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

Thestreet.com 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.

 

JimCramer'sFace

 

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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76Comments
Oct 26, 2012 7:04AM
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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 !

Oct 25, 2012 11:54PM
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"Where do you go once you've screwed the whole world?"

 

Good one Veteran!  I like it!

 

(I posted this about 5 hours ago, but it's not here.  However, it's not some MSN crop circle conspiracy theory.  It's just those big rats down in the tunnels and chambers under New York chewing on the wires.  Which leads us to a wonderful public relations phrase for the New York City Chamber of Commerce.

 

             "If you like rats, you'll love New York."

 

New York.  The armpit of America.

 

 

Oct 25, 2012 8:07PM
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Well, the silver linings to this are first, it puts a cap on the government's claim.  At least we know how big the box is now.  Second, when the B of A lawyers finally settle with the government I'm sure that they will settle with prejudice so that no other government claims can be filed.
Oct 25, 2012 7:18PM
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When will we finally realize that the only solution to this is to put the Glass/Steagall Act back on the books?  The top 20 are not "banks".......they're trading companies who own banks to fund their trading activities.  But for the actions of the local banks, the community banks, the regional banks and the credit unions this country would have collapsed financially.  And what was their reward for doing the job right?  That's right......the Dodd/Frank Act which penalizes them forcing their consolidation.  For what?  So the top 20 can take them over too?
Oct 25, 2012 7:08PM
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You wouldn't feel that this way if you had lost your home, lost your life savings, and lost your entire sense of how to try and do something about it legally by hiring an attorney to fight for your rights against a system lost in a hurricane of Bad Faith, Blame Passing, and the Lies and Corruption the system has passed off to get out of taking any personal responsibility! Our American dream, a life time of hard work and responsible living was destroyed by predatory lending and In "Your Face Fraud" by a CountryWide Broker and then made worse by being reinforced by the people at Bank Of America! Our night mare is seven years old and just continues as we slowly find our way through the legal system!
Oct 25, 2012 7:07PM
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some on should sue the s&p for giving the loans an A rating...there is more to blame than b of a
Oct 25, 2012 6:44PM
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Foreclosure is a stigma for so many people, finances, financial institutions and the taxpayers. B of A was literally forced into taking over Country Wide when all the financial wizards knew it would crush B of A. I am not saying B of A was completely innocent of bad loans and foresclosures, it was country wide that was the straw that broke the camel's back.
Oct 25, 2012 6:13PM
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It doesn't matter what is done. This country treads water each and every day. Greed, self gain, the almighty buck....it built us, and it destroys us all in unison. Accountability? What is that?
Oct 25, 2012 6:13PM
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MIL called B of A on a CC and couldn't understand with the accents. She asked for a call center here-was told there are none.

 

Wall St and lenders were fu&^ing around with mortgage backs starting in the 80s. They realized if they make these complex securities, no one could figure out what was going on, and they were right. I saw it over and over and snapped when they kept demanding I sign off on pension funds, esp NYPD and NYFD.

 

The software firm I went to that designs and tests investment software couldn't get the mortgage back programming right no matter what. Send me, who has multiple Finance degrees, to post-grad, expensive Finance schools. The professors THERE (with doctorates) couldn't figure it out-why the heck do the numbers never agree?

 

I didn't know THIS was going to happen but I knew it was very bad. I left and now help people going through Foreclosures and now I can sleep at night, esp after I use my knowledge of their tricks to help homeowners.

Oct 25, 2012 6:01PM
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"Where do you go once you've screwed the whole world?"

 

 

Good one Veteran!  I like it!

 

 

Oct 25, 2012 5:56PM
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Cramer is actually pretty close to hitting the nail on the head this time.  Bank of America, Wells Fargo, Goldman Sachs, Lehman Bros., Freddie Mac and Fannie Mae (and others) all have a long and shameful history.  More than that, they rewarded those who best adjusted to their cultures of dishonesty.  It is an incredible indictment of our political system that mortgage loan underwriters, their superiors, and management of these institutions continue to walk the streets of our once-great nation freely, rather than populate our white-collar prisons.  If a man robs a bank, law enforcement spares no expnse to find and incarcerate him and the courts find a way to sentence him.  If a bank robs the population, then the principals are rewarded with bonuses and Uncle Sam protects the bank from sufferring the consequences of its own myopic and greedy folly.  the TBTF banks then excuse huge bonuses for the most successful cons by saying they need to pay them well to keep them.   
Oct 25, 2012 5:47PM
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The way they screw their customers, BOA should stand for;

Bend Over Already!!!!!!!!!!!!!!!!!!!!!
Oct 25, 2012 5:21PM
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 Why just BOA?  Citi, Chase and Wells were right there too.  And, to right this very minute, all of them are still putting troubled homeowners through hell under their processing of mortgage modification applications.  On the one hand they are telling these people they are there to help them and asking for gobs of records and then telling them they never received them and the circle keeps going round and round.  On the other hand, they are in court quietly foreclosing on these same homeowners, all the while, their processing people are telling (of course it is done on the phone and not in writing) the homeowners that they don't have to go to court because they are in the modification program.   And, all of sudden, the homeowner is evicted and out on the street wondering what happened.  There are thousands of stories like this and what has our Congress done to these sleazeballs who have destroyed all these families?  NOTHING!   Congress is a BIG part of the problem.

Oct 25, 2012 4:57PM
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As usual,  all this will add up to zero or less for the average citizen/consumer.
As they say,  "A man with a briefcase can steal more money than any man with a gun".

Oct 25, 2012 4:36PM
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I have been saying for the past 18 years that when the American public wakes up and see what their government has done , there will be the biggest march on Washington ever.  This is just the tip of the iceberg.  How about the stupidity of the Treasury Secretarty and his biggest puppet the IRS.  More fraud every year.  It has to stop or we will be just like the Roman Empire.  Gone, gone gone!!!!!!!!!!!!
Oct 25, 2012 4:28PM
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Wanna know who started the banking difficulty?  Look at your congressional people.  Since the Clinton era began, banks and lending institutions have been under direct pressure to make home loans to people unable to meet their mortgage obligations.  If you wanted to run a lending bank, you either cooperated,had pressure of closure applied or you made a sufficient number of loans to keep congress off your back.  This created a wide open industry.  Countrywide, Fannie and Freddie
doubled-down.  (Hey!  It wasn't their money, it was free "government money." ).  Take note that our  New England based  representatives so deeply involved (democrats) are now retired living the good life.  Want a similar deal?  Look at solar energy.  We gotta be the dumbest voters in the universe.
Oct 25, 2012 4:10PM
Oct 25, 2012 3:58PM
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And as usual, it's the taxpayer who gets screwed.
Oct 25, 2012 3:18PM
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2 points concerning the banking industry. It does seem as though state and federal governments are taking back a substantial amount of the bad-boy's ill-gotten gains through massive lawsuits(some measure of justice). Also, I've noticed certain responsible banks(BB&T among others) have been given(earned) something of a leg up in the market and have been taking advantage of the opportunity to grow their footprint in the industry. I think, when the whole mess shakes out, BAC, Citi, etc. will have taken enough haircuts to level the playing field substantially. My point is that it seems as though the fed and others are making efforts to make things right(er?) using market forces as opposed to policy. Dare I say, Capitalism?  Disclaimer- I don't work in the financial industry and haven't lost a home.  
Oct 25, 2012 3:00PM
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Cramer owned the street dot com - countrywide was its BIGGEST advertiser ---- cramer constantly had mozilla on his show saying what a great CEO he was even as mozilla was selling hundreds of millions of dollars worth of own stock. mozilla was sued by the feds and forced to pay back some of those millions .....

Did cramer payback any of the money he took from countrywide via ad sales as he pumped up the stock on his mad money show ?


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