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10 December, 2012

"Will It Never End?!?" Goldfinger Laments

from the New York Times  ("fair use" authorized under 17 U.S.C. § 107):
"The nation’s largest banks are facing a fresh torrent of lawsuits asserting that they sold shoddy mortgage securities that imploded during the financial crisis, potentially adding significantly to the tens of billions of dollars the banks have already paid to settle other cases."
Apparently, investors take issue with being sold "securities" that weren't, well, "secured".

Who'da thunk? 

And they, along with "regulators" (Goldfinger personnel at SEC, etc., with whom this was all A-OK till the organic matter hit the rotating oscillator), prosecutors (ditto), and insurers (ditto, as long as they didn't have to actually pay out) are on the offensive, taking the TBTFs (BofA, JPMorgan Chase, Wells Fargo, Citigroup, et al) to court over more than $1,000,000,000,000.00 (that's what "1 trillion" looks like in actual numbers) in "securities" that were, supposedly, "backed by residential mortgages."

At that, NYT reports that "some in the banking industry" think that losing ALL of these lawsuits could result in "losses" of as mush as 300,000,000,000.00 (30%; gotta love the math!).  But at least one "mucky-muck" (a term that has reached a whole new level of meaning) at Tangent Capital Partners (italics are mine - but you just can't make this stuff up)  admits
“The real price tag is terrifying.” 
Seems that the 25 billion (see how different it looks in words?) that the cartel - um, industry - put up as a "settlement" awhile back just ain't gonna cut it.

In as classic a line as I've ever read, NYT paraphrases "several senior officials in the insustry" as saying "But in the most extreme situation, the litigation could empty even more well-stocked reserves and weigh down profits..." (emphases mine). 

Think about THAT for a moment.  If 1,000,000,000,000.00 will only "weigh down profits", I guess Goldfinger really is "Too Big To Fail".  Then again, the NYT article does overlook one facet of all this, saying,
"The banks are battling on three fronts: with prosecutors who accuse them of fraud, with regulators who claim that they duped investors into buying bad mortgage securities, and with investors seeking to force them to buy back the soured loans."
What NYT overlooks is that the momentum is building from a fourth "front":  the other side.  As time passes, more and more mortgagor-victims are prevailing in their own battles against foreclosure, based upon fraud of varying types.  One recent example is a property owner who had a "securitization audit" done, and obtained verification from SEC of these findings:

"Our search of EDGAR, the Commission’s electronic database of corporate filings, for the CWABS Asset-Backed Certificates Trust Series 2006-23 ( produced no filings referencing the loan number you provided.  We also did not locate a pooling and servicing agreement attached as an exhibit to the Trust’s registration statement.  A Form 15 to terminate the Trust’s registration was filed in January 2007."

Which, if you've been paying attention, leads directly back to the securities-victims discussed above, who, it appears, invested in mortgage "pools" that Karl Denninger, at Market Ticker, calls "empty trusts".



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