The ActiveRain Addiction

This morning, something happened many had a pretty good idea was in the works, the attorney generals for three states (California, Washington and Illinois) formally filed lawsuits against Countrywide for fraudulent or discrimatory lending practices. The filing of these lawsuit happened soon after Countrywide shareholders approved the planned acquisition by Bank of America, the timing without doubt not coindicental. 

These lawsuits have some very far reaching impacts, for example the Illinois one could Countrywide to take back tens of billions in bad loans which they securitized and sold.  The WA lawsuit was followed up with a call for ask regulators to withdraw its state license to do business in Washington.  In the past once one state pulls a lenders license usually all the others will pile on and do the same thing.

So what does this mean for the planned acquisition by Bank of America? 

I've been saying since it was announced I would be abolutely shocked if it closed, Bank of America would have to be smoking crack to take on the liabilities on Countrywide's balance sheet.  They are potentially large enough that they would take all of Bank of America down.

About a month ago it was divulged that Bank of America planned to keep all of the bad assets in a shell LLC, pick off the good parts and let the LLC go BK.  Of course the legality of this is very questionable and bond holders would get screwed instantly and be lining up to file lawsuits.   Several large firms tried this tactic in the past to get out from under billion in asbestos lawsuit liabilities and were slapped down by the bancruptcy courts.  With the state AG's filing these lawsuits Bank of America can no longer claim the liabilities are unknown and will turn any remaining chance of this working into road kill.  Now I think Bank of America's management has not to be just smoking crack but also mainlineingheroine to move forward with this deal.

6/30 Update: Florida has now thrown itself onto the Countrywide pig pile.  Tomorrow is the moment of truth as the Bank of America acquisition is supposed to close.

7/1 Update: It looks like the Bank of America acquisition did actually close, Ken Lewis decided to swallow the puffer fish whole, good luck with that...

Up until yesterday there hadn't been much in the way of indictments related to the fall out of the mortgage mess and credit problems.  Boy, what a difference 48 hours makes.

More than 400 charged in mortgage probe

Yesterday the justice department brings charges against more than 400 individuals in a three month long investigation into mortgage fraud, including lending fraud, foreclosure rescue scams and mortgage-related bankrupcy scams.  The number of individuals charged is likey to grow substantially as the investigation continues, and I'm sure some of those charged start naming names.

Indictments handed out in Bear Stearns Fund Manager Case

Two managers to failed hedge funds at Bear Stearns have now been indicted by the FED's for concealing the problems from investors that lead to a near total loss.  The lieing that occurred here was so blatent I'm shocked that it took this long for the indictments to be handed down given the blow up officially ocurred back in Aug.  They were basically telling all the funds investors there was no problems while having internal conversations at the company about how bad things were.  You will see A LOT more cases like this, guarenteed.  The lying that has ocurred on Wall Street to conceal these credit related problems is massive and still continuing.

Former UBS Banker Pleads Guilty to Aiding Tax Evasion

"Both men were accused of creating bogus trusts and sham offshore entities to hide some $20 billion in offshore assets owned by wealthy American clients. UBS is in talks with the Justice Department and Swiss authorities about turning over the names of up to 20,000 American clients."

Yeah, I have a feeling there are about 20,000 American clients that may not be having a great night of sleep tonight...

Contrary to some rumors that may be out there I'm still alive, just popping my head up to see what's going on.  As many know, ActiveRain had some, uh, pretty serious "technical issues" for a while which I've been helping to battle. Luckily things have stabilized quite a bit in the last week.  I'll try to give you the post mortem on this one, warning tech talk ahead.

Traffic to ActiveRain's site has been steadily increasing month over month, I think we're averaging somewhere north of 80k visitors a day and 15M page views a month.  Our servers were able to handle the human traffic fine, but then we started getting absolutely pounded by various bots and spiders trying to crawl the hundreds of thousands, if not millions, of pages on the site.  For some reason they liked to all choose the exact same time to hit us too.  Some of the RSS feed readers were particularly hideous, as unlike the major search engines that would throttle their requests and only try to say load a page a send, they would trying hitting every RSS feed on the site at the same time.  This was causing traffic spikes that were large enough to start taking down our web servers periodically or at least make them so slow for periods of time they were nearly unusable.

About two months ago we ordered upgraded hardware doubling our number of web servers.  Our managed hosting company built out this environment, but in the process upgraded almost all the software and operating system versions to the latest ones.  As most computer users know, while upgrading software theoretically should help reduce problems it often has the opposite effect.  The new environment went through our testing no problem, and seemed to function fine when we put it up.  However, when we switched over, every couple hours our servers would just blow up (not litererally), almost at random.  We spent many, many hours going line by line through log files, and doing everything we could to diagnose the issue.  Not being able to find any reason for the random self destruction we began rolling software versions back methodically trying to find if one of those caused it.

None of the usual suspects seemed to help, finally we ended up rolling the version of linux we're running on back a minor version and the problem disappeared.  Almost two weeks after the roll out of our new environent we had a fix.  That was about a week ago, and things have greatly stabilized since then.  We've got one more major hardware upgrade coming in the next day or two, as we're going to much more powerful database servers (4 core/4 GB of RAM to 16 core/32 GB ram)  This should further speed up the site and give us a lot of buffer for future growth, and yes we are making sure they are all running the same software versions this time.

So that's what I've been up to and while all of my hair finally fell out :)  No I'm not Jeff Turner's long lost twin...