Remember, it is against the law – Sarbanes-Oxley - for a Bank Executive (or any other public company executive) to not know or the falsify any part of their public report.
Of course not one person has been indicted for this since SarBox was passed. Not even Dick Fuld, who said – in public – he was going to “burn the shorts.” Nor was Mozilo even though there’s a prima-facie case that he knew his company was imploding even as he was appearing on CNBS pumping it.
But Dimon said relating to Foreclosuregate:
JPMorgan Chief Executive Officer Jamie Dimon, 54, faced analysts¡¯ questions about foreclosures on the company¡¯s third- quarter conference call Oct. 13. Dimon said the New York-based lender probably will pay an ¡°incremental¡± sum to review and fix foreclosure documents.
“Fix and review.”
Note what’s not said – submitting a false affidavit or one where notarization was forged is perjury, a felony. Suborning perjury is also a felony.
Citibank is out with their numbers, and as with JP Morgan they decided to cut loss reserves. Is this prudent – or even proper? What are the expected losses on repurchase demands? Estimates vary – from $20 billion (ha!) to close to $200 billion.
My estimate? I go back to my original view – $3-3.5 trillion in losses for residential housing.
We’ve absorbed $1 trillion thus far.
I have often wondered in these pages how long the remainder can be hidden?
The bottom line is this: Those losses already happened. They happened when the bad loans were made. They cannot be “un-made.” They can be papered over for some period of time but the cash flow always ultimately wins.
I’ve got more than 20 years of business experience and anyone who has been in business knows this is true. All those hyped Internet companies in the 1990s were doing absolutely great right up until the cash flow forced them to admit to their insolvency – they couldn’t pay the rent on the building and the light bill. Then they all detonated – at once.
The markets are hype-driven machines – especially the stock market. Witness the 1990s – for those who don’t remember it, here’s the latter half of 1999 and the first part of 2000:
Now tell me all about the market ”discounting the future”? Nonsense.
The entirety of that ramp job came off – and more – when it cracked. Why? Because the cash flow was never there, and the reported “earnings” were lies.
SarBox was a law intended to render such games unprofitable by making them criminal. We have yet to see any prosecutions under that law, even though it is clear that there are dozens of individuals who made false statements in public, and who arguably attested to false statements in their quarterly reports.
Now that the banks are reporting “earnings”, and taking down provisions into what analysts are reporting will be monstrous credit losses for repurchase liability, not to mention potential criminal liability for document fraud in the nation’s courts, it is time to chronicle all of these statements and provisioning changes so as to be sure to shove them under prosecutors noses when the truth is revealed in the coming months.
