While you may not have heard about it yet (you probably will start noticing it in the MSM soon, if not this morning), it appears that over the past 18 hours our country's largest bank, Bank of America,
may have entered into the final stage(s) of a fairly swift implosion. Obviously, the economic, political and social implications of an event of this nature and magnitude occurring right now--if it does continue along its apparent trajectory even for a few more days--are nothing less than horrific.
Ten days ago, I posted a diary here entitled: "The Great Unravelling: Is Bank of America Done?" The piece provided extensive detail as to why the already-insolvent megabank was even more insolvent than most realized, since it would more than likely (over ensuing months and, perhaps, years) have to eat scores of billions of dollars in unanticipated "put-backs" (i.e.: in lay-speak and in this instance, "put-backs" is a slang term for refunds to investors of mortgage securitization bonds/paper).
This story materialized due to revelations uncovered in a New Jersey bankruptcy hearing (
Kemp v. Countrywide) which had occurred over the week prior to the publication of my diary. In that case, an
inference was made public--for the first time--by an employee of Bank of America's Countrywide Financial unit, the largest originator of subprime mortgages in the U.S. during the past decade, that, for all intents and purposes, Countrywide had committed ongoing investor fraud on a massive/national scale, starting sometime around 2004-2005 and continuing through 2008. The rampant fraud occurred due to the fact that the mortgage firm had ceased conveying proper mortgage documentation to the securitization firms that were responsible for selling shares/bonds in those bundled mortgages to the investment community; when in fact, those securitization entities were actually selling shares/bonds to investors in something that those securitization firms never even possessed.
Apparently, the BofA story from ten days ago was just a teaser for the main act which started playing out on the MSM stage roughly 18 hours ago. Yesterday, MSM and blog stories started surfacing concerning two separate issues (SEE: HERE, concerning the bank's latest nightmare, and HERE, which provides an update to the story I started covering 10 days ago), with either one providing more than sufficient cause to drive the two-trillion-dollar behemoth into receivership, or worse--that place where almost all divine oligarchic institutions have gone of late: taxpayer exponential bailout hell.
As you'll see, below, the bank is very much in Wikileaks' sights, and it's all but formally confirmed that they will be the subject of Julian Assange's next planned data dump, sometime in January.
On top of that and based upon further revelations, Naked Capitalism's Yves Smith points out that, after taking a deeper dive into that New Jersey court testimony, from just three weeks ago, it is now confirmed that previously-reported inferences concerning Countrywide's potentially-rampant fraud were, indeed, general practice for virtually all (at least 96%) of that firm's securitization efforts for approximately four or five years during the past decade.
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A very big h/t to Calculated Risk, for pointing us to these first two blurbs, on Tuesday, from Andy Greenberg over at the Forbes Magazine blog:
From Monday: "WikiLeaks' Julian Assange Wants To Spill Your Corporate Secrets."
Early next year, Julian Assange says, a major American bank will suddenly find itself turned inside out. Tens of thousands of its internal documents will be exposed on Wikileaks.org ... The data dump will lay bare the finance firm's secrets on the Web for every customer, every competitor, every regulator to examine and pass judgment on.
And from Tuesday: "Bank Of America WikiLeaks' Next Target?"
[A]n eagle-eyed reader has sent me a link to a quote from a Computer World interview with Assange from October of 2009, which, if true, may contain a clue to that bank's identity:
"At the moment, for example, we are sitting on five gigabytes from Bank of America, one of the executive's hard drives," he said. "Now how do we present that? It's a difficult problem. We could just dump it all into one giant Zip file, but we know for a fact that has limited impact. To have impact, it needs to be easy for people to dive in and search it and get something out of it."
Here's another view on all of this, from the Lede Blog over at the NY Times, roughly 18 hours ago: "Latest Updates on Leak of U.S. Cables, Day 3."
And, last of all, if you have ANY doubts that this Wikileaks' story is not about Bank of America, HERE'S some help connecting the dots, from Zero Hedge, on Monday.
And, here's more on the second act of this horror show...
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(Note: Naked Capitalism Publisher Yves Smith has provided diarist with written authorization to republish her blog's posts in their entirety for the benefit of the DKos community.)
More on BofA Employee Damaging Admissions re Failure to Convey Mortgage Notes
Yves Smith
Naked Capitalism
Tuesday, November 30, 2010
We've had a series of posts (see here, here, and here) on the judge's decision in a case called Kemp c. Countrywide, which provided what appeared to be the first official confirmation of what we've long suspected and described on this blog: that as of a certain point in time post 2002, mortgage originators and sponsors simply quit conveying mortgage notes (the borrower IOUs) through a chain of intermediary owners to securitization trusts, as stipulted in the pooling and servicing agreements, the contracts that governed these deals. We say "appeared to be" because Bank of America's attorney promptly issued a denial, effectively saying that the employee whose testimony the judge cited in his decision, one Linda DeMartini, a team leader in the bank's mortgage- litigation management division. didn't know what she was talking about. As we discussed, this seems pretty peculiar, since she was put on the stand precisely because she was deemed to be knowledgeable about Countrywide's practices.
Tday, an article appears in Bloomberg, and it appears to be a rehash of this now week-old story, so I was puzzled to see it run now. But buried in the article is the probable reason for this piece, namely, that the Bloomberg reporters saw that BankThink had purchased and posted the trial transcripts, and quoted more of DeMartini's testimony. And it isn't pretty. From Bloomberg:
The judge asked DeMartini whether the notes ever move to follow the transfer of ownership, according to the transcript of the August 2009 hearing.
"I can't say that they're never moved because, I mean, with this many millions of loans as we have I wouldn't presume to say that, but it is not customary for them to move," DeMartini said.
This is in keeping with the judge's recap, and also underscores the notion that it was Countrywide's practice to not convey the notes. We have been told separately that a senior industry executive also said that no one in the industry transferred the notes. If true, this has very serious implications. As we've indicated, it means that residential mortgage backed securties are not secured by real estate, or as Adam Levitin put it, they are "non mortgage backed decurities. Bloomberg provides further comments along those lines:
"It may mean investors who think they bought mortgage- backed securities bought securities that aren't backed by anything," said Kurt Eggert, a professor at Chapman University School of Law in Orange, California.
With the ramifications so serious, expect industry denials to continue apace until the evidence becomes overwhelming.
Bold type is diarist's emphasis.
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IMHO, this story's all but concluded. Either Bank of America takes a 20-foot perp walk across an 18-foot gangplank, and we stick a fork in it; or, Washington looks the other way as it financially nukes an already-ravaged Main Street, yet again (on top of the additional, mutually assured devastation it's already laying on us this week, too).
Any way one might look at these most recent developments, IMHO, from a myriad of perspectives, this latest BofA chapter in the over-arching story of our country's recent financial woes could easily turn out to be THE biggest nightmare yet. One thing that's obvious, if only for the past few hours, is that whatever's going down right now is happening very swiftly.