Sorry, you’re going to have to wait until Monday to get the lowdown from me on what’s really happening behind the scenes in the U.S. Treasury bills, notes, and bond markets. I’m pushing that release until Monday.
Don’t get me wrong – that is maybe the biggest news of the year. It has global implications, will change capital markets forever, and create tradable events with tremendous profits for investors to grab.
It’s just that we’ve got something even more incredible to talk about today… (and it’s good news, for once).
Yesterday’s jury finding in a Manhattan court that a bank and a bank executive are liable for fraud is a true watershed. This is something that hasn’t happened since investigations and settlements over what led to the financial crisis have been coming and going.
In a civil suit, Preet Bharara, the U.S. attorney for the Southern District of New York, scored a massive victory over Bank of America and one of its former executives. The defendants, instead of settling, were found guilty of fraud by a jury of four men and six women.
I almost couldn’t believe my eyes when I saw this…
The hard-charging U.S. attorney brilliantly used the 1989 Financial Institutions Reform, Recovery and Enforcement Act to target fraud that originated in 2007 and 2008. The Act was enacted as a result of the savings & loan crisis. It extends the statute of limitations in fraud cases involving financial firms accused of ripping off federally insured financial institutions (those where taxpayers ultimately hold the bag) from five years to 10 years – putting those fraudulent acts back within the realm of legal culpability.
Bank of America, which bought Countrywide in 2008, and Rebecca Mairone (a Countrywide executive at the time) were found guilty of fraud over a program overseen by Ms. Mairone.
The program rushed poorly originated prime mortgages along what was called the “Fast Swim Lane” into packages to be sold to Fannie Mae and Freddie Mac, to get the crappy mortgages off their own books just as the mortgage market was collapsing… and profit handsomely from them.
The program at Countrywide was known as “The Hustle”
Well, apparently the jury agreed it was all a big hustle.
Next up, the judge in the case, the often pissed-off Judge Jed Rakoff, will determine the civil penalties.
We’ve talked about this judge before (here). He’s got guts. He has famously held up some settlements demanding that they be meted out with accompanying admissions of guilt, rather than the usual “neither admit or deny” free ride settling parties skate off with. We can only hope Judge Rakoff will throw the holy book at them.
Not that this is over by any means. There will more than likely be years of appeals. But at least it is a start.
Where’s Ms. Mairone now? Oh, she’s an executive over at JPMorgan Chase.
Speaking of JPMorgan, they’re now working out the finer details of a supposed $13 billion settlement with the Justice Department – the same Department run by Eric Holder. The same Eric Holder who sells guns to drug cartels, condones the NSA’s wiretapping of anyone in America and a few world leaders (just ask Angela Merkel of Germany, to name just the latest pissed-off head of state our Orwellian oligarchs are spying on), and has taken it upon himself to look like a taxpayer advocate and bank basher by raking in billions from America’s big banks.
To be clear, I do like the fact that the banks have to pay for their crimes.
What I don’t like is that Holder has let all the big campaign-donor bank executives skate with unlimited get-out-of-jail-free cards.
JPMorgan set aside $9 billion last quarter for legal costs. It now has amassed a pile of $23 billion (on top of the tens of billions they’ve already paid in settlements and lawyers fees) for future “legal costs.”
And Jamie Dimon? He’s still running the bank. Still stealing from the bank’s shareholders to pay the ungodly legal bills and settlement fines that continue to pile up.
The latest $13 billion settlement deal he’s working on, well, it really isn’t $13 billion. It’s $9 billion, which is what they set aside a few weeks ago. It’s $9 billion because $4 billion of the talked-about money to be paid won’t ever be paid. That sum is supposed to help underwater homeowners and delinquent borrowers and widows and orphans. That money will never be paid out. There won’t ever be any real accountability for it. It’s just part of the “we’re making them pay” rubbish Holder & Co. are claiming they extracted.
Is there more litigation ahead for JPMorgan? Of course there is. I can count almost $10 billion more that is on the horizon, and that could easily double.
And how are the banks doing, in spite of paying all these fines and now being found guilty of fraud? Quite well, thank you. No, thank the Federal Reserve.
Because the big banks need to make billions to pay for their war against the U.S. economy crimes, the Fed engineered quantitative easing. QE is not about the economy and trickle-down economics. It’s about fattening up the banks so they can keep on keeping on.
When will the QE taper start? As soon as the bulk of these cases are behind the banks, that’s when.
When will that be?
It will probably be on the 12th of Never or in February in the future. Why a February? Because it will be a cold day in Hell before the lucrative ownership of America by the banks ever ends.
P.S. Don’t miss my email Monday. I’ll reveal what’s quietly happening in the Treasury market. It’s huge.
This isn’t something that’s obvious, otherwise you’d have heard about it. But we, meaning my hedge fund friends and institutional money manager friends and a couple of bank executives who run Treasury trading operations, are talking about it. Major changes in capital markets are afoot – and there will be tremendous opportunities to trade what’s coming.