Bank of America Down 20% Today After Being Sued by AIG for "Massive Fraud" ... Goldman, JP Morgan and Deutsche Are Next → Washingtons Blog
Bank of America Down 20% Today After Being Sued by AIG for "Massive Fraud" ... Goldman, JP Morgan and Deutsche Are Next - Washingtons Blog

Monday, August 8, 2011

Bank of America Down 20% Today After Being Sued by AIG for "Massive Fraud" ... Goldman, JP Morgan and Deutsche Are Next

Bank of America Down 20% ... Committed "Massive Fraud"

B of A is down 20% after AIG sued the bank for "massive fraud" in connection with mortgage debt, seeking $10 billion dollars.

As Reuters notes:

AIG accused Bank of America and its Countrywide and Merrill Lynch units of misrepresenting the quality of mortgage-backed securities, including more than $28 billion it bought, and lying to credit rating agencies about the underlying loans.

According to its complaint, AIG examined 262,322 mortgages that backed 349 offerings it bought between 2005 and 2007. It said the quality of 40.2 percent of the mortgages was significantly inferior to what had been represented.

"Defendants were engaged in a massive scheme to manipulate and deceive investors, like AIG, who had no alternative but to rely on the lies and omissions made," said the complaint, filed on Monday in the New York State Supreme Court in Manhattan.

(The bank is down 50% for the month).

Bloomberg notes:

Credit-default swaps on Bank of America Corp., the nation's biggest bank by assets, soared to the highest since May 2009.

Goldman Sachs, JPMorgan Chase and Deutsche Bank To Be Sued By AIG

Moreover, AIG intends to sue a number of other large banks for fraud as well. As the New York Times reports:

A.I.G. is preparing similar suits against other large financial institutions including Goldman Sachs, JPMorgan Chase and Deutsche Bank, said the people with knowledge of the complaint, as part of a litigation strategy aimed at recovering some of the billions in losses the insurer sustained during the financial crisis.

The Problem: Failure to Prosecute Fraud

As I've repeatedly noted, both the Great Depression and the current financial crisis were largely caused by fraud, and the economy cannot stabilize until fraud is prosecuted.

The failure of government to prosecute Wall Street fraud is the main reason that we're experiencing chaos in the markets again.

Unfortunately, the leaders of both parties have made it official policy not to prosecute fraud (and see this).

Bailing Out the Big Banks Just Made Things Worse

Bailing out the giant banks which committed massive fraud hurt - rather than helped - the economy.

As I wrote last month: If We Don't Break Up the Giant Banks NOW, They'll Be Bailed Out Again and Again ... Dragging the World Economy Down With Them.

This is not the view of some obscure blogger. Virtually all of the independent economists and financial experts (not working for the Fed, Treasury, or big banks) agree ...


  1. It's about time the law came into play. If a thug in the street holds someone up for $10, they do years in prison.
    These thugs in a suit are no different, in fact they are worse because they had every advantage this country had to offer them-and it still wasn't enough...

  2. There certainly was fraud, but where was AIG's due diligence. I think greed got in the way of due diligence.

  3. I agree that there was massive fraud, but where was AIG'S due diligence? I think greed got in the way of due diligence.

  4. Thanks The banks have been so unfair. After squandering taxpayers money That I think judgment day is coming Wall Street takes them down Don't come to us broke tax payers to ask for more money shut down all the banks Open up one bank That is it

  5. Want to get really incensed? Find out how our monetary system works. Check out Money as Debt 2 Promises Unleashed and The Money Masters on youtube. You'll never look at politics and economics the same way!

  6. The era of fraud. A milestone from which to learn and hopefully cause future changes. First we lived through the gigantic stock market fraud. Even an imbecile could see that there was no way most tech stocks were worth their highs. One must remember what exactly stocks are. Millions of people lost their retirement.

    That wasnt too bad though, right? I mean, they had EQUITY! FALSE equity brought about by deceptive, dangerous lending. Years ago the banks had to decide if they would close down then or play with fire until it burned them. In the mean time they became fat pigs while defrauding investors. Our 'perfect mortgage storm' was destined. The ill wind started blowing several decades ago. Now the nation is paying the piper. The fraud is so massive and the damage to citizens so great that many people will die without recouping anything at all. Now we are building a huge population of post baby boomers whop have nothing, are too old to get good jobs, and will have to look to the government to live. They will need money we dont have. The waves from this giant stone will erode the beaches of our lives for many years.

    Marvin Von Renchler, ex 31 year mortgage broker. (No, I did NOT use stated income loans to help destroy the system)

  7. We're so glad we paid off our mortgage to Bank of America this month - all $78,000+ of it! We were so incensed at this dumb gorilla of a bank and finally did something to get the monkey off our backs. Our advise - get out of big banks and do with credit unions.


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