I am a ..
I am a ..'s picture

This is banking cannibalism.  The top of the food chain wants its money.

 

It is the last chance for the FED to get something for the $2.3 Trillion in mtgs that they are carrying on their balance sheet. 

 

The FED was not going to be able to offload their toxic balance sheets onto the banks because they were BK back in 08 and have not improved and are still insolvent today.  This is the only solution left for the FED, TPTB and they had to take it before the statute of limitations ran out. 

 

This legal action and the legal extraction of the last remaining assets of the banking industry must go to the FED to cleanse its toxic balance sheet while there is still an avenue for the FED to get some value back and offload its toxic balance sheet.  Only thru this means will the super elite powers that are behind the FED, get value.  It’s a given that the Federal Reserve banks are not going to be solvent, let alone profitable any time soon.  There is no honor among thieves and the top echelon crooks want their money before it all disappears.

 

The FED and the Elite must survive even if it does mean eating their own henchmen.

 

Sat, 09/03/2011 - 06:02 | Link to Comment macholatte
macholatte's picture

 

The law that really nees to be prosecuted is called Racketeering (RICO) both civil and criminal. It is real serious and can cost the defendant triple damages and big jail time. It is the law that is enforceable when an individual or entity engages in a criminal enterprise for a period of years. Proving it against the slime balls at BAC and JPM and GS and Freddie and Fannie, etc. should be a cake walk. It could be so serious that the individuals involved who committed so many hundreds of crimes would get so much jail time that they would never get out. Potentially life in prison plus complete financial ruin.  Check it out:

 

The Racketeer Influenced and Corrupt Organizations Act

The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The RICO Act focuses specifically on racketeering, and it allows for the leaders of a syndicate to be tried for the crimes which they ordered others to do or assisted them, closing a perceived loophole that allowed someone who told a man to, for example, murder, to be exempt from the trial because they did not actually do it.

 

Under RICO, a person who is a member of an enterprise that has committed any two of 35 crimes—27 federal crimes and 8 state crimes—within a 10-year period can be charged with racketeering. Those found guilty of racketeering can be fined up to $25,000 and sentenced to 20 years in prison per racketeering count. In addition, the racketeer must forfeit all ill-gotten gains and interest in any business gained through a pattern of "racketeering activity." RICO also permits a private individual harmed by the actions of such an enterprise to file a civil suit; if successful, the individual can collect treble damages.

  http://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act

 

Sat, 09/03/2011 - 10:30 | Link to Comment tom a taxpayer
tom a taxpayer's picture

 

Will prosecutors grow a pair of balls now to go for criminal prosecutions of RICO enterprises that committed the greatest financial crimes in U.S. history. With the FINRA lawsuit, prosecutors now have the cover and the "smoking gun" to bring comparable, large-scale criminal cases.

Because of the huge backlog of RICO cases, the prosecution and the courtroom should be modified to process the mass trials in style of the Maxiprocesso (Maxi Trials) of the Mafia in Sicily during the 1980s that resulted in hundreds of defendants convicted. 

 http://www.youtube.com/watch?v=_nPEgV1oqX0&feature=related

We need balls-to-the-walls prosecutions of Credit Rating Agencies, Countrywide, the mortgage industry, the appraisers,Freddie and Fannie, Citi and the big banksters, Goldman Sachs (including Hank Paulson) and other Wall Street banks, AIG, and federal co-conspirators at U.S. Treasury (including Hank Paulson), SEC, OTS, Federal Reserve, especially FRBNY, and those members of Congress who aided and abetted the greatest financial crimes in U.S. history.

Justice demands long-overdue prosecutions of Countrywide, the ratings agencies, Goldman Sachs, Wall Street con artists and every one in between in these overlapping RICO criminal enterprises. We need 20 years-to-life hard time prison sentences for the hundreds convicted. We need RICO confiscations of the hundreds of billions in illegal "profits" from the criminal enterprises of the banks, mortgage industry, and Wall Street Mafia.

 The prosecutor who leads the charge will become a national hero. 

 

Sat, 09/03/2011 - 11:08 | Link to Comment sschu
sschu's picture

When they finished with the focus group of PO'd voters that pegged the angry needle, they decided:

Step 1 - sue them

Step 2 - discovery

Step 3 - publically vilify them

Step 4 - RICO

Step 5 - seize them

Step 6 - reset

If Bam etal is playing politics, then a post election settlement will be in order and this will all come to nothing just like the Microsoft suit. 

If someone (and I cannot decide who that is) is serious, and wants to clean house, then the question is who, because we know it is not the Bamster.  How far are they willing to go?  If it is serious, then they better have deep pockets, balls of steel and be ready for the fight to the death. 

sschu

PS  Wrote this yesterday, someone or something is after these guys for some reason.  It could be political or it could be altruistic or it could just be the only way out.

Why isn't Holder in the middle of this?  Why isn't Bamster taking some credit?  It could be the MIC, they realize if this is not fixed, and soon, the US loses its preeminent status as world power.  This is the only group that has what it takes to see it done against the Banksters that I can imagine.   If so, we are headed for some type of military dictatorship in the not-do-distant-future. 

Watch the Bamster in the next few weeks, something tells me he was not in on the deal.  The generals do not like the punk, and for good reason.

Sat, 09/03/2011 - 16:55 | Link to Comment RockyRacoon
RockyRacoon's picture

Good stuff.   It's conspiracy theory with legs.   Another seemingly off-the-wall and obtuse thing to watch is Fox News handling of this banking matter.   I was about to throw in my DVD of Revolver, to watch yet again, when I overheard the Fox N Friends talking heads "discuss" the BofA, et al, legal takedown.   They approached it (read off the teleprompters) from the view that the current administration (gasp!) was coming down hard on the banks in this dire economic time.   Overall message to the already converted was that the bank(s) was being oppressed and vilified by Obama (gasp!).   This take on these actions by Fox is not to be taken lightly.  It shapes and focuses and diverts debate on the matters.   There was no "discussion" of whether wrong had been done -- none.   It was seen as a witch-hunt.   Not having the stomach to pursue the follow-up after copious commercial breaks, I went about my business.   Fox is, of course, not the only network which shapes thought.  MSNBC and its gaggle of lefties trash any reasoned debate about curbing government largess.   There is hardly ever a mention of just where the current money is coming from and its effect, nor where future funds will come from.  Message: "Just don't touch our benefits."

Take heed:  For those who abstain from the telly and its false prophets, your foes are being cultivated there, your philosophy is being trashed there, whether you be left or right leaning.  There is a channel for substantiation and/or nullification of your views and the creation of "views" if the masses don't quite have one yet.  Having a handle on who is doing what -- and why -- is going to be essential.  Know thy enemy is still sage advice.  Beware.

Sat, 09/03/2011 - 23:45 | Link to Comment trav7777
trav7777's picture

FN/FR need to be shut down immediately, not be suing anyone.

WTF is going to be recovered, more money for the MOST insolvent institutions?  Both of these GSEs have eaten far more in billions than ANYONE else even came CLOSE to.  If the payroll of any of these banks was half black, I bet they wouldn't get sued by the Bamster.

Shit will more and more clearly start breaking down along obvious racial lines...unless of course your head is so far up your white ass that you just can't see it.

Sun, 09/04/2011 - 06:57 | Link to Comment swissbene
swissbene's picture

i have been debating this point with myself.  personally have been shifting away from media out of boredom and disgust.  network tv is out of my tolerance range.  barrons, wsj, ft, pbs, economist, and many others have deteriorated significantly in last 20 years and approaching useless in terms of first order information.

when i do read them now, the value is primarily indirect knowledge/understanding of how societies are being manipulated/lied to.

however too much attention may be dangerous or at least a waste of time.  media (& related analysis) can keep one's attention and perhaps entertain, but the utility curve flattens quickly like internet porn.

Sun, 09/04/2011 - 13:07 | Link to Comment RSloane
RSloane's picture

I think they are aware that the American public wants blood and all they have to offer is red kool-aid.

Sat, 09/03/2011 - 06:03 | Link to Comment Highrev
Highrev's picture

 

 

They're paving the way for nationalization, and it could be an expressway.

 

 

Sat, 09/03/2011 - 09:42 | Link to Comment narnia
narnia's picture

The FDIC has been the true economic owner of these ridiculous offspring of a flawed financial system for some time.  

Sat, 09/03/2011 - 06:17 | Link to Comment lewy14
lewy14's picture

I'm always amused reading accounts of the actions of the "elites" as if they were capable of some kind of 11 dimensional chess.

The "elites" are as fractious a tribe as any.

There was a very simple modus vivendi reached between the political elites and the banking elites in Q1 '09: the bankers could keep skimming the earnings for their bonuses. The rest would be subject to periodic confiscation. These lawsuits are simply another way to claim back what was earned on the yield curve in the last three years.

The only suckers at the table are the shareholders. Yet the bank won't be allowed to fail (too messy). The bank will survive, and its stock will look "cheap", approximately forever.

Is this not the simplest explanation?

Sat, 09/03/2011 - 12:06 | Link to Comment Breaker
Breaker's picture

"The only suckers at the table are the shareholders. Yet the bank won't be allowed to fail (too messy). The bank will survive, and its stock will look "cheap", approximately forever. Is this not the simplest explanation?"

Yes. Don't forget the biggest set of suckers--the taxpayers.

Sat, 09/03/2011 - 06:18 | Link to Comment oldman
oldman's picture

There seems to be a greater liability to the banks than Fannie and Freddie, in my mind.

These actions by the two agencies may or may not result in a 20% liability; it appears likely that it is more a political ploy than a legal threat of great proportions and in any event can be 'kicked down the road' for decades by the appeals processes. However, the securities in question were aggressively sold all over the world and these actions open the door for every buyer to bring suit against the banks under the law of the countries in which they were sold. I do not know the legal ramifications of this, but I do know that weaker holders of these vehicles will not stand aside and take the losses once a court finds in favor of the two agency plaintiffs should this occur. It might turn into a great shark war between the banks themselves.

Hopefully, someone with specific knowledge in law and how this shit was structured will pick this comment up since this oldman is simply running amok with his imagination on a long weekend and has no idea of reality in these matters.

Come on     someone or ones    help an oldman, please                 om

Sat, 09/03/2011 - 06:22 | Link to Comment A Man without Q...
A Man without Qualities's picture

This is a superbly written piece, even by your standards.

I think it is high time ZH revisited the ML bonus scandal story, in light of the resurrection of the ML fraud.  I know some of those who were given huge bonus payments EVEN THOUGH SENIOR MANAGEMENT KNEW THE PROFITS WERE UTTERLY FICTITIOUS.  They are some of the most unpleasant people in an industry full of them.  It is the single act of fraud that angers me the most.

 


WASHINGTON (AFP) – Merrill Lynch quietly paid out at least one million dollars bonus each to about 700 top executive even when the investment house was bleeding with losses last year, a probe has revealed.

They were part of 3.6 billion dollars in the firm’s bonus payments in December before the announcement of its fourth quarterly losses and takeover by Bank of America, the investigation by the New York state Attorney General’s office showed.

“696 individuals received bonuses of one million dollars or more,” New York Attorney General Andrew Cuomo said of the Merrill scandal in a letter to a lawmaker heading the House of Representatives financial services committee.

Cuomo said “these payments and their curious timing raise serious questions as to whether the Merrill Lynch and Bank of America boards of directors were derelict in their duties and violated their fiduciary obligations,” according to a copy of the letter.

http://broadcatching.wordpress.com/2009/02/12/merrill-lynch-made-700-peo...

Sat, 09/03/2011 - 23:47 | Link to Comment trav7777
trav7777's picture

you mean the UTTER COLLAPSE of this insitution DOESN'T raise "questions" as to whether all of these motherfuckers were DERELICT?  We have to look at the effin bonuses they paid to even have such a "question"?

Sat, 09/03/2011 - 06:27 | Link to Comment PaperBear
PaperBear's picture

I think the writer is being generous to these two. This was a conveyer belt of fraud.

Sat, 09/03/2011 - 06:43 | Link to Comment zorba THE GREEK
zorba THE GREEK's picture

Every banker I have ever known was honest and cared about the people in his/her community.

I have a dear friend who recently retired from a high banking position. He was on the Federal Reserve

at one time. He is one of the finest human beings I have ever known. The corruption in the banking

industry is concentrated at the top. In banking and in government, the saying 'cream rises to the top'

has been replaced with 'shit floats'.  

Sat, 09/03/2011 - 08:19 | Link to Comment Sambo
Sambo's picture

lol !

Sat, 09/03/2011 - 10:01 | Link to Comment A Man without Q...
A Man without Qualities's picture

The rise of the sociopaths....

Sat, 09/03/2011 - 14:51 | Link to Comment macholatte
macholatte's picture

'shit floats'

in this case, it's bailed out and propped up and given a golden parachute.

Sat, 09/03/2011 - 06:57 | Link to Comment GCT
GCT's picture

Obama was trying to get the state AG's to back off and they refused.  Now the fed will sue and the states no longer have jurisdiction.  Problem solved.  

Although some of you think it is great some banksters will loose their jobs the one that will loose are the ones you meet daily.  Tellers , loan officers, book keepers.  The top of the food change will loose some just as a token jesture.  All because the fed now want jurisdiction. 

Sat, 09/03/2011 - 06:57 | Link to Comment papaswamp
papaswamp's picture

Circle jerk bitchez

Sat, 09/03/2011 - 07:09 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

In UBS, the suit was based on $4.4B billion in RMBS in which the Plaintiff is alleging approximately 20% losses on the securities at issue and asking to for $900m.

Wow, 20% losses is a staggering breach of due dilligence even for the GSEs.  If this is private label stuff they held to meet their underserved requirements, then they obviously never even sampled the underlying mortgages in the pool.  If it's retained crap that they themselves issued, then they are incompetent beyond belief (i.e., incompetent in judging value sof the mortgages they bought and then securitized, or incompetent in committing fraud).

The govt had better prosecute "some" of these guys...for their own protection.  Because when the SHTF, and it will, there will be no justice like angry mob justice.  The search for the guilty will be as ruthless as it is indiscriminate.

Sat, 09/03/2011 - 07:32 | Link to Comment pauldia
pauldia's picture

This is simply another brick in the road. Back in 2009, the foundation was being laid to Nationalize the banks. Noriel Roubini, Alan Geenspan,Linsey Graham all are on record as being open to the idea. How could this occur and still have public opinon massaged to accept a socialization powerplay on the banks? This lawsuit will burn bank capital and shareholder equity along with demonizing bankers as greedy parasites, & will open the door for benevolent Uncle Samobama. One link provided but many are available. Uncle Warren will be made whole plus by Treasury and BAC will soon be part of the loving "Federal Family".

http://online.wsj.com/article/SB123517380343437079.html

Sat, 09/03/2011 - 07:54 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

these are a bunch of civil suits.  no one (or almost no one) will be charge with any crime.  most of those "cases" were "investigated" but the justice dept decided not to prosecute very much because, in a court-room, ya know there is a near-impossible "burden of proof" (shoutout to gretchen!) and besides the criminals bought the fuking Justice Dept, too!

anyhow, these files were inadvertantly thrown away and launced into cyberspace when they probably, technically, shouldn't-a-bin-deleted, you know, legally, but there was some confusion and misunderstanding amond some lower-lever GS types @ Justice who have tranferred to the CIA where they are nlow managers and supervisors!

so this is maybe just a big circle-jerk where all the fraudsters and their goobermint cronies pass a shitstorm of virtual FRNs around and the taxpayer ends up w/ another trillion dollar baby of an albatross for a "new" necklace (due, perhaps to a reduction in what you got coming or perhaps a "fair" needs test for a part of one's retirement money, to "control costs"), and the super congo makes sure the military conquest of libya continues, and scoobydooby doo, according to the exact wishes of the puppetmasters on the Council

now, if you hold the contrary view and think the glass is half empty, then...

Sat, 09/03/2011 - 14:24 | Link to Comment pazmaker
pazmaker's picture

slewie, I like your theory here. There remains lots of unknowns and there is a lot of specualtion on here...... What ever the reults are it can't be good for us slave taxpayers. I gotta find a way of this wheel!

Sat, 09/03/2011 - 08:06 | Link to Comment somethingelse
somethingelse's picture

i guess the most stable secure thing is to be an attorney....they're the only party that always wins

Sat, 09/03/2011 - 09:12 | Link to Comment PMakoi
PMakoi's picture

Exactly what I was thinking, 'Bend over your desk banksters, let the lawyers show you how to f*ck someone!"  And, the lawyers will be able to do it for years and years and years longer than any of those guys wrote synthetic CDO's.

Sat, 09/03/2011 - 08:14 | Link to Comment Sambo
Sambo's picture

How long before the second entity sues the first entity? Bankers dont go down without a fight. It is in their genes.

Sat, 09/03/2011 - 08:17 | Link to Comment Sambo
Sambo's picture

This is all diversionary tactics to keep the public from looking at the much larger debt ceiling monster again. Good job Obama & Boehner!

Sat, 09/03/2011 - 08:20 | Link to Comment MoneyWise
MoneyWise's picture

"Fannie (FNMA.OB) and Freddie (FMCC.OB) lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers."

Too much noise over nothing, 30b $ it's pocket change for those

banks, I'll not be surprised, if they settle this for

about $300-500 mil at most.

Sat, 09/03/2011 - 08:22 | Link to Comment mikmid
mikmid's picture

This country is run by ruthless, kleptrocrats. I think the oligarks are working on one world gov. with this. We shall see.

Sat, 09/03/2011 - 08:25 | Link to Comment MoneyWise
MoneyWise's picture

Looks like just last 2 days noise is plan of the game,

timing is very suspicious, all this sh*t comes to surface

at ones right before Fed Meeting and probably more on the way.

Nice scenario.

Sat, 09/03/2011 - 08:39 | Link to Comment digalert
digalert's picture

Ah, the appropriately named TARP,

aka coverup.

We remember when "non-banks" GS and MS scrambled, with the assistance of shifty Paulson, to become banks. Specifically to receive the TARP, even though they didn't need the TARP (haha). I expect GS and MS to proclaim they are not really banks, but merely an appendage of the FED. We can now see a striking resemblance between the Bernank and the Blanfein. Where they give us that stupid "what do you mean?" look while they testify under oath they had no clue about...well anything.

Sat, 09/03/2011 - 08:49 | Link to Comment MoneyWise
MoneyWise's picture

Indeed, but I mean why now?
What they've been waiting for 3 years???

Sat, 09/03/2011 - 08:51 | Link to Comment Jvee
Jvee's picture

The layoffs and the lawsuits have nothing to do with each other.

The 30.000 job cuts were announced in Jan 2009 when John Thain and Ken Lewis discussed the "synergies" of the combined organization. Probably the easiest thing Moynihan can deliver.

Two years later the work to combine is now complete. Making the cuts now saves the year end compensation pool for those sticking around. Bonus season is right around the corner and JPM and MS iare aggressively targeting the mid level talent at rivals.

Creating a new company called "Merrill Lynch" would reverse all this effort and create jobs for Owebummer. Suspect this conveniently happens in the coming election year.

Notice the Feds PR department @ the WSJ reports spinoff is a done deal - I mean- on the table.

Sat, 09/03/2011 - 09:03 | Link to Comment Clinteastwood
Clinteastwood's picture

The liberals caused all this mess in the first place.  Can you say Glass-Steagall?  How aout the Community Reinvestment Act?  Any of you people still like Bill Clinton?

Now Oblamea wreeks further havoc by suing the banks he insisted organize fraudulent loans to his "community."  

Doesn't it occur to anyone the obvious truth that the liberals want the US to go down in flames, just like alQuaida does? (or so we're supposed to believe).

Think the US will ever again have a leader who will speak the truth?

Sat, 09/03/2011 - 09:18 | Link to Comment Crassus
Crassus's picture

Monica Lewinsky brought down Glass-Steagall.

Sat, 09/03/2011 - 09:25 | Link to Comment centerline
centerline's picture

Liberals, conservatives, left, right, Republican, Democrat...

Clearly you still don't get it and can be easily distracted. Waiting for the "strong-man" to arrive it seems.

Probably the first "rat out" the neighbors when the you are offered some trinket for your "patriotic duty." I mean, you must have some nut-job liberals around you, right?

Sat, 09/03/2011 - 09:32 | Link to Comment Cursive
Cursive's picture

 

 

So to sum up: first the taxpayers were asked to save Freddie and Fannie, then they were asked to save the banks, now when it is politically expedient to do so, the first entity which is still being saved ($200B of taxpayer funded capital injections later) is suing the second saved entity.

 

Cannibalism.  When there's no one else to loot, the scum turn on each other.

In the interim, on a day when job growth in this country was essentially ZERO, we are going to lose another 30,000 private sector jobs.

It'll definitely be worse this time because we kicked the can in 2009.

It is time someone finally put an end to this farce on and handed a summons to Hank and his "crony communism" buddies, who ended up bailing out mother Merrill's multi-millionaire stakeholders and managers, at the expense of hundreds of billions in wiped out Bank of America equity value, and soon to be, deposit impairments, as America's biggest bank is first taken to edge, and then, beyond.

Long overdue.  Time to nail Hammerin' Hank.  Does anyone remember that special Goldman board of directors meeting with Treasury Secretary Paulson in Moscow?

 

 

Sat, 09/03/2011 - 11:54 | Link to Comment tom a taxpayer
tom a taxpayer's picture

 

In June 2008 U.S. Treasury Secretary Paulson "held a meeting with the [Goldman Sachs] bank’s board in which he spilled details of government policy".

Treasury Secretary Paulson "met with the Goldman Sachs board even though he signed an ethics agreement when appointed Treasury Secretary in 2006, under which he promised not to contact Goldman Sachs, the bank for which he worked for 32 years and which he ran for seven years."

"Ethics experts yesterday called on Congress to investigate Mr Paulson’s actions. Melanie Sloan, executive director for Citizens for Responsibility and Ethics in Washington, a non-profit body, said: “It’s hard to imagine why [Mr Paulson] thought such a meeting would be OK. It wasn’t purely social — purely social is when you don’t discuss business. That’s basically inside information that the Goldman board received”."

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_...

Article reporting on Sorkin's book "Too Big To Fail".

 

Sat, 09/03/2011 - 12:03 | Link to Comment Cursive
Cursive's picture

@tom a taxpayer

 

Very good, but you left out the most interesting tidbit, something which would give every conspiracy theorist a hard-on:

For the next hour, Paulson regaled his old friends with stories about his time in Treasury and his prognostications about the economy. They questioned him about the possibility of another bank blowing up, like Lehman, and he talked about the need for the government to have the power to wind down troubled firms, offering a preview of his upcoming speech.

Aaron Sorkin obtained all of this information from the FOIA release of Paulson's calendar.  Remember, this meeting was held after JPM "acquired" Bear Stearns (with guarantees, BTW), but PRIOR to the Lehman takedown.

http://seekingalpha.com/article/167565-the-secret-paulson-goldman-meeting

 

Sat, 09/03/2011 - 09:45 | Link to Comment PulauHantu29
PulauHantu29's picture

Let the good times roll! More Bonuses! More Bank Bailouts.....

 

"Why steal less when you can steal more....."

Sat, 09/03/2011 - 09:49 | Link to Comment Long-John-Silver
Sat, 09/03/2011 - 10:53 | Link to Comment TomJoad
TomJoad's picture

Well, you got the "DP" part right. 

 

 

 

Jump! You Fuckers!

Sat, 09/03/2011 - 10:36 | Link to Comment EhKnowKneeMass
EhKnowKneeMass's picture

FOMC Gang Signs

https://secure.flickr.com/photos/expd/6106341695/

Somebody stole it from Banzai?

Sat, 09/03/2011 - 10:42 | Link to Comment goldinpenguin
goldinpenguin's picture

The head of FHFA is "acting" appointed by O'B, look forward to a puffball settlement.

 

Wells Fraudco not in the suit, I'm sure they aren't clean, probably trying to cut a separate deal.

 

Any chance Uncle Warren didn't know this was coming? Has he given BAC the money yet? Maybe another lawsuit? That would be funny.

Sat, 09/03/2011 - 11:11 | Link to Comment cocoablini
cocoablini's picture

Yes, interesting that week after the Buffet BA deal, this cimes down and Wells/ Wachovia are not implicated. Buffets exposure to Bank America in minor compared to Wells. He probably saw this coming, threw some liquidity at BA as it was swandiving and told Obama to leave Wells alone in exchange for the 7 billion in investment( or saving it by being Warren and having sheeo investors tailgate him.)
I also think because the states have big suits against the banks that the Federal suit is an attempt to frontrun those potentially long suits and get a quick settlement out of the banks. The numbers discussed are clearly bad, but not enough to send the banks over the cliff. Plus settlement amount will be far less. The conclusion of the Federal suit will indemnify it from other suits( which is what I think the Fed/ bank cabal wants to do OR the Feds want all the money and sticking it to the states( Obama is not very pro state's rights-he likes centralized power.)
They can get money first and prevent further bleeding if they rush this lawsuit- its all a big dog and pony show for the media. It won't amout to much like the Goldman wristslap.

Sat, 09/03/2011 - 11:13 | Link to Comment Simple.Machine
Simple.Machine's picture

Will these lawsuits make the intricacies behind the business relationships be entered into public record? Is there potential that the FHFA, Freddie Mac and Fannie Mae have just screwed themselves and the banks they are suing?

Sat, 09/03/2011 - 11:14 | Link to Comment Simple.Machine
Simple.Machine's picture

.

Sat, 09/03/2011 - 11:39 | Link to Comment PulauHantu29
PulauHantu29's picture

"Snow in Hell"...that's the chances any of these lawsuits has of succeeding aginst the most powerful elite in the universe. The Regulators turned their heads for years...Congress encouraged the theft...and all positions are filled by industry wonks themselves.\

I expect zilch to come out of this except "Bread and Circus" for the Hoi Poloi to eat up like sheeples.

Sat, 09/03/2011 - 11:47 | Link to Comment PulauHantu29
PulauHantu29's picture

"Snow in Hell"...that's the chances any of these lawsuits has of succeeding aginst the most powerful elite in the universe. The Regulators turned their heads for years...Congress encouraged the theft...and all positions are filled by industry wonks themselves.\

I expect zilch to come out of this except "Bread and Circus" for the Hoi Poloi to eat up like sheeples.

Sat, 09/03/2011 - 11:56 | Link to Comment humblepie
humblepie's picture

IMHO, the timing of this filing reeks of politics. I said in a comment a few days ago that the reps and warranties issue is going to blow up. Didn't think it'll happen this fast. I think Obama is using this as leverage to force the banks to do the refi deals at the GSEs, maybe even principal reduction, plus, for once, Washington can't be blamed for not doing the 'right thing'.

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