Jonathan Weil has piped up, which marks a turning point, I suspect...

Here’s the latest: Thanks to a Nov. 16 court ruling in Camden, New Jersey, we now know that a Bank of America Corp. employee, Linda DeMartini, testified last year that the lender routinely retained possession of mortgage promissory notes and related documents, even after loans were packaged into bonds that were sold to investors. If we’re to believe what she said, it raises the prospect that some of those loans still should be on Bank of America’s balance sheet today.

Actually, it's more bizarre than that. 

The original case began with a claim that the mortgage was owned and all in the good, as is always the case.

The problem was that the documentation thereof was legally insufficient.

There began the trouble.

There was allegedly an "allonge" (that is, another sheet of additional assignments) that is supposed to be "permanently attached" (e.g. riveted, etc) to the original so as to prevent someone from detaching it and replacing it later.  This, incidentally, is required by the UCC.  If my information is correct it was presented to the court as a loose sheet of paper - that is, not attached at all.  Examination of the so-called transfers showed that the note was assigned to the trust after the default and just before foreclosure was initiated.

And the pooling and servicing agreement, which the borrower's counsel asked to have produced (to prove that all of the other things done were on the "up and up" was allegedly produced in court unexecuted and with the word "DRAFT" emblazoned over the top of it, after an attempt to find it on the SEC's EDGAR website proved fruitless.

DeMartini’s statements also place Bank of America’s outside auditor, PricewaterhouseCoopers LLP, in a tough spot. The firm has no choice now under U.S. auditing standards but to find out definitively if what DeMartini said is correct, and whether the answer would affect any of its prior audit conclusions. PwC billed Bank of America $128 million for its audit and other services last year. The mortgage at issue in the court ruling was originated in 2006 by Countrywide Financial, which Bank of America bought in 2008.

Auditors have never mattered since ENRON.  In fact, basically all of them involved in auditing the financials of banks should be strung up by their nuts by now.  How you can possibly argue that an audit opinion has merit after the disclosure of The Fed haircuts on the so-called "assets" pledged for TAF and similar programs at this point is beyond the pale.  That is, we now know that banks came to these programs and pledged assets with ten times or more the face value of what they "borrowed" - but then when these loans were repaid those worthless assets (in the opinion of the NY Fed desk) were never recognized at that valuation by anyone ever again.  In fact, they're probably still sitting on bank balance sheets - at 95 or even 100 cents on the dollar. 

This much I can tell you with certainty - whatever collateral was pledged on 1/21/2009 in the "face" amount of $185 billion for a $15 billion loan was never exposed in a 10K or 10Q as having taken a loss of more than 90%. 

Such a loss would have resulted in in the instantaneous detonation of Bank of America.  Indeed, that loss is more than half of the firm's enterprise value as of today and exceeds the company's market cap.

That is, it was more than enough to blow them to Mars - and that was one transaction.

While some of those loans were clearly rollovers of earlier ones, and thus the "9 trillion" bandied about is a histrionic distortion (typical of many people in the media and Congress) the fact remains that these programs disclose monstrous hidden losses in the form of worthless collateral that was posted by these institutions and which then disappeared once again into their bowels and has not been seen since.

A Bank of America spokesman, Jerry Dubrowski, declined to answer questions about PwC, but said it was premature to speculate on the need for any accounting reviews. A PwC spokesman, Steven Silber, declined to comment. Countrywide’s financial filings show the company sold more than $1 trillion of loans from 2005 to 2007, primarily in the form of securities.

Uh huh.  The need for accounting reviews was evident a hell of a long time ago. 

Where are the damn "assets" that were haircut by 90% or more during Fed TAF and similar operations - and we're not talking just about BAC either.  Pick a bank - they're all showing the same sorts of things, although some are not quite that extreme.  Nonetheless 80% writedowns on collateral valuations are absolutely common and yet there has been no exposition by these institutions WHATSOEVER as to where those valuations AS DEFINED BY THE FED went.

If you think we've really "recovered" in our banking system you have to deal with and dispose of this problem.  Valuations that are 80% less than claimed face value are for all intents and purposes zero.

I've talked about this repeatedly since the crisis began and have repeatedly been told I was full of crap.  Well, if I'm so full of it, why is it that The Federal Reserve agrees with me on the value of these so-called "assets"? 

We now know why everyone is so assiduously trying to hide the truth - including the armwaving now over Wikileaks and their alleged knowledge of some highly-embarassing documents related to banks. 

The entirety of this so-called "recovery" in the financial sector IS A LIE.