SHADOW ACCOUNTING: Did BofA Make $3B or Lose $7B?

It is not true that another bailout will be required to maintain our financial system. In fact, if we want to return to true capitalism we must let the mega banks fail if they indeed run out of money. The reason is simple: this time, there is not even the hint of a risk that the economy will lose a source of capital for economic growth. Wall Street is busy serving itself steaks while the rest of the country strives to eek out an existence on day-old bread. Wall Street does not provide capital anymore — it consumes it.

We have 7,000 strong community banks and credit unions and an infrastructure that works for electronic transfer and communication of money transfers and payments without the likes of the mega-banks. Returning to a decentralized banking system restores power to the people and their government and stops the hemorrhaging of capital caused by the “new” Wall Street. We regain BOTH capitalism and democracy if we get rid of the bank oligopoly.

The engine is full and the box cars are empty. How is it that the people on Wall Street are making more money than ever while the rest of the country’s hardworking or wishing they are were hardworking citizenry languishes in unemployment and declining median income. In fact, if you took the median income on Wall Street out of the equation the picture would look like, well, the way it is — deplorable.

We have been so absorbed with NOT becoming socialist and maintaining our capitalist economic system that we forgot to look at our political system — that it is controlled by large corporations instead of the people. In the process we have lost both capitalism and democracy. Capitalism, as its name suggests, is an economic system which is intended to provide the engine for economic growth and prosperity. It does this by creating innovative means to distribute capital to new businesses and expanding businesses. It is supposed to be the engine that pulls the box cars full of the products and services we make and provide. Wall Street doesn’t make cars or toasters and doesn’t wash cars or serve the toast to you at breakfast. It has no purpose other than to provide the necessary capital for a business to be started or maintained that will provide you with the products and services you need or want.

Socialism, on the other hand, uses taxpayer money to fund various services and to underwrite the risks of many new ventures that are deemed useful for the country or its citizens. Most people in this country don’t want the government making those decisions. But that is what has happened — and I’m not talking about social security or medicare. I’m talking about tax breaks and direct subsidies to big corporations that in many cases pay no taxes, get government contracts, paid with taxpayer money in a non-bidding contest of who can lobby better. In other words, I am saying we are already have a socialist economic system — but in our case it is run for the benefit of the corporations and the holders of wealth rather than the working men and women of the country. It’s an interesting twist on the original idea. And it stinks.

While we were sleeping our way through the last 4 decades, the creation of capital for itself has become the priority. Not surprisingly proprietary currency in the form of credit derivatives has soared from zero in 1983 to over $600 trillion today. Yes, the total of all government-issued currency is only $50 trillion versus the $600 trillion that Wall Street issued. In other words, privately issued “currency” is now more than 12 times the volume of real money issued by all the governments of the world. And Wall Street is making money not by providing capital to our economy for the needs of our society and governmental functions but rather, for itself.

It therefore should come as no surprise that big corporations actually make the rules and enforce them. After all, they have the money and neither we nor our governments have anything that compares to their enormous “wealth.” Having all that wealth and power makes it easy for them to scare us. They say “socialism” and images of Hitler and Stalin come to mind taking all our liberties away. Meanwhile they suck the taxpayer money into their own pockets while at the same time convincing us we are not entitled to share in the benefits of the taxes we pay. Like the the other recent Wall Street schemes, when things go well they make money and we make a little. When things go badly, they make money and we lose money. They never lose. They have no risk. And they make the rules that insure that the status quo will be maintained.

It is for that reason that I say that I won’t vote for anyone who uses the “boogey man” to scare me into voting one way or another. If they say “Socialism”I want to know what corporations are subsidizing their candidacies behind what are now permitted anonymous donations — and especially how much those corporations receive in benefits from tax breaks and subsidies.

Which brings me to the question posed by the title of this article. BOA reported a $3 billion profit, but it also reported a $10 billion charge (a “one time” charge allowed under the rules of accounting). At the end of the quarter they had $7 billion less than they had before by even the current stupid accounting standards that allow management to value their own assets. Yet it is accepted that even though they have already admitted that they will continue to have more of these “one-time” charges, they should still be viewed as having made $3 billion and their stock is valued as though it was $12 billion per year. By the way, these “one-time” charges are gradual admissions seeping into the reports of the trillions of dollars Wall Street stands to lose as investors and borrowers start connecting the dots and collecting money back from a pot of ill-gotten gains.

So their stock is valued as though they were making $12 Billion even though the reality is that they will lose at least $50 billion, at a minimum over the current year, and it could be a multiple of that figure. The fact that they were willing to sponsor perjury in affidavits, misrepresentations by attorneys, and outright fraud on the courts is not yet taken into account in discounting their prospects as a viable institution. Instead, because we are led by people who are getting information from Wall Street and accepting it at face value, the myth is that if we tell the truth, another bailout will be required.

It is not true that another bailout will be required to maintain our financial system. In fact, if we want to return to true capitalism we must let the mega banks fail if they indeed run out of money. The reason is simple: this time, there is not even the hint of a risk that the economy will lose a source of capital for economic growth. Wall Street is busy serving itself steaks while the rest of the country strives to eek out an existence on day-old bread. Wall Street does not provide capital anymore it consumes it. We have 7,000 strong community banks and credit unions and an infrastructure that works for electronic transfer and communication of money transfers and payments without the likes of the mega-banks. Returning to a decentralized banking system restores power to the people and their government and stops the hemorrhaging of capital caused by the “new” Wall Street. We regain BOTH capitalism and democracy if we get rid of the bank oligopoly.

27 Responses

  1. BSE ….. glad you enjoyed the Orange Jump Suit video. We had a blast making it.

  2. There are so many legal loss leaders in this quest for the answers to prevailing.

    In California, it appears the loss of ownership for assets (“loan”) and the mere servicing role they maintain is sufficient to bring action for the failure to comply with section 2932.5 of the Code of Civil Procedure which governs the power of sale under an assigned mortgage and Bus. & Prof. Code Section 17200, et seq. (17200) various other provisions of the California Civil Code, various provisions of the Financial Code, and other statutory and common law in effect.

    What is amazing to me is the obvious and need to by some to bypass the single most damaging element of fraud. That point of judicial quandary is no doubt the alleged breach of accounting rules and violation attributed to FAS 140.

    Registrants use a separate institution, or special purpose entity for capitalizing the base capital requirements for a proposed securitization of asset backed securities.

    The special purpose capital vehicle creates and sells the securities, using the proceeds of the sale to remunerate for cash the loans pooled and offered by the bank.

    Therefore the underlying assets the FDIC member bank originated are the basis for capitalization used to create a waterfall of term securities instruments. The effort is not possible without the ability of the FDIC member bank to transfer the entire economic benefits of a mortgage whole loan to the SPE in exchange for cash.

    Problem one is the closed whole loans are now recognized as a capital contribution to a balance sheet. The balance sheet is the source of the investment capitalization process used to sell certificates to members of an indentured trust.

    Problems two is this was , till as of late, an accounting scheme used to sell mortgage receivables at a discount, in a way that transferred most—but not all—of the collection risk to a third party.

    Under the old accounting rules such transfers could typically be treated by the bank as a sale, where the asset disappears from the balance sheet and is replaced by cash.

    Therefore the bank should not possess the note of files collateral nor should it be allowed to do much more than authorize its rights to collect checks from a lock box.

    To this extent the bank is lost to the loans it used to capitalize a trust investment and gain tax preferential treatment thought is affiliated REMIC platform.

    Here is the special purpose vehicle responsible for “bundling” the underlying assets into a specified pool that will fit the risk preferences and other needs of investors who might want to buy the securities, for managing credit risk—often by transferring it to an insurance company after paying a premium—and for distributing payments from the securities.

    As long as the credit risk of the underlying assets is transferred to another entity the originating bank removes the value of the underlying assets from its balance sheet and receives cash in return as the asset backed securities are sold. It is a transaction which can improve its credit rating and reduce the amount of capital that it needs.

    Therefore there is no way in hell the bank foreclosing or the nominee it identified on the deed can be shown to have any controlling interest, as in a foreclosure or even failed modification effort.

    It’s a simple pleading we assist counsel with in allowing plaintiffs to zero in on the facts and show proper cause for claiming a right to rescind a sale.

  3. MSNBC: “The people who bought these mortgages… were the judge’s pension fund, the police’s pension fund(e.g. the sheriff’s department that evicts you)”…

    YA THINK. Seems to me like an explosive case of Conflict of Interest. You have People(real human beings that are decent and have compassion) that Need a place to Live(no person shall be deprived Life, Liberty or Property) on one side and on the other Greedy Politicians, Corrupt Judges and Crooked Cops that WERE supposed to look out for the People’s best interest and at LEAST provide them with due process but figured that raking in Million Dollar Pensions like the officials in Bell California were far more important. You know I think I remember someone that kept talking about this issue- Oh wait that was Me! But Nobody with a loud enough voice(e.g. LivingLies, Neil, Media), has yet pointed out The Inherent Conflict of Interests that are at the Core Issue of Why they are trying to make the Banks Buy Back the Mortgages and I Wish Somebody Would.

  4. @ mymisstake, you wrote:

    ” I don’t understand derivatives and all that stuff or securitization so I don’t try to play that game.”

    That’s the problem. None of us wanted to play that game. None of us were told or knew that by signing a note, we’d be enrolled in the biggest Ponzi scheme of all time.

    BSE, thanks for all of the Bill Black videos, Even though I’ve watched them all before, they’re all worth seeing again.

    I have to admit that I’ve been underwhelmed by the response of the participants on this forum to Bill Blacks recent piece on Huff Post. It’s a clear plan of attack that if taken up by one and all and made a clarion call, could force this issue out in the open and call it by it’s real name = MASSIVE FRAUD. And it’s the only write up to date that I’ve seen that has a very cogent plan for a fix. What’s up people?

  5. BSE, on October 23, 2010 at 10:05 pm Said:

    It’s nice to see that others are seeing through this “crap”. Shari Olefson is the biggest mouthpiece for wall street (talking points come to mind) e.g. “if your in default and not paying, the banks have the right to foreclose”…..well gee, who put the borrowers in that position with ARMs and promises to “refi” at a lower rate and then reneging, allowing a “designed to fail mortgage” to languish for years after a borrower was “proactive in every respect” to find solutions before the “train wreck” was about to ocurr…..typical BS from “network news”.


  6. herd, not heard, you big dummy!

  7. It’s an unnatural environment when we keep things alive that have demonstrated they are too weak and unproductive. It’s “Survival of the Fittest”. If you nurture the weak (or those too foolish to act wisely) then it weakens the entire system. The weak and the foolish take resources needed to succeed. There is only so much of anything to go around and so its kind of like the animal kingdom. I used to hate watching those shows, I always looked away whenever a tiger took down a gazelle or something like that. But no matter how much we don’t like stuff like that, it has a lesson for us. But if you keep the unproductive/weak alive, they drag down the rest of the heard and then everyone’s done for. The weak are still weak but they’ve made the rest of the herd weak too so that the first predator who comes along fines a society/herd that is struggling and easy to take down.

    We are also rewarding bad behavior and I haven’t seen any behavioral gurus advocating that. When your child is bad you don’t reward them or that teaches them to do it again. The lesson we’ve taught the banks is “don’t worry, we won’t let you fall”. So there’s no fear there, they know we will catch them. But I say the next time they have to get a wake-up call and make it on their own or else. Life has consequences, the way we live has consequences. Yes, we can walk down an alley at midnight all by ourselves, it’s our RIGHT but its not smart. We have free choice but if we make a dumb choice like the banks did it doesn’t mean that the rest of us are obligated to pick you up.

    Sink or swim, its the way nature works. And if its worked for nature all his time, who are we to deny it and save the weak and the foolish? That’s my story (I like allegory, it works for my right brain/left brain thing) and I’m sticking to it.

    I don’t “do” high finance. I don’t understand derivatives and all that stuff or securitization so I don’t try to play that game. I’ll let you guys figure all that out but I think I’ve got the right idea on this one.

  8. Order the Orange Jump Suits


  10. Be Careful How you vote.

    Another important Video which confirms the orange jump suit order.

  11. Nothing but calculated deceit funded by the bankster and employed within the
    US Government. Be careful how you vote. One stroke of a pen will fleece the US Taxpayer / Homeowner every last cent that was earned over a life time.

    Order the orange jump suits !

  12. Neil Garfield ahead of the game. Here’s confirmation
    from Bill K Black – Control Fraud

  13. Everyone should watch – Spread the word.

    BILL MOYERS JOURNAL | William K. Black | PBS

  14. William “Bill” Black developed the concept of “control fraud” – frauds in which the CEO or head of state uses the entity as a “weapon.” Control frauds cause greater financial losses than all other forms of property crime combined and kill and maim thousands..

    Order the Orange Suits ! We will need thousands and must build addional space in a few federal & state prisons.

  15. I was so hoping that someone else would be quick to point out that WE ARE NOT A DEMOCRACY, but sadly nobody did. WE ARE A REPUBLIC, and every state is guaranteed that form of government by our Constitution. Democracy is practically the same thing as Socialism when merged with a representative government and no individual could ever be free in such a society, everything would depend on the will of the majority which would be dictated by whoever had the most influence over them. If we were a true Democracy there would be no government, no representatives, no elections and no judges. We would decide everything from the ground up from within our local communities and logically that is all possible no with the ability of internet connecting all of America at the tips of our fingers. But the elected officials (both parties) would have everyone believe that we are a representative Democracy are only deceiving you so the people that control both parties can switch every election term paying good cop bad cop back and forth. All the while the agenda never changes only the style that it’s delivered in.

  16. My belief is that we the people have lost our rights. While reading frankielee’s post I was brought back to over a year ago when 2 thugs came banging on my door to repo a vehicle. We had filed BK but the repo guys still came and threatened me physicially. As they were banging on my door with their fists, I felt the terror that people in places who have no rights and their doors were being kicked in. This is not America when you have the government, law enforcement and judicial courts ignoring what is going on just because they are banks. Where is it written in our laws that banks are excluded from following the laws? People are angry at all this injustice.

    We as a country will not go down because miilions of people could not pay their mortgages. We will go down because the banks and Wall Street who started this mess will find that the money they got from the government has run dry. Or China has taken it all over. May they all suffer in hell.

  17. We have lost capitalism and democracy. If and when we also lose our judicial system, it WILL be pitchfork time. I think everyone’s patience is running out.

  18. A recent letter from the foreclosing attorney stated that they have the right to inspect the property inside and out at a time of their choosing without notice.

    OK Bucko…give that a try! This should be fun! Since I KNOW thet don’t have the right to foreclose, I’m damned well SURE they’ll get poked with a stick in the eye at the time of their choosing, if they try an inspection. Bring it on you jack-booted thieves, bring it on! Have stick in hand!

  19. I just posted on my blog something about this banking stupidity. I was seeing red after reading about another potential bank bailout.

    I so whole heartedly agree with your conclusions here. Democracy and Free Capital Enterprise are depending on making sure that there is honesty and ethics in the marketplace . Those that are honest will NEVER get ahead while Fraud is rewarded.

  20. BofAs not fooling the FDIC. Clearly, it’s current and potential liabilities warrant it’s seizure.

  21. *
    Quote of the Day

    “The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” -John Maynard Keynes

    Macro Notes

  22. This esoteric ruling is the evidence. The horrible english composition is designed to obfuscate the truth.
    Notice that it says BEFORE THE ISSUE OF FIAT.
    It specifically says they did not lend or advance MONEY. It was a credit exchange.

    A plea of set-off
    In an action by the assignees In bankruptcy for money lent by the bankrupts,
    alleging that before the Issue of the fiat ,
    defendants discounted a bill of exchange for the bankrupts
    and then lent and advanced to them and gave credit to them ,
    for a certain large sum of money,
    exceeding the amount sued,
    for upon the security of such bill of exchange,
    Is sufficiently put in issue by a replication alleging
    that defendants did not lend or advance a
    large sum of money or any sum of money to
    the bankrupts, as the giving of credit was part
    of the same transaction as the lending and advance . Alsager v. Currle

  23. Thank Thank Thank you Neil!

    This is truly the REAL SUBSTANTIVE ISSUE .

    Private/Proprietary currency circulates. It always has.
    A promissory note IS MONEY if it is circulated past the first transfer.

    The people do not realize they issued money that is more legit than the Federal Reserve’s Notes because it is backed by a very specific collateral.

    It becomes money once it is accepted as valuable.

    The people don’t realize the entire basis for the income tax is because they are circulating the private feds currency WITHOUT RECOURSE. The Fed has an equitable interest in the profits/income of property acquired using their credit. No one writes their acceptance on FRN’s do they? They undertake no liability to pay do they? So when someone obtains some object with the FED’s money they are the payor.

    Think of this , when you don’t pay tax you get a NOTICE of tax lien. This means the lien already exists. The basis of the lien is the conditional and very public notice that is given that using the Fed’s credit obligates someone to pay income tax. Courts have repeatedly held the income tax is an EXCISE tax. That means it is a usage tax. The usage of the currency is what is taxed period.

    But to get to the point these banks have been circulating OUR CURRENCY WITHOUT RECOURSE. Where is the IRS and why are the not collecting our equitable interest in the profitsw from it’s usage and transfer.

    This is the heart of the matter. MERS has nothing to do with petty fees. What does a $75 recording fee matter when the transaction is in the hundreds of thousands? Does a few hundred bux over the life of a mortgage matter when the interest accrued ends up being 10 orders of magnitude beyond that?

    No , MERS was designed to hide that the notes where circulated at all. It was designed to hide a secondary back door currency system in which the banks alone determine it’s convertibility into Federal Reserve Notes. Which coincidently are backed by the “borrowers notes” and not the FED’s own collateral.

    The are hiding their tax liability for one.
    If I give a promise to pay for a promise to pay there is simply of exchange of credit. If I sell their (FRN’s) credit for a house and they don’t sell my note I OWE .Once they sell mine . I no longer owe them anything. There is no loan. There is simply a currency exchange.

    Start claiming the equity in the circualtion of the note. Don’t you realize why they will never produce the chain of custody for the note? They have it but it would proof of profit and the equity in that profit . After all they used YOUR credit for that profit.

  24. Vision Bank Class Action Lawsuit


    Please stayed tuned for posts and requests for participants in a class action suit against Vision Bank of Florida; Starting a blog about Vision to gather customers/borrowers and going to the Papers and will post an email for people to respond to soon.

    Banks can not get away with having 23% of there loans as non performing as Vision Bank does. there parent company admitting in SEC filings there shortcomings on loan approvals, lack of due diligence in verfiying if borrowers can pay, knowing borrowers could not pay, raising payments alomst double, refusing short sales to mitigated the situation of broke borrowers, getting TARP money, and then fighting ruthlessly to get judgments at 18% default interest, when all these baks created the very reason borrowers properties devalued and can not be sold to pay the note off and many borrowers can not earn a living to make the payments.

    Judges just think you signed the note you owe the money. THAT IS JUST NOT RIGHT, none of the borrowers signed up knowing banks were just closing loans for profit and all the appreciation buyers thought was real demand was phantom. IT IS NOT RIGHT THE BANKS can run a muck in the court system and the Judges not look out for the little guy.

  25. Vision Bank

  26. Great article one of the best.

  27. The banks are like a cancer they consume our vital organs.

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