Blog on the Run: Reloaded

Tuesday, December 7, 2010 8:19 pm

That ancient groaning sound you hear …

… may be the jaws of hell opening beneath Bank of America. Via Zero Hedge, Moody’s opines:

We believe the case will lead to increased litigation, higher servicing costs, and more foreclosure delays. This will pressure BofA’s earnings. Increased foreclosure timelines and costs associated with potentially defective loans will also increase losses for Countrywide-sponsored RMBS. This is negative for both BofA and Countrywide-sponsored RMBS [residential mortgage-backed securities — Lex].

Moody’s is being too cute by half. The “defects” in these loans were common in the loans of many, many other lenders as well. BAC may be first, but they will be far from last.

It would be only human to indulge in a bit of sangfroid over the failure of a too-big-to-fail bank, one that has propped itself up with tax money while gobbling some of that same money down in the form of bonuses. And I, for one, won’t shed a tear if bank executives face, as the lawyers say, significant exposure, civil and/or criminal, though I’ll believe it when it happens.

The problem, of course, is that the failure of an institution as big as BAC, particularly one whose failure was not structured in disciplined, orderly fashion as should have happened the moment the bank’s insolvency became apparent, is going to have all sorts of consequences, and you can best believe that the direst of those will be directed at those of us least able to protect ourselves.



1 Comment

  1. Possibly off topic ( BOA ) but I just felt like sharing this Irishman’s rant.

    Comment by Fred Gregory — Sunday, December 12, 2010 3:26 pm @ 3:26 pm

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