Thursday, July 21, 2011

The Bank Of America Cover-Up

Bank of America BAC, America's biggest bully bank by assets spent its fiscal second quarter 2011, padlocking homes it didn't own, forging loan documents it didn't have and foreclosing on homes owned the homeowners outright. But it still wasn't enough, when it was over the bank posted it's greatest quarterly loss ever.

Bank of America Corp. (BAC) posted the biggest quarterly loss in the lender’s history after Chief Executive Officer Brian T. Moynihan booked more costs tied to defective mortgages and revenue continued to slide.

The second-quarter loss of $8.83 billion, or 90 cents a share, compared with profit of $3.12 billion, or 27 cents, a year earlier, the lender said today in a statement. Ed Najarian, head of bank research at International Strategy & Investment Group, called revenue “fundamentally” weak and Paul Miller at FBR Capital Markets said doubts about earnings power may prompt analysts to lower their ratings.
There is no reason to doubt Bank of America's earning power, it doesn't have any. Nor do the rating agencies should have downgraded it long ago.

Bank of America has been living on borrowed time since it was forced to buy countrywide financial and 2008. The $45 billion it received in TARP funds, cash from conduits such as AIG and the Fed, and other nefarious stealthy bailout funds bought it time but could not buy it soundness. And while the bank and its governmental and accounting enablers continued to polish its exterior to a high burnish luster, it's decrepit and decaying interior is beginning to come off in chunks. Bank of America is finally showing investors what it really is, the cover-up that they can no longer cover-up.

Not that the bank and the regulators won't continue to try, just so long as the consequences will be paid by others. When asked if Bank of America would need to raise more capital, Moynihan said what you would would expect him to.
The answer is no, Moynihan told analysts during a conference call after reporting an $8.83 billion loss at the bank where he’s chief executive officer.
Moynihan blatant lie absolutely guarantees that Bank of America will have to raise more capital, $50 billion more.
Bank of America Corp. (BAC) may have to build its capital cushion by $50 billion and renege again on Chief Executive Officer Brian T. Moynihan’s pledge to raise the firm’s dividend as mortgage losses drain funds.
The $8.83 billion loss interestingly enough matches almost exactly the $8.5 billion settlement that Bank of America reached institutional investors who get burned with cruddy mortgage-backed securities.
Among the investors were BlackRock Inc (BLK.N), MetLife Inc (MET.N) and Allianz SE's (ALVG.DE) Pacific Investment Management Co. Of the 22 investors that agreed to the accord, only the Federal Reserve Bank of New York and the Federal Home Loan Banks were not sent letters by Schneiderman.
The $8.5 is made to sound like a lot but it's just another layer of hypocrisy. The settlement was for $20 billion. So, Bank of America rips you off for $20 billion pays you back $8.5 billion and they call it punitive. By the new math that's an $11.5 billion gain. The FASB financial accounting standards should be so sound. But seeing past the deception on Wall Street is like looking through a thick fog. Many of the same institutional investors that were burned by Bank of America also do business, big business with Bank of America. So, there is an incentive just to make whole those at the very top of the pyramid scheme. For the small investors and pension recipients there is no such justness. Belatedly they raise their voices saying, "Where's our bailout."
In a filing Wednesday in the New York State Supreme Court in Manhattan, the group of four funds said the proposed settlement "may provide some investors with a windfall and may not appropriately compensate others for their actual loss."
A windfall for large investors and the shaft for the average taxpayer who were forced to bail Bank of America out.
While powerful investors stand to benefit from the $8.5 billion settlement over the bank’s bundling of shoddy mortgages as securities, the fallout for the nearly 275,000 borrowers who took out those loans depends greatly on how deep they are in the foreclosure process and whether they earn enough money to dig themselves out.

While no exact income qualification has been set as part of the agreement, which was announced last month, many servicers use a formula in which borrowers can qualify for a modification as long as the new monthly payment does not exceed 31 percent of their monthly gross income. For borrowers who are unemployed or lack the income to cover even reduced mortgage payments, foreclosure and eviction could be much more immediate.
And even as it placates the powerful investors investors it seeks to divide and conquer the lowly states attorneys general.
Bank of America Corp. (BAC) was accused by a top official at the Iowa attorney general’s office of engaging in a divide-and-conquer strategy by undermining support for the settlement of a nationwide probe into foreclosure practices, a person familiar with the matter said.
But at its heart Bank of America is a foreclosure mill. This is where the wounded beast can do the most harm, in metrics of finance and non-finance as well. The bank, which was bailed out to the tune of hundreds of billions of dollars is among the most prolific liars on foreclosures and worst offenders with regard to home modifications.
Hooray! Bank of America (BAC) is lowering your mortgage payments, which means you’ll get to keep your house. Or maybe not: Many homeowners report that the financial giant is moving to foreclose ever after it granted them a permanent loan modification under the federal government’s main anti-foreclosure initiative.
As a result, homeowners under the impression that they have staved off foreclosure, often after months or even years of jumping through hoops to participate in the program, are blindsided. Mortgage payments mysteriously vanish. Borrowers are wrongly thrown into default, damaging their credit records. Lenders ladle on late fees. One day people are told their loan mods are in order, the next they’re getting threatening letters from bank attorneys. Lawyers involved in the litigation against B of A even claim that some bank “loan mitigation” personnel have gotten paid extra for collecting more in mortgage payments than what is permitted under a modification agreement.
Blindsided, betrayed, and out on the street with no one to turn to. Meanwhile what was Brian Moynahan's punishment for delivering an $8.5 billion loss? A shabby $1,940,070 in fiscal annual compensation plus another $5,568,060.00 in market value of exercisable options. That is what Wall Street is about, keeping the profits stream flowing to the top of the pyramid.

So, the carnage and cover-up will continue for as long as zombie bank can stagger to feed. But some things cannot be papered over. A mountain of bad mortgage debt in the middle of the worst housing crisis in history is one of those things. In the twilight of the second coming of the credit apocalypse Bank of America while leading the big banks to the bottom, has become only the first of the cover ups that they can no longer cover-up.

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