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As Wall Street Strong-Arms Consumers, Will WikiLeaks Bring One of the Biggest Banks To Its Knees?

The banks have been going after their critics, but one big Wall Street player may meet its match in the coming weeks.

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At the heart of all these efforts is the banks' imperative to avoid transparency – transparency that might offer irrefutable evidence for scholar and former regulator William Black's assertion that there was widespread “fraud at every step in the home finance food chain.” (Just this week, the attorneys general of Nevada and Arizona slapped BofA with a “blistering” lawsuit alleging various fraudulent practices on the part of the mega-bank.)

That's why execs at Bank of America must be squirming after a series of messages posted on Twitter by Wikileaks last weekend. One read, “We ask that all people who love freedom close out their accounts at Bank of America,” and a second asked, “Does your business do business with Bank of America? Our advise [sic] is to place your funds somewhere safer.”

Bank of America, following the lead of firms like PayPal, Visa Europe and Mastercard, blocked payments to Wikileaks last week, saying the move was “based upon our reasonable belief that Wikileaks may be engaged in activities that are, among other things, inconsistent with our internal policies for processing payments.”

BofA doesn't only need to worry about hackers launching attacks on its site in retaliation – as they have done to a host of other organizations that have come out against Wikileaks – because the whistleblower itself may have enough dirt on BofA to bring the supposedly too-big-to-fail bank to its knees.

The rumors date back to a 2009 interview Wikileaks founder Julian Assange gave to Computerworld, in which he claimed he was, “sitting on 5GB from Bank of America, one of the executive's hard drives." Last month, Assange told Forbes' Andy Greenberg that the anarchist media group was planning on releasing a “mega-leak” in early 2011 regarding a major U.S. bank, and more recently the Financial Times reported that Assange promised to “release information about the financial services sector in spite of facing 'attacks' by banks.”

Nobody knows what Assange may be sitting on. As Greenberg pointed out, any information Assange was talking about in 2009 is now a year old. But the import of such a release could be far-reaching. As  I wrote last month, part of the reason there have been no prosecutions of senior personnel resulting from the fraud that built the mortgage bubble is that the FBI slashed the number of agents dedicated to unearthing financial crimes by some 75 percent since the 1980s, even as the complexity of the alphabet soup of Wall Street's “exotic” investments increased exponentially. Dumping a bank's inner communications on the world's consumer watchdogs, banking reformers and even bloggers would offer thousands of people the opportunity to dig through the raw material.

Another possible reason no big fish have been caught in the Justice Department's net is that senior executives may have learned a lesson or two during the Savings and Loan crisis, when over a thousand bankers were prosecuted, and are far more cautious of leaving a trail of incriminating evidence. It's conceivable that something on some exec's hard-drive might become a smoking gun implicating top management -- proof that fraud wasn't isolated to the "few bad apples" at lower levels who have been prosecuted so far.

A less dramatic revelation could also cause major damage to BofA: revealing to investors that its balance-sheet is full of hidden garbage. As I noted in November, BofA has allegedly been playing fast-and-loose with its numbers. “The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet,”  wrote Bloomberg columnist Jonathan Weil, “is that it’s largely impenetrable.” Nobody really knows the true values of the assets these companies are holding, which has been the case ever since the collapse. But according to Weil, some of BofA’s financial statements “are so delusional that they invite laughter.”