Bank of America suit too little, too late

Shareholders get hit, and the bad guys get away.

By Jim Cramer Oct 25, 2012 9:08AM LoGOOur eyes glaze over at another lawsuit against Bank of America (BAC), this time from the U.S. attorney for mortgage fraud. Our eyes glaze over for the following reasons:


  1. No one will be pursued personally, which is all we really care about, because it wasn't "systematic," it was right from the top. The buck didn't stop at the institution, it stopped at the people running the institution at the time. The only bills they will have to pay are the ones on their boat drink tab.
  2. The shareholders of Bank of America are the ones who are ultimately going to have to pay the legal tab and the settlement sum, because the feds are not going to shut down Bank of America. Nobody post Arthur Andersen gets shut down, as that cost too many jobs. Bank of America is on the too-big-to-fail list anyway.
  3. The housing market is coming back, the only thing stopping it from booming being the banks that are so far behind in legal paperwork and don't want to add new lending officers and back-office personnel until all of these legal bills are sorted.
  4. The decision by Justice to pursue Bank of America now for what its predecessor bank did years ago seems almost like desperation. It won't change any behavior that changed years ago.
  5. We never put in place a federal criminal mortgage task force to target the people who got us into this mess, and you can go back and read the headlines and sense the failure to supervise and perhaps the insistence that laws be broken to make quarters. We always hear that these cases are too hard to make. So then why do we even bother at all to sue the companies when the people who will pay are the hapless shareholders who did nothing?
Now, I am very pro prosecution and thought there were a group of people who so aggressively went against the law that fraud cases could have been brought and the wins could have been in the bag, given what every jury in this country knows to be the case.


Photodisc Green, Getty ImagesBut the only real major case I saw about mortgage fraud was a loss for the government, a complicated case about valuing securities owned by a fund and the managers who valued them that was brought in Brooklyn. That loss took the steam right out of the government and the Justice Department in Washington, D.C. Rather than assessing what went wrong in Brooklyn just decided to focus on other, less important issues.


So Bank of America will contest this case, as it does all of them. There will be many years of discovery, which will produce nothing other than what we already know happened, and in the end the government will announce a settlement with Bank of America for a huge amount that will go who knows where, and lots of money will be made by the lawyers who defend Bank of America, and it will cost some half penny a share, and the shareholders will pay the bill, and that's about it.


The failure of the governments at all levels to regulate this business now rivals the failure of the government and the banks to do their jobs in trying to clean up the mess. This lawsuit is still one step backward. Too little, too late, with not an ounce of justice coming from Justice. What an opportunity missed, what a barn door closing on the shareholders' faces after the bad guys got away.




Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.



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Oct 25, 2012 12:44PM
Cramer... some history for you. After the Tax Reform Act of 1986 introduced reasons for refinance and home equity products, America had a problem. Banks were checklist lenders without a clue how to actually lend. They did FHA VA New Construction and bandwidth Fannie Freddie programs. no Risk... just collect the documents on the list and close when they were all checked off. HFC was the first to offer alternative programs nationwide and others soon followed. Meritor Mortgage was bought by Ford to become Ford Consumer Finance and took the evolving nonconforming industry into the wholesale realm. Originally, there were only a handful of us that actually grasped the dynamics. Crooks soon followed. Countrywide literally appeared simultaneously with Subprime. The Tax Reform Act created the hyper-appreciation housing value condition destroying our economy now. How hard was it to lend- even if poorly, and let the bad stuff appreciate until it could be fixed or flipped out of trouble? REAL LENDERS fixed the problems, made less, but kept the customer. As the Public Sector credit industry grew into the wealth stage, big bloated monsters like Countrywide had plenty of tentacles in pots they knew little about and managed poorly. You could always get Countrywide to buy poorly packaged credit because they needed the fuel. After October, 1998 (when banks conspired with Wall Street and collapsed all the warehouse credit facilities that supported the whole industry), banks bought all the companies they perceived worth buying and killed the rest. Countrywide was simply too big but it also was a prize to the East Coast bankers who had been in the industry too long. As will history show when B of A collapses and takes the other Too Big For America banks down with them... we will know that the Tax Reform Act triggered a value Tsunami and a new industry that "should" have collapsed banks and modernly diversified money handling industries. The plug pulled on Warehouse credit by banks will be noted as an intentional shot fired to kill off banking competition and the Gramm Leach Bliley Act will be pegged as the vessel for terrorist financial control and attempted take-over of America. During Obama's second term, the world will have to- close all banks, end our Federal Reserve and other Central Banks, and collapse the vessel of destruction-- falsely manipulated Exchanges.

One question, Jim: Where do you go once you've screwed the whole world? Notably, those who will be tasked with fixing what took decades of Ivy League collusion to make, won't be wearing school colors or watching commercialized sports instead of doing their jobs.

Oct 25, 2012 12:38PM

 I assume the opinion of ANY  talking head on TV who makes a good salary is biased, most likely towards the Republicans because they say they will tax them less. They end up voting for SOMEBODY, right? I'd bet 80% of those who make more than 300k a year vote GOP. I extrapolate that to talking heads on TV as well .I bet 80% vote GOP, even the dudes on MSNBC. Make that 95%  for CNBC and Fox
Oct 25, 2012 12:36PM
Doesn't matter what action is taken; the court system is rigged much the same as the political system, and in the end it will cost the tax payer who foots the bill to "prosecute" these white collar crimes. Consider the Goldman exec convicted of insider trading; 2 years and comparatively small financial slap on the wrist. Judge Rakoff had the nerve to state:  "No one really knows how much jail time is necessary to materially deter insider trading; but common sense suggests that most business executives fear even a modest prison term to a degree that more hardened types might not. Thus, a relatively modest prison term should be 'sufficient, but not more than necessary,' for this purpose." A judge claims ignorance concerning sentencing the Rich? Wolves in robes and designer suits...
Oct 25, 2012 12:29PM

 He who bests or equals the iPad will get filthy rich. Who will it be?
Oct 25, 2012 12:27PM

  I will give Jim  credit for promoting Apple big time when it was at an all time high of 200 and many thought it had peaked. You could have tripled your money quite quickly

  However, he also stated the housing market had bottomed out in the summer of 2009. Three  years later, and prices are finally staring to rise again. Off just a tad there, Jim, but hey nobody's perfect, right?
Oct 25, 2012 12:23PM

this clown said sell CLF at 32........that very day CLF went up 5

then with CLF at 44 a few days ago he said buy because it was up in a down market

today it gapped down 4.............PLEASE DON'T LISTEN TO ANYTHING THIS HACK SAYS

Oct 25, 2012 12:18PM

 The drops this week were mere overreaction to rosy earnings expectations that inevitably fell short. GREAT bargains to be had when that happens
Oct 25, 2012 12:16PM
Cramer conveniently forgets how he used to scream that Countrywide was a great buy about 3 months before it dropped from $45 to low teens --- he had angelo mozilla on his show many times to praise him for the great job he was doing.

He was also a champion for BofA to buy Countrywide as it turned to crap ........crAmnesia indeed....

I too would like to see investigations and prosecutions of ALL those who created 5 years of turmoil and misery for the AVERAGE American ......cramer of course wants us to forget all that happened.

cramer heal thyself .....
Oct 25, 2012 12:12PM

 Let's see now, TARP sure as hell wasn't  Communism or Socialism because private enterprise benefited from tax dollars. And it sure as hell wasn't Capitalism because public funds were used instead of private ones to fund the banks. I guess that only leaves on "ism" left, huh
 What do you call it when Middle Class tax money is used to bail out the Upper Class as necessary to ensure the ruling status quo stays intact. And as I said, since it worked so damned well, WHY NOT repeat as necessary
Oct 25, 2012 12:06PM

 Did not TARP save the banks from being nationalized? Or do we wish to rewrite history.  So why do you that love the Capitalist system bad mouth it.   It worked GREAT and even made a profit  for Uncle Sam. We would have Socialism in the US today without TARP. So WHY NOT repeat as necessary. You tell me
Oct 25, 2012 12:00PM

 If you have a mortgage with Chase and a line of credit with Bank of America,  you cannot refinance with Chase because Bank of America will balk, saying they refuse to take a subordinate position. I could have saved $350 a month from an unsolicited refinance offer from Chase, but lost out because I also had an account with Bank of America who refused to go along
Oct 25, 2012 11:54AM
  HEY Bank of America! Please explain why I should stick with you? YOU charge me $25 a month for a checking account regardless of the balance and the fact that I have direct deposit with you. Chase on the other hand charges me NOTHING for a checking account if I have a direct deposit, no minimum balance and they will give me $150 to switch. So up yours. I'll use the $25 a month to pay my Medicare supplemental insurance premiums instead. A penny saved is a penny earned
Oct 25, 2012 10:30AM
cozbee The only one on this blog who appears to be a idiot and a moron is you !  Your blind faith in the banks and the financial systems is the problem !   Happy Holidays Enjoy your MONEY !
Oct 25, 2012 10:08AM
Too true. Most of us wanted to see actual heads roll, real justice for  real crimes against the
American economy. Put real hurt to the B***t**ds who did this.
Oct 25, 2012 9:55AM
 Fed and Ben are putting the screws to the tax payers and Wallstreet and the banks are getting well. We will all pay for this BS.
Oct 25, 2012 9:29AM
Take your money out of Bank of America ! It is a criminal organization out to RAPE,PILLAGE and PLUNDER  the American people !
Oct 25, 2012 9:13AM

Reg;s are working so don't let Romney undo them and let wild west come back.....


Which Romney will we see today on tv, the real one or the flip flopper ?????

For War against War, for women against women, for middleclass against middleclass, for coal against coal, for medical reform against medical reform.

A real shape shifter, a chameleon. America wake up to this guy he been an opportunist all his life !

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