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Friday, August 5, 2011

8/5/2011 - Bank of America is going down, starting tomorrow

So yesterday things started to get rough, with the DOW closing down 500+ point.

Japan and HongKong overnight down 3.72% and 5.13% respectively.

Europe wide has opened this morning is full on panic mode, with open positions blasting all predictions by "experts" out of the water.

Bank of America is Trouble,
Royal Bank of Scotland about to write off GBP 800 million of Greece debt as part of a total GBP1.4 Billion loss in the first 6 months of 2011.
A Bank run in Italy.
Massive volatility of the commodities, as banks try to achieve liquidity,

So this is the place to track all the fun and happiness that we are in for this Black Friday.

Remember it always starts in Japan. 

Bank of America, aka BAC, is one of the ``too big to fail`` banks... and they just got crushed for their fraud by a judge in New York. 

Got Bank Of America CDS? New York AG Says BAC's $8.5 Billion Settlement Is "Unfair and Misleading"; BAC Equity Offering Imminent 

When we last looked at the Bank of America joke of a "non-settlement" settlement for a paltry $8.5 billion when $424 billion in total misrepresented (530 in total) Countrywide mortgage trusts were at stake, we said, "we are confident that the legal process will prevail and that the presiding judge on this case, and if not him then certainly the New York District Attorney, will step up and demand a thorough reevaluation of the settlement process."

According to a just released filing from the New York Attorney General Eric Schneiderman, Bank of America (and Bank of New York Mellon, one of the tri-party repo banks mind you), violated New York state law and "misled investors." In a knock out punch to Bank of America (and Brian Lin who was profiled here previously), the bank allegedly violated the New York’s Martin Act and misled investors about its conduct tied to mortgage securitization as Bloomberg summarizes. Schneiderman said he has "potential claims" against Bank of America Corp. and its Countrywide Financial unit.

As Zero Hedge alleged all along, "The proposed cash payment is far less than the massive losses investors have faced and will continue to face." What does that mean? Well, as the countersuit by the FHLB indicated (which we are certain will be the basis for the NY AG claims), the likely final settlement is probably going to be about $22 to $27.5 billion. Which also means that the bank's Tier 1 capital is about to be discounted by about 25% lower. Which, lastly, means that the stock is about to plunge due to a massive litigation reserve shortfall which will have to be plugged with, surprise, a new equity capital raise.

Long story short: Bank of America is now totally skewered (as in can you spell U-N-D-E-R-R-E-S-E-R-V-E-D), as this process throws the entire existing settlement, which most certainly was cobbled together with the assistance of the purported legal adversaries so that the American financial system was not scuttled when BAC has to file for bankruptcy, out of the window.

BAC is very big... if it goes down, which it seems it will, it could be another Lehman Brothers... and bring the whole system near collapse... if not outright collapse. 

That, the situation in Europe (especially Italy) and the unemployment report tomorrow shall make interesting news. 

Financial collapse tomorrow? Yes we can! (but as always, those bastards are probably gonna give them a secret bailout or something to save the day once again) Or you know they gonna do the usual stuff... cut BAC into pieces... the bad stuff goes to the US taxpayers... and the good stuff is taken by Goldman and/or JPMorgan.

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