Stocks of the largest financial institutions at midday. Wells Fargo is down 3%, JPM 3%, BAC 4.7%, C 2% PNC 1% USB is up .7% and BBT is down 0.83%. The banks are being sold off on "Robogate" which is a foreclosure scandal that could hit many of the nations lenders.The scandal involves foreclosures on houses by the banks without the necessary documentation and the foreclosure of houses using robo-signers which is when workers involved in forclosures indicate the documentation is present when it is not. This has caused an investigation into whether the banks have violated the law in certain states.
J.P. Morgan is currently reviewing about 115,000 mortgages that are in the foreclosure process and is expanding the temporary moratorium to 41 states.
To give investors a hint on why the current declines in the banking stocks are absurd. Is that the current number of J.P Morgan houses under review where to triple to 345,000 and we use an average home value of 300,000 and we write off all J.P. Morgan's loans on these homes to zero you get a charge of 10 billion. Not only will JPM likely not have to write off any of these loans, it is also likely they will face a very small legal charges.
J.P. Morgan's market cap has already declined by more than our most absurd scenario. This usually gives a hint into that the big fund managers and the people selling the stock have no idea what they are doing.
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