Sunday, September 4, 2011

Big banks get busted, again....

Also on Friday, the U.S. Federal Housing Finance Agency (which oversees Fannie Mae and Freddie Mac) filed a lawsuit related to about $200 billion worth of problematic mortgage backed securities originated by Ally Financial Inc. / GMAC, LLC, Bank of America Corp., Barclays Bank PLC, Citigroup, Inc., Countrywide Financial Corp., Credit Suisse Holdings (USA), Inc., Deutsche Bank AG First Horizon National Corp., General Electric Co., Goldman Sachs & Co., HSBC North America Holdings, Inc., JPMorgan Chase & Co., Merrill Lynch & Co. / First Franklin Financial Corp, Morgan Stanley, Nomura Holding America Inc., Royal Bank of Scotland Group PLC and Société Générale.

MY TAKE: Factors negatively affecting the banking sector include 1) the fall-out of no-documentation loans and no-documentation foreclosure processing, 2) the challenges by both insiders and investors in assessing complex and opaque financial structures, 3) litigation that could take years to resolve and 4) reduced financial performance. In the process, thousands of banking employees will join the unemployed and “bubble era” senior managers may be playing golf.

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