Judge Rules Against a Bank – Precedent Could Cost Bank of America Billions


PAUL JAY: Welcome to The Real News Network.
I’m Paul Jay. And welcome to this week’s edition of The Black Financial and Fraud Report with
Bill Black, who now joins us from Kansas City. Bill’s an associate professor of economics
and law at the University of Missouri-Kansas City. He’s a white-collar criminologist, a
former financial regulator, and author of the book The Best Way to Rob a Bank Is to
Own One. Thanks for joining us again, Bill. BILL BLACK: Thank you. JAY: So what do you got for us this week? BLACK: I’ve got an obscure case that’s really
important in two different ways. So this is the Flagstar case. And it was sued by what’s
called a monoline insurer. So Flagstar was a big mortgage lender, and
it lent among the riskiest kinds of mortgages and was a major user of liar’s loans. These
are the pervasively fraudulent loans that I’ve talked about many times. And Assured–when
we say a monoline insurer, that just means that it’s a specialized insurance company
that specialized in guaranteeing the quality of these kinds of loans, once they were packaged,
to back this kind of bond. So in itself this case isn’t all that important,
but it turns out that this is the same methodology being used in an enormously bigger case against
the Bank of America. And Assured just got a huge win against Flagstar, where Judge Rakoff
has ruled that the lender basically lied repeatedly–in one year, 75 percent of the time–to the people
that were insuring the quality of their loans. So that’s a big deal, because under that same
methodology, Bank of America could face actually tens of billions of dollars of liability from
other parties. And, of course, that could be a massive effect on Bank of America. But I also want to–. JAY: Just one sec. Where’s that case at, like,
in terms of level of court and appeals? BLACK: That is a district court decision that
has just come down within the last, you know, 36 hours or so. So this is hot off the presses.
And, of course, your implicit question is an important one: there obviously will be
an appeal, and there may well be a settlement. But this is a well-respected Judge, and if
other judges followed and approved the same kind of methodology and some of the rulings
on the law, then Bank of America is in a world of hurt. JAY: [inaud.] just make sure I understand
it, the insurance companies are saying, you banks lied to us about how good these assets
were, and we insured you, and now, I guess, we want our money back. BLACK: That’s right. We other people came
and demanded their money back from us, because we guaranteed these bonds and said they were
good bonds. And so now we’re turning around and suing you, because you’re the one who
lied to us and induced us to provide that kind of insurance. And as I said, the methodology that the judge
approved found that in 2005, 75 percent of the time, the lender misrepresented to the
insurance company what was going on. And in 2006 they did so 65 percent of the time. In
other words, this is in a massive business built on fraud. And the insurance players are, you know, a
relatively moderate to modest group. The other folks who would have been defrauded in this
fashion of course include Fannie and Freddie and all the investment banks and random cities
in Norway and such. So all of those entities’ potential to win their cases just went up
rather considerably if other judges approach the law the way Judge Rakoff did. Now, that’s
the first thing. Here’s the second thing that is, however,
getting absolutely no press and is completely insane. So remember there are only lawyers
for the lender and lawyers for the insurance company arguing to the judge. And so a bizarre
version of reality emerged from all of this in which 75 percent of the time the lender
lies deliberately to the insurer, lies to the people who buy the bonds. All of these
people are, you know, supposedly among the most sophisticated financial players in the
world. But as soon as they get to fraud in the origination, in the making of the loan,
with no discussion, everybody involved assumes that it must have been the borrowers that
did all the lying, not the lenders. And of course this is completely insane, completely
contrary to the accounting control fraud recipe, in which the lender deliberately makes–grows
enormously by making incredible numbers of crappy loans at a premium yield with extreme
leverage and next to no reserves against losses. And guess what? That’s exactly what the lender
did in these cases. But because there is no one representing the
borrower, and because there is no one bringing criminology theory and findings and research
findings in front of the judge, they just all assume that all of this fraud had to arrive
from the borrowers, even in a case where they’re saying that the lender repeatedly lied to
everybody else involved. JAY: And by borrower they mean some ordinary
person who’s told, here’s some money at subprime, you can go get a house, and we don’t even
need to see any of your credit history. BLACK: Right. And, indeed, if you don’t give
the right answer as a borrower, they often just made it up, and in extreme cases forged
the borrower’s name. So that’s what the evidence overwhelmingly shows. But none of that evidence was presented in
the court. And, of course, then you get a press report from Forbes. And what does Forbes
take away? Whoa, those rotten Fred and Mary, those borrowers, those fraudulent borrowers
ripping off people. JAY: Thanks for joining us, Bill. BLACK: Thank you. JAY: Thank you for joining us on The Real
News Network.

16 thoughts on “Judge Rules Against a Bank – Precedent Could Cost Bank of America Billions

  • well, HSBC was cost billions, didn't hurt them any. Won't hurt BofA either of they can shove it to the tax-payer:
    dailybail . com/home/holy-bailout-federal-reserve-now-backstopping-75-trillion-of.html

  • This is why it's good to have many judges in many courts rather than one regulatory agency. You just need a couple ppl in key positions in regulatory agencies. And they have the power to block any legal motions against the industries they are "monitoring".

    It's virtually impossible to bribe all the judges in all the cases however. Judges have been impeached. Judges also can and have been impeached. An impossibility for a regulatory agency.

  • Why to I doubt any of this will ever see the light of day? lol Yeah, and they'll arrest and try Chenney and Bush for War Crimes…keep dreaming. It's over.

  • It should be perfectly clear to everyone that the entire global banking system is fraudulent. BANKS LEND NO MONEY! They fund their so-called loans with credits via book keeping entries alone. Their bought-off government goons just rewarded them with trillions of our hard earned dollars for collapsing the global economy as they continued to foreclose on our properties in which they had absolutely no investment, no "VALUABLE CONSIDERATION" as required by law for a legally binding contract.

  • The national debts are GIGANTIC FRAUDS! Every time a central bank created a billion dollars (out of thin air) to "lend" to its host country, the bank's private owners (fake-Jewish Khazarian Zionists, the "zi" in Nazi) instantly became a billion dollars richer on paper. These monsters won't be happy until We're all camped out beside vacant suburbs killing each other for food! They're Humanity's only real threat and Mankind's only true enemy. Life will be a paradise without them, thanks OPPT!

  • JMHO But, -How do you get that it cost HSBC (hong kong china) billions? It didn't cost them ,,, ,last I looked if you made more than you pay in fines you still come out ahead. Remember 'loans" were sold several times at huge profits, then later made $ off the homeowners, then the insurance companies, and by investing rightly they didn't have to pay taxes on much of it. oh yeah I forgot to say THEY DIDN'T – they just make it sound like they did. Also they made money on 4closure,transactions.

  • 1.92 billion was the HSBC fine, and yet, they actually made profit from their money-laundering crimes with murderers & terrorists. This far beyond loans. This is bales of cocaine, missiles, hit-squads for Sinaloa, Russia, Iran, all over.

  • I tested it, it is working. You need to unfilter the youtube erasures.
    Copy the link into notepad. Delete all invalid characters. Copy it back to the address bar. Go to link
    dailybail
    com
    home
    holy-bailout-federal
    -reserve-now-backstopping
    -75-trillion-of
    .
    html

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