If you’ve watched the collapse in Bank of America’s stock this past month, you’ve probably read that investors are concerned about the bank’s legal liabilities from the devastation of the housing market. Analysts usually cite the raft of lawsuits filed by just about anybody who had anything to do with the bank or Countrywide, which was bought by Bank of America when Countrywide was on the verge of bankruptcy. Analysts, however, don’t tell you the details behind these legal claims – what exactly did Bank of America do to earn its position as poster child for banking industry fraud? To the rescue comes a lawsuit filled with such details, from someone who has access to thousands of consumer complaints about Bank of America. The complaint was filed recently by the Attorney General of Nevada, Catherine Cortez Masto. You should take the time to read this lawsuit. It tells you in a comprehensive way what went wrong with the mortgage business from origination of the mortgage to foreclosure. But fair warning: be prepared to be nauseated. If Bank of America perpetrated even a fraction of the frauds outlined in this report, it raises a most serious question: why does this company still have a banking license?

Countrywide Sets the Tone

The other day many of us were exposed to a BBC interview where a business reporter kept repeating the tired old mantra that hedge funds had no involvement with the global economic meltdown.

Oh really?

Then surely, given the opaque nature of these private investment concerns, there would be no surprises forthcoming if they were to be intensively audited by forensic accounting teams together with certified fraud examiners?

And while we're at it, might not the same auditing processes yield interesting results if also directed at those private equity leveraged buyout funds (LBOs) and the major credit derivatives dealers, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Citigroup and Bank of America (with Credit Suisse FB, UBS and Deutsche Bank in the mix as well)?

Awhile back, Dr. John L. Goldberg of the University of Sydney, was brought in by the Australian government as a consultant to research the financing behind a number of public-private partnerships concerning Australian toll roads and infrastructure projects.

Now public-private partnerships, where securitizations with the subsequent generation of credit derivatives occur, incorporate the same underlying fundamental financial model as hedge funds, private equity firm LBOs and credit derivatives dealing by major ("too big to fail") banks.

Dr. Goldberg's three principal points, taken from one of his executive summaries, were as follows:

"Paying equity dividends with virtually no cash flow available (CCT)"