The markets finally woke up to the mortgage fraud debacle. JP Morgan, a day after beating earnings expectations, is off 4.18% for the high water mark of 48 hours ago. Bank of America is off 11.9% and Wells Fargo is off 5.9%.
With perhaps a tiny bit of understatement, David Fabor states that:
It appears the mortgage content of many of those pools—created when the banks were dominating the mortgage securitization market in 2005, 2006 and 2007—may have been misrepresented.
Yet perhaps most interesting is admission by JPM that they ceased using MERS on some transactions two years ago. One wonders why? The answer from spokesman Tom Kelly was vague,
So I asked Kelly why they dropped MERS. First he said, “In truth some courts won’t accept MERS for foreclosures.” But then he said it was “a matter of policy.” I’m sure they don’t want to come right out and say, well, we’re not exactly sure MERS is all that legal.
Oh, and something I noticed in the earnings … JP Morgan upped its reserves for “litigation and repurchase.” Repurchase refers to when the bank is forced to buy back loans (called “putbacks”) from the investor or security due to some problem with the origination. They have the biggest reserves of all the banks, according to experts.
This is not a new crisis. This is a continuation of the crisis that surfaced three years ago but began years before that. The many individual stories of homeowners who were wrongly evicted, or had their homes broken into, or had false documents created and presented to the courts are all pointers to the rot, the toxicity of the assets in question.
So the questions above are addressed both to the CEOs of the major banks and to the primary architects and defenders of the bailouts. See, despite all the assurances by Geithner and Bernanke, all is not well with the bailout. Instead, the government and the mega banks are in collusion to deceive the broad public, the investing community, (which keeps getting smaller) and international private and public economic players. It appears JP Morgan has known that all is not well but has been acting as if it were.
This post addresses much more thoroughly what I alluded to a few days ago. The Fed owns this crap and that puts the government in bed with the bankers. I will just pull out one section.
The free-market, let the banks do what they do mentality was what allowed them to create a $14 trillion mountain of securities backed by precarious mortgages to begin with. Don’t look at what they’re doing, that might hurt the boom. Don’t ask them for anything in return for bailouts — that might clog the system. Don’t stop them from churning foreclosed properties — that might stop the recovery.
But the real reason for Geithner’s reluctance about a foreclosure moratorium is that he’s scared stiff about those securities – because even if he won’t admit it, he knows that the bailout wasn’t just about TARP and Bernanke isn’t just an economic savior.
The government owns or is backing trillions of dollars worth of assets predicated on the same or similar suspicious loans that defaulted during the 2008 crisis period, which they did nothing to stop (or force banks to restructure).
I believe the intent of Geithner has been to deceive for political purposes and to protect the markets, which is really to protect the existing wealth distribution and power structure.
It is time for an investigation of banks, the executive branch, and the Fed to answer the questions, what did they know and when did they know it?