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Tuesday
Dec202011

Adam Levitin Tells Congress: Citigroup, Bank Of America, JPMorgan & Wells Fargo Are All INSOLVENT

Update:  Bernanke doesn't see a problem with insolvency

Video - Georgetown Law Professor Dr. Adam Levitin

Start watching at 1:35, though the bomb from Levitin comes near the end...

  • "If they started writing off their second-lien mortgages, they would have no capital left.  They would be insolvent."

He mentions Citigroup (nyse:C), JP Morgan (nyse:jpm), Bank of America (nyse:BAC), and Wells Fargo (nyse:wfc) by name.

Though it's nice to hear the truth leak out in front of a small Congressional committee, this is nothing new to Daily Bail readers.  It's not even close, really.  The 4 largest banks are insolvent many times over.  Their puny and massively over-leveraged capital bases would not just be wiped out, they would be turned into negative multiples of the original equity.

Then take the next step and understand that these same criminally fraudulent and insolvent institutions, are paying their executives $144 billion in bonuses this year, based on false accounting that was endorsed by Congress and jammed down the throats of FASB in June of 2009.

I wrote about the criminal insolvency of banks here.

And here:

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Bill Black has made the case recently here...

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Adam Levitin's thoughts can be found in more detail here...

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Quotes from Levitin's testimony before Congress...

"It is important to emphasize that junk fees on homeowners ultimately come out of the pocket of MBS investors. If the homeowner lacks sufficient equity in the property to cover the amount owed on the loan, including junk fees, then there is a deficiency from the foreclosure sale. As many mortgages are legally or functionally non-recourse, this means that the deficiency cannot be collected from the homeowner’s other assets. Mortgage servicers recover their expenses off the top in foreclosure sales, before MBS investors are paid. Therefore, when a servicer lards on illegal fees in a foreclosure, it is stealing from investors such as pension plans and the US government.

Many foreclosure complaints are facially defective and should be dismissed because they fail to attach the note. I have recently examined a small sample of foreclosure cases filed in Allegheny County, Pennsylvania (Pittsburgh and environs) in May 2010. In over 60% of those foreclosure filings, the complaint failed to include a copy of the note. Failure to attach the note appears to be routine practice for some of the foreclosure mill law firms, including two that handle all of Bank of America’s foreclosures.

Recently, arguments have been raised in foreclosure litigation about whether the notes and mortgages were in fact properly transferred to the securitization trusts. This is a critical issue because the trust has standing to foreclose if, and only if it is the mortgagee. If the notes and mortgages were not transferred to the trust, then the trust lacks standing to foreclose."

DB here.  We played a game of roulette in the 1980s when all of our large money-center banks were technically insolvent due to Latin American exposure, and most sloggged their way back to solvency over the the next 10 years.  The difference this time is simple - LEVERAGE.  Paulson's 2004 SEC-enhanced gift of unlimited leverage for the 5 largest investment banks changed the game.

From the New York Times:

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Video - Ratigan on Paulson and the SEC rule change...

Both of these clips are outstanding.

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Video - More of the same from Ratigan with a touch more focus on failed bank CEOs and the Wall Street bonus structure.

 

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Reader Comments (14)

Fraudclosure Hearing, Day II

http://market-ticker.org/post=172631
Nov 19, 2010 at 4:47 AM | Registered CommenterDailyBail
On Passage of the Bill, the Objections of the President Notwithstanding: H R 3808 To require any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce

http://www.govtrack.us/congress/vote.xpd?vote=h2010-573
Nov 19, 2010 at 4:50 AM | Registered CommenterDailyBail
http://clerk.house.gov/evs/2010/roll573.xml

FINAL VOTE RESULTS FOR ROLL CALL 573
Nov 19, 2010 at 4:51 AM | Registered CommenterDailyBail
We Won! Bill to Retroactively Immunize Mortgage Fraud Defeated

http://www.washingtonsblog.com/2010/11/we-won-veto-on-retroactive-immunity-for.html
Nov 19, 2010 at 4:53 AM | Registered CommenterDailyBail
Even a blind hog finds an acorn once in awhile!

The banks have poured way to much money into the Congress for this issue not to raise it's ugly head again. They'll keep at it till the mortgage servicers and the Banks are immune to prosecution for fraud and they can get back to ripping off the middle class.
Nov 19, 2010 at 12:44 PM | Unregistered CommenterSagebrush
i fear you are correct sage...but still it's nice to have a victory now and again...
Nov 19, 2010 at 2:22 PM | Registered CommenterDailyBail
"Many foreclosure complaints are facially defective and should be dismissed because they fail to attach the note."

As transcribed by Karl Denninger; correction, that should be "factually defective...."
Nov 20, 2010 at 9:34 PM | Unregistered Commentersignalfire
i fear you are correct sage...but still it's nice to have a victory now and again...

OK, Then lets run the banks on Monday before Christmas just to show them we are awake. What do we have to lose...................?

But then im on my 3rd drink, & blowin smoke out of my Ass....! But then 2 years ago it all started in Ca. and the fed's shut it down by the time the rest of the country knew about it.

From east-to west coast, Monday mornning we pull it out for 3 mo. Put it in yr wife's Viberator-Dilldow, Drawa.........! Its safe thAre !

Lets face it, we dont have anyother choice's....You cant hurt them, if you cant get to them.......?
Nov 26, 2010 at 9:27 PM | Unregistered CommenterTexas Dar
Would somebody please tell me why anybody would waste their time talking to this criminal cabal in Congress? They bailed out the banksters at taxpayer expense; why does this idiot think that Congress is going to anything about THIS? If anything, I think that they'd use it as an excuse to throw more money at them. After all, aren't they bought and paid for by the banksters? AREN'T THEY? They also refuse to stop appropriating $$$ for the ongoing genocide in the Middle East. Jesus, how long is the list? Congress belongs in the storm drain. Better yet, use their useless, treasonous asses to plug the reactors in Japan.
Mar 20, 2011 at 6:15 PM | Unregistered CommenterBig M
DB, I want to put this here regarding your comments about latin american exposure..

http://www.businessweek.com/news/2010-12-27/santander-to-buy-ge-mexico-mortgages-for-162-million.html

I came across this because Banco Santander just financed a wind project here in the US.....
Dec 20, 2011 at 9:00 PM | Unregistered Commenterjohn
Thanks john. I hadn't seen that story. Good to see you and thanks for sticking around during my long break from the site. I promise it won't happen again, at least not for the next 3 years...;)
Dec 20, 2011 at 11:10 PM | Registered CommenterDailyBail
It's all fun and games until the citizens turn vigilante and bring out the guillotines. Creating dead bodies is always a good way to make people in authority think about their actions.
Dec 22, 2011 at 2:08 PM | Unregistered Commenterlili
Dec 22, 2011 at 2:08 PM | lili

Very Well Put. Sad, but it may need to come to that.......?
Dec 22, 2011 at 8:56 PM | Unregistered CommenterTexas Dar
if these banks are insolvent too where is all that money? seriously i wonder where is all the wealth stolen from people.
Dec 31, 2011 at 5:36 PM | Unregistered Commenterenos

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