William Black (one of my favs) teams up with L. Randall Wray for in depth analysis of the ongoing mortgage fraud.
This is a couple days old but worth the read. The authors will be following up.
Read more:
Let's Set the Record Straight on Bank of America: Open the Books!Bank of America Should be Placed in Receivership NOW
The bank's response primarily criticizes its borrowers as deadbeats, yet the data it provides support points we have made in our prior posts, including Bill Black's posts about the banks working with the Chamber of Commerce and Chairman Bernanke to extort the Financial Accounting Standards Board (FASB) in order to destroy the integrity of the accounting rules requiring banks to recognize losses on their bad loans. We have explained why the fraudulent officers controlling many lenders followed a strategy of making bad loans at premium yields in order to maximize (fictional) accounting income and their bonuses. This dynamic drove the current crisis. These frauds hyper-inflated the housing bubble and caused trillions of dollars of losses.
The extortion of FASB was successful; Bank of America was one of the leaders of that extortion. It changed the accounting rules so that banks could often avoid recognizing losses on these fraudulent loans, until they actually sold the home taken back through foreclosure. This dishonorable accounting fiction creates perverse incentives for banks to do exactly what Bank of America has done -- let bad assets waste away and make already severe losses catastrophic.
Bank of America's data add to our argument that hundreds of thousands of its customers were induced by their lenders to purchase homes they could not afford. The overwhelming bulk of the lender fraud at Bank of America probably did come from Countrywide, which was already infamous for its toxic loans at the time that Bank of America chose to acquire it (and also most of Countrywide's managers who had perpetrated the frauds). The data also support our position that fraudulent lenders are delaying foreclosures and the sales of foreclosed homes primarily in order to delay enormous loss recognition.
The fraud scheme inherently strips homeowners of their life savings and finally their homes. It is inevitable that the homeowners would become delinquent; that was the inherent consequence of inducing those who could not repay their loans to borrow large sums and purchase homes at grossly inflated prices supported by fraudulent inflated appraisals. This was not an accident, but rather the product of those who designed the "exploding rate" mortgages. Those mortgages' initial "teaser rates" induce unsophisticated borrowers to purchase homes whose values were inflated by appraisal fraud (which is generated by the lenders and their agents) and those initial teaser rates delay the inevitable defaults (allowing the banks' senior managers to obtain massive bonuses for many years based on the fictional income). Soon after the bubble stalls, however, the interest rate the purchasers must pay explodes and the inevitable wave of defaults strikes. Delinquency, default, foreclosure, and the destruction of entire neighborhoods are the four horsemen that always ride together to wreak havoc in the wake of epidemics of mortgage fraud by lenders.
Read more:
Let's Set the Record Straight on Bank of America: Open the Books!Previous analysis from Black and Wray
Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership Foreclose on the Foreclosure Fraudsters, Part 2: Spurious Arguments Against Holding the Fraudsters Accountable
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