HOME EQUITY NIGHTMARE: Second Liens, Second Wave Of Losses For Big Banks (The Daily Bail)

July 20, 2011 (The Daily Bail) -- This is the great equalizer.  The land of insolvency.  Georgetown Law professor Adam Levitin did not mince words in his appearance before Congress in January, stating bluntly that JPMorgan, Citigroup, Bank Of America and Wells Fargo are all insolvent, just from their massive portfolios of second-lien loans.  It's not even close, according to Levitin, as all 4 our largest commercial banks would be wiped out by an honest valuation of home-equity loans.

The 4 largest banks are insolvent many times over.  Their puny and massively over-leveraged capital bases would not just be wiped out, they would be turned into negative multiples of the original equity.  Then take the next step and understand that these same criminally fraudulent and insolvent institutions, paid their executives $144 billion in bonuses this year, based on false accounting that was endorsed by Congress and jammed down the throats of FASB in June of 2009.

Chris Whalen is quoted extensively in Gretchen Morgenson's new piece below.

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