SEC suit: Bank of America failed to disclose ’staggering financial losses’ to shareholders

Federal regulators sued Bank of America Corp. on Tuesday, accusing the company of failing to disclose "staggering financial losses" at Merrill Lynch before shareholders approved a combination of the companies.

The lawsuit filed by the Securities and Exchange Commission in U.S. District Court in Manhattan sought an order requiring Bank of America to pay a civil penalty for not telling shareholders it was losing $15.3 billion in the fourth quarter of 2008.

Bank of America spokesman Robert Stickler called the charges "totally without merit."

He said the company believes it provided sufficient and appropriate disclosure to shareholders prior to their vote approving the combination. (more)

Mobius: U.S. Market at Risk of 20 Percent Drop

Although the stock market is on a rebound, investors should remain cautious, Mark Mobius, executive chairman at Templeton Asset Management, told CNBC.

The market will likely correct itself soon with a steep adjustment, noting that a 20 percent correction would be par for the course, he said.

“In a secular bull market, where we are now, you will see corrections can be as much as 15-20 percent, but we shouldn't be concerned that this represents a bear market," he said.

"A 20 percent correction is not unusual, we've seen it in China already last year … so you will see that on an individual market basis,” Mobius said. (more)

Bankergate: Emails Expose Criminal Financial Dictatorship At Work

Explosive emails released last week could see Treasury secretary Timothy Geithner become embroiled in criminal charges for his role in a cover up that exposes the monumental criminality behind the $182.3 billion bailout of American International Group Inc.

In November and December 2008, The Federal Reserve Bank of New York instructed the bailed out AIG to hide from the public details regarding payments the insurance giant made to banks, including Goldman Sachs Group Inc. and Societe Generale SA.

Using Fed secured taxpayer bailout money, AIG paid several banks 100 percent of the face value of credit-default swaps, as other financial institutions were negotiating deep discounts for the unregulated paper assets that do not have to be backed by cash. (more)

Things We've Forgotten, Howard Ruff

One of the most dangerous political philosophies afflicting America today is the belief that we can’t allow anyone to suffer the natural consequences of their own stupidity.

For example, after the government first sucked people into buying and taking on mortgages they couldn’t afford to pay, when they got in trouble, the government produced welfare programs to see they had enough money. They also would force the banks to lower the mortgage terms so the consequences of stupidity would not be felt.

If cars aren’t selling, create the open-ended Cash for Clunkers program. If the big banks are about to fail, pour money into them and take control for the greater good of all of us. (more)

Fitch: U.S. State and Federal Debt to Hit 94% of GDP

How fast is government debt growing in the United States?details how serious the situation is:

Fitch Ratings has issued the starkest warning to date that the US will lose its AAA credit rating unless acts to bring the budget deficit under control, citing a spiral in debt service costs and dependence on foreign lenders.

Brian Coulton, the agency's head of sovereign ratings, said the US is shielded for now by its pivotal role in global finance and the dollar's status as the key reserve currency, but the picture is deteriorating fast enough to ring alarm bells... (more)

Moody’s warns of 'social unrest’ as sovereign debt spirals

In a sombre report on the outlook for next year, the credit rating agency raised the prospect that future tax rises and spending cuts could trigger social unrest in a range of countries from the developing to the developed world.

It said that in the coming years, evidence of social unrest and public tension may become just as important signs of whether a country will be able to adapt as traditional economic metrics. Signalling that a fiscal crisis remains a possibility for a leading economy, it said that 2010 would be a “tumultuous year for sovereign debt issuers”. (more)

401k/IRA Screw Job Coming?

Now this is a guaranteed rape job.

In a short conversation this noontime that CNBC apparently has omitted from their archives (Why's that folks?) Rick Santelli was talking about a potential to effectively force money into the Treasury market.

Where would they get this?

From your 401k and IRA accounts!

From Businessweek:

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort. (more)

Fed paid record $46.1B to Treasury last year

The Federal Reserve paid a record $46.1 billion in earnings to the Treasury Department last year, reflecting gains as the central bank bulked up its portfolio of securities to revive the economy and fight the financial crisis.

The payment marks an increase of $14.4 billion from what the Treasury was provided in 2008 and is the largest since the Fed began operating in 1914, the central bank announced Tuesday.

The Fed's net income of $52.1 billion in 2009 also was a record, according to preliminary figures. It was up from $35.5 billion in 2008. (more)

US Mortgage Originations Seen Plunging in 2010

U.S. residential mortgage originations are expected to plummet 40 percent in 2010 to their lowest level in a decade, eclipsing a forecast drop made just one month ago, the industry's main trade group said Tuesday.
Lenders will underwrite $1.28 trillion in home loans this year, down from $2.11 trillion in 2009, the Mortgage Bankers Association said in its latest forecast. That would be the lowest since $1.14 trillion in 2000.

The forecast was downgraded from December, when the MBA predicted originations would fall about 24 percent.

The forecast decline is worse than what Chase Home Mortgage, one of the largest U.S. lenders, had seen in October. (more)

Goldman Admits To Frontrunning Clients Through Its Prop Desk

The topic of Goldman frontrunning clients using its prop desk, which has long bothered Zero Hedge, and which in the past received Goldman's vehement refutation, seems to have resurfaced, and to have proven our initial speculations correct. Jane Lattin, assistant to Thomas Mazarakis, head of fundamental strategies, sent out an email to clients earlier, notifying them that the firm in the past has traded ahead of them in its Fundamental Strategies Group, aka its Prop Trading desk, which is, by definition, frontrunning: "The Fundamental Strategies Group is a group of cross-capital structure desk analysts employed by our Securities Divisions to assist our traders. They develop Trading Ideas in conjunction with traders. We may trade, and may have existing positions, based on Trading Ideas before we have discussed those Trading Ideas with you. We may continue to act on Trading Ideas, and may trade out of any position, based on Trading Ideas, at any time after we have discussed them with you. We will also discuss Trading Ideas with other clients, both before and after we have discussed them with you." This answers our repeated queries from July as to whether Goldman is legally front-running its clients for its own prop positions. (more)

Fitch: U.S. Prime Jumbo RMBS Delinquencies Nearly Triple to 9%; CA Drives Trend

More U.S. prime jumbo borrowers are falling and staying behind on their monthly mortgage payments, with states such as California and Florida driving the elevated underperformance, according to Fitch Ratings in the latest edition of its U.S. RMBS delinquency updates through Performance Metrics.

Overall, prime RMBS 60+ days delinquencies rose to 9.2% for December 2009, up almost three times compared to the same period last year (3.2% in December 2008). The 2006/2007 vintages combined rose to 12.7% from 4.3%.

The five states with the highest volume of prime jumbo loans outstanding (California, New York, Florida, Virginia, and New Jersey) comprise approximately two-thirds of the loans in question. Prime jumbo RMBS 60+ days delinquencies for these states at December 2009 compared to December 2008, and their approximate share of the $388 billion market, are as follows: (more)