Monday, December 5, 2011

What's That Smell?

I love the smell of napalm in the morning, says Robert Duvall's character in Apocalypse Now. We are getting a whiff of that on the morning after this CBS 60 Minutes piece on alleged fraud at Countrywide Financial (now a division of Bank of America):

Now, none of this is really news. If you have been following this blog, you know that Bank of America is freighted with huge successor liabilities inherited not just from Countrywide, but from Merrill Lynch as well. Consumer fraud, investor fraud, breach of fiduciary duty, obstruction of justice--you name it. That the Obama Administration has done so little to hold these companies accountable is a sure sign of whose shed has the biggest Tool.

Maybe, if the feds don't do it, the states will. The Attorneys General of the fifty states have been trying for a year or more to reach a settlement with BofA and other Wall Street lenders over foreclosure abuses. But the dollar figure being floated around for the industry to buy immunity is, in the eyes of at least one AG, too small. So last week Martha Coakley of Massachusetts announced that her office is striking off on its own and suing BofA, Wells Fargo, JP Morgan Chase, Citigroup, and GMAC. To her chagrin, Martha will be forever remembered as the heavily favored Senatorial candidate who lost Ted Kennedy's seat to a little-known Republican runt, Scott Brown. But she has been a crackerjack AG, going after some of the big banks in 2008 when few others did.

The news flow on Bank of America continues to, um, reek. Aside from this latest legal attack, there was the credit downgrade announced by Standard & Poor's late Tuesday of BofA and 36 other global banks. Indeed, the share price of BAC common was headed for a toilet spin until a gang of central banks injected a stiff dose of monetary heroin the very next morning. And how's business, you ask? BAC's share of mortgage loan originations in the U.S. has declined from about 25% to around 10% in Q3 2011. That's in a market that is expected to soften by 25% in 2012. Hmm, wonder what that combo is going to do to revenues.

But faithful shareholder MainePERS is hanging tough, I tell ya. HANGING TOUGH!

[update, 12-07-11--]

Mississippi PERS just reached a settlement with BofA, recovering $315 million from a soured investment in toxic mortgage-backed securities peddled by Merrill Lynch in 2006 and 2007. The settlement awaits approval by Federal District Judge Jed Rakoff. Yup, that Judge Rakoff.

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