Perfect storm of bad banking news

On the same day that the Bureau of Labor Statistics reported that no new jobs were created in August, the banking sector got slammed with a hat trick of bad press.

American Banker reports that despite ongoing legal action, major mortgage-holding banks are still engaging in the fraudulent practice of "robo-signing" - pushing through foreclosures without bothering to confirm key pieces of information, like who actually lives in the home or whether or not it's been paid off. Pat Garofalo of Think Progress points out that the practice has become so sloppy that as recently as one month ago, banks were signing mortgages from one trustee to another years after both parties went bankrupt or ceased to exist.

Meanwhile, the Associated Press reports that the robo-signing practice isn't just still going on - it actually started long before many suspected, with officials discovering suspiciously similar and sloppy paperwork dating back to the late '90s. "Because of these bad titles, property owners can't prove they own the properties they think they bought, and banks can't prove they had the right to sell them," Jeff Thigpen, the registrar of deeds in Guilford County, North Carolina, told the AP.

Finally, the New York Times broke the story that the Federal Housing Finance Agency is set to sue "a dozen" of the country's biggest banks for lying about the mortgages it securitized and sold to investors with AAA ratings. The lawsuit will hit major players like Goldman Sachs ( GS ), JPMorgan Chase ( JPM ) and the beleagured Bank of America ( BAC ), which has already endured a beating in the last few months of trading.

In aggregate, these reports paint a picture of a banking industry gone completely off the rails (as if that wasn't common knowledge), cutting corners and flat-out lying about who owns which mortgages, what they're worth and where they are stored. None of this is really fresh news - the robo-signing scandal reared its ugly head around this time last year, while the AAA ratings of garbage mortgage-backed securities were called into question by many investors - some of whom made a fortune when the subprime bubble burst.

Still, these three stories landing on the same day as the dismal BLS report is sure to stir up plenty of rage against Wall Street. The real question is whether, in the face of the populist fury, the government will find itself able to nail some of the biggest campaign contributors to the wall.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics

Banking US Markets