William Black – Let’s Set the Record Straight on Bank of America: Open the Books!

William K. BlackL. Randall Wray

William K. Black and L. Randall Wray

Let’s Set the Record Straight on Bank of America: Open the Books!

While we welcome Bank of America’s response to our two-part essay, “Foreclose on the Foreclosure Fraudsters,” it does not actually respond to any of the facts or analytical points we made. Indeed, it does not engage the issues we raised. Bank of America’s response contains some useful data on foreclosures that supports points we have made in prior articles, but overwhelmingly it is a plea for sympathy; Bank of America says it is beset by deadbeat borrowers and it is distressed that it is criticized when it forecloses on their homes. Bank of America portrays itself as the victim of an ungrateful public.

Bank of America Should be Placed in Receivership NOW

We argued that the FDIC should place Bank of America in receivership and the federal banking agencies should impose a moratorium on foreclosures until the mortgage servicers correct their systems, which currently often rely on massive fraud and perjury. There can be no assurance that foreclosures are lawful until the banks actually find the mortgage “wet ink” notes signed by debtors to prove they are the true beneficial owner of the mortgage debts, which is required to seize property. We also called on the banks to identify and compensate homeowners who were fraudulently induced to borrow by the lenders and their agents through a number of fraudulent practices variously marketed by lenders as “no doc”, liar, and NINJA loans (all subspecies of what the industry aptly called “liar’s” loans).

We showed that outside studies by a wide range of parties showed massive fraud by the bank.

The demands by investors that Bank of America repurchase loans and securities sold under false “reps and warranties” may cause exceptional losses if those making the demands document the broader fraud by the lenders. The article “Bank of America Resists Rebuying Bad Loans” shows that Bank of America’s potential loss exposure to Fannie and Freddie is staggering: “[Bank of America] said it sold $1.2 trillion in loans to the government-controlled housing giants from 2004 to 2008 and has thus far received $18 billion in repurchase claims on those loans.”

The company is fighting the groups that are demanding that it repurchase the toxic mortgages. Its CEO, Brian Moynihan counters their claims with the following analogy:

Such investors are like “people who come back and say, ‘I bought a Chevy Vega, but I want it to be a Mercedes with a 12-cylinder [engine],'” Mr. Moynihan said in October. “We’re not putting up with that.”

One-third of its subprime business is in default and Mr. Moynihan thinks Countrywide was selling Vegas? If one third of Vegas crashed and burned within three years of being purchased the metaphor might be apt and completely incriminating. We argued that putting Bank of America into receivership is the proper remedy for its substantial violations of the law and for its continuing reliance on unsafe and unsound practices. Outside reviews have documented the most extensive and financially harmful violations of law and unsafe banking practices and conditions in history.

As argued in a recent article by Jonathon Weil, the bank is nearing a “tipping point” as markets recognize it is “cooking the books,” vastly overstating the value of its assets as it refuses to recognize the true scale of losses on its purchase of Countrywide. Ironically, it still carries on its books $4.4 billion of fictional “goodwill” value created by overpaying for Countrywide (a notorious control fraud), as well as $142 billion of home equity loans that are worth far less. A more honest accounting of “good will” and of the value of home equity loans would take a big bite out of Bank of America’s market capitalization ($116 billion), which has lost 41 percent of its value since April 15. The markets are moving ever closer to shutting down the institution, but Moynihan is not “putting up with” the demand by investors for Bank of America to come clean on its fraudulent practices.

Ms. Mairone’s Response Verifies Our Claims

Rebecca Mairone replied on behalf of Bank of America to our two-part post. Step back for a moment and consider the context of Bank of America’s response. We cite evidence that the bank has committed massive fraud, explain that this provides a legal basis for placing it in receivership, and call on the FDIC to do so. Bank of America chooses to respond publicly, but its response never contests its massive fraud or our demonstration that there is a legal basis for placing it in receivership.

Instead, Bank of America complains that we “do nothing to illuminate the challenges [BofA’s home mortgagees] face.” This is not our task; nevertheless, the claim is incorrect. We illuminate the problems posed by the fact that nonprime borrowers were frequently victims of mortgage fraud perpetrated by lenders as well as many other operatives in the unprecedented criminal lending and securities fraud of the past decade. This problem is typically ignored — at least by the financial sector and the mainstream media — so we did “illuminate” the problem and the cause of action borrowers could bring for “fraud in the inducement.”

We showed that the fraudulent senior officers that controlled home mortgage lenders created “liars,” and NINJA loan programs designed to induce millions of Americans to take out loans they could not afford to repay. The endemic underlying fraud in the origination and sale of nonprime loans is critical to understanding why loan defaults are massive, why borrowers were typically the victims of the fraud and lost their meager savings due to the frauds, why loan modifications typically fail, and why foreclosure fraud has been so common. The endemic fraud also hyper-inflated the bubble and helped cause the economic crisis and severe loss of employment. Over a million Bank of America borrowers face these “challenges” that we “illuminated.”

Bank of America’s response is guilty of what it criticizes; it ignores the fraud by nonprime lenders and sellers, particularly Bank of America’s frauds in both capacities. It does not seek to “illuminate” the frauds or the problems that arise from endemic mortgage fraud. We did not invent the “epidemic” of mortgage fraud. The FBI began testifying about that in 2004. The FBI predicted that it would cause a “crisis” if it were not stopped — and no one claims it was stopped. The mortgage industry’s own fraud experts opined publicly in 2006 that the type of loans that Countrywide decided to elevate to its favored product was an “open invitation to fraudsters” and fully deserved the phrase that the lenders used to describe the product: “liars’ loans”. (Bank of America chose to purchase Countrywide at a time when it was notorious for the awful quality of its mortgage loans.) It is the lenders and their agents, the loan brokers, that directed the lies in these liar’s loans and appraisals and it was the lenders that made fraudulent “reps and warranties” in order to sell the fraudulent loans on to others in the form of securities. Economists and white-collar criminologists share a belief in “revealed preferences.” The senior officers that control lenders provide an “open invitation to fraudsters” in the midst of an “epidemic” of fraud because they intend to profit from those frauds.

Instead of contesting its issuance and sale of massive numbers of fraudulent loans, Bank of America writes to provide data on delinquencies and foreclosures in support of its claim that it is the victim of Countrywide’s deadbeat borrowers who it tries in vain to help. Bank of America’s data, however, add support for the evidence of widespread mortgage fraud, particularly by Countrywide. Accounting control frauds maximize their (fictional) reported income by lending routinely to those who cannot afford to repay their loans. It is this aspect of the fraud scheme that is most counter-intuitive to those that do not study fraud, but to criminologists it provides the most distinctive markers of fraud. The senior officers that control fraudulent lenders maximize the bank’s reported short-term income, in order to maximize their compensation, by growing extremely rapidly through making loans at a premium yield. This strategy creates a “sure thing” (Akerlof & Romer 1993). The lender is sure to report record (fictional) profits in the short term and suffer enormous (real) losses in the longer term.

The Evidence Supports Our Claims of Fraud

If we are correct…

You can catch the rest here…



I sure could use some…

12 Responses to “William Black – Let’s Set the Record Straight on Bank of America: Open the Books!”
    • Recoveryless Recovery says:

      All foreclosures are rigged? OK. But how then did you people wind-up in a rigged foreclosure? Simple. You AREN’T making payments on your homes anymore because YOU ‘rigged’ yourselves with loans you COULD NEVER AFFORD to begin with.

      So are banksters degenerate criminals? Of course they are. But you yourselves are degenerate little PIGLETS for voluntarily painting yourselves stupidly into a financial corner. I still haven’t read anyone complaining that they had a gun pointed to their heads in order to force them into stupid loans. It takes TWO to tango, and you deadbeats all seemed to be having the TIMES OF YOUR LIVES while the music was still playing loud & sweet.

      • To Tell The Truth says:

        Lord, forgive this nincompoop who will get his home foreclosed sooner or later whether he is paying on time or not so he can understand that not all the fraudclosures were from deadbeat buyers or any deadbeat buyers at all. Have no fear, you are not alone in your summation…so you will soon add to the inventory…have no fear…then let us know your thoughts then…

  1. D. Hesher says:

    I purchased a house in 2007, and put over half down, the balance financed through Wells Fargo. My wife & I are self-employed, our business could not survive, and we closed it 4/2010, and forced to file bankruptcy 7/27/2010. I had been trying to work out a loan mod with Wells Fargo since Jan. 2010. after Wells Fargo received notice of the BK, on 7/28/10 a letter was sent to me dated 7/30/10 that I did not qualify for a loan mod because they did not receive all requested documents. On 8/5/10 the deed was sold to Bank of America and they wanted a lift-stay from the BK to commence foreclosure. Wells Fargo says they still have the mortgage, and B of A has no record of my loan, but they managed to get a trustee sale date of 1/11/2011. The trustee/attorney is the same for both banks, is that not a conflict of interest. I requested a 6mo foreberance to establish a new business and start having some income. My wife is on SSI $633 a mo. & I will start drawing SSI in Feb 2011 of $2200. Between SSI & income from the new business we could afford the mortgage payment

  2. Meet One Of The KEY Players Making Foreclosure Fraud Happen. Meet Jo Ann Caudle, acting as Assistant Clerk of Superior Court for Forsyth County North Carolina.


    (This was a Bank of America foreclosure.)

  3. Recoveryless Recovery says:

    Signs You May Be Living in a Third World Craphole:
    Honest & competent individuals such as William K Black are routinely mocked, ignored or simply pushed aside while the dishonest and incompetent are advanced and routinely rewarded with positions of power & authority.

  4. Robbed says:

    foreclosure motivation and solutions…. (How to take out the zombie monsters…)


  5. l vent says:

    The Bankster frauds will never face up to their crimes. Foreclosure Fraud is the the only thing stopping financial Armegeddon for the Wall Street crooks and the Bankster crooks. They will stop at nothing to cover this up and either will the Government. There is nothing that is going to save this sinking ship unless the Government gives every AMERICAN CITIZEN a nice fat check for maybe say $100,000.00. Let the American people grow and stimulate THEIR OWN ECONOMY. Gee, What a Banner idea. So as the U.S. economy declines with the dollar, joblessness increases,jobs that are out there (if you can find one) do not come close to paying the bills in this overinflated economy, the crisis wil deepen and people will be defaulting on all of their personal debt as well as car loan debt, and mortgage debt, maybe even tax debt. What else are the AMERICAN PEOPLE SUPPOSED TO DO?? If the FED and the GOV do not pull the trough away from the Wall Street pigs and the Bankster crooks they will only be shooting their own foot as NATIONAL SOVEREIGNTY WILL PREVAIL.It is time for the American People to begin to take back their country, starting today. WE MUST FREE OURSELVES FROM GOVERNMENT IMPOSED ENSLAVEMENT. WE CAN NOT ALLOW OURSELVES TO BECOME NOTHING MORE THAN A DEBTORS NATION. WALK AWAY FROM YOUR DEBT THAT WALL STREET AND THE BANKS CREATED TO ENSLAVE YOU AND START YOUR OWN BUSINESS WITH THAT MONEY OR DO WHAT YOU THINK YOU SHOULD DO WITH THE MONEY. WE CANNOT STAND ALONE WE MUST STAND TOGETHER IN THE RETAKING OF OUR COUNTRY!!!!!!!!!! WE THE PEOPLE ARE THE ONLY ONES WHO CAN PUT THIS ONCE GREAT NATION ON THE RIGHT PATH AGAIN.

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