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The stock is close to $8, way under book and woes mounting. How much longer? And they've clearly under-reserved for their mortgage problems
Bank of America Corp. (BAC), the largest U.S. lender, posted its worst two-day decline since 2009 after telling investors that claims from Fannie Mae and Freddie Mac may cost more than previously forecast.
The bank fell 7.5 percent yesterday in New York Stock Exchange composite trading, the biggest drop in the Dow Jones Industrial Average, and extended its slide for the past two sessions to 15 percent. New demands for refunds on soured loans from the two U.S.-owned mortgage firms are coming “in numbers that were not expected based on historical experience,” the company said in its Aug. 4 quarterly report to regulators.
It is clear that the Charlotte bank has too much in the way of legal liability that it will not be able to shed and yet-to-be-taken writedowns on balance sheet items (for instance, roughly $125 billion of home equity loans and junior liens on residential real estate as of end of last year) for it not to be at risk of a death spiral. Its stock was down 7.44% yesterday, which puts its market cap at $89.5 billion, which is a mere 41.6% of common equity (total equity less book value of preferred) of $215 billion. That means if the bank is under pressure to raise its capital levels, it will be so dilutive as to be problematic, particularly if the stock market weakens further and banks continue to take it on the chin. And the entire mortgage industrial complex is coming under stress. Number three mortgage insured PMI posted yet another loss and fell short of regulatory standards. Although mortgage insurer woes are mainly a Fannie-Freddie issue, problems in tightly-coupled systems can ricochet in unexpected ways.
I still remember that complete moron Joe Kernen's reaction to their Countrywide purchase: "The rich get richer."
One day a real rain is gonna come...
I really think this could eventually sink Bank America. Short of the Tim Geithner and Obama giving absolution to Bank America any additional bad news could push them over the edge. Once a stock goes to $5 vultures pound and even without that the market already believes more than its half book value is pure fiction.
Bank of America is obviously not pleased with this development. In the article, a bank spokesperson gripes about how the firm's behavior "continues to evolve" regarding its putback policies. In January, the bank stated that its total putback cost would be capped at around $3 billion. We now know that these losses will likely be higher, but it's unclear how much higher.
Due to its acquisition of Countrywide, the biggest mortgage lender during the housing bubble, Bank of America's putback problems are likely to dwarf those of other banks. But Fannie probably wouldn't single out Bank of America, so other banks will presumably also face larger-than-expected losses due to Fannie's increasingly aggressive putback policy.
Bad for Bank Investors, Good for Taxpayers
Bank of America and its investors won't welcome this news. The institution's stock is down 5% as of about 2:45pm on Friday, while the Dow is up nearly 1%. Fannie's move makes the Bank's loan losses even more uncertain, as it will likely owe the firm more than its investors had anticipated after its January statement.
But taxpayers should be pleased. Any money lost by Bank of America and its shareholders due to these buybacks is money that taxpayers won't have to fork over to keep Fannie afloat. Unfortunately, the extra capital that this evolving policy will provide will likely still be far too little to allow Fannie to make taxpayers whole.
WHat ever happened to Julian Assange? He said he had a B of A hard drive that was going to bring them down big time.
If I recall correctly Countrywide had loans of over $100 billion with
Federal Home Loan banks, so there may be a domino effect if BofA fails.
The American International Group is planning to sue Bank of America over hundreds of mortgage-backed securities, adding to the surge of investors seeking compensation for the troubled mortgages that led to the financial crisis.
The suit seeks to recover more than $10 billion in losses on $28 billion of investments, in possibly the largest mortgage-security-related action filed by a single investor.
agreed re moron joe kernan
cool was when he paraded his poor speech-impeded 10 YO daughter on the the air promoting "her" book: "my teachers are lazy union members"
what can you expect from a failed stockbroker?
"I still remember that complete moron Joe Kernen's reaction to their Countrywide purchase: "The rich get richer.""
Maybe he was referring to Angelo Mozilo, not BAC. Ang Moz got out of this fairly clean (legally at least - reputationally not so much) with a big pile of dough. And of course he still has the tan.
Credit-default swaps on Bank of America Corp. (BAC), the nation’s biggest bank by assets, soared to the highest since June 2009 and contracts tied to Morgan Stanley debt increased to the most in more than a year.
"I really think this could eventually sink Bank America"
I would diasgree with "eventually." If they manage to extend and pretend all the way to eventually, then they have a good chance of earning their way out of the mess. Even with earnings facing headwinds from absence of loan growth, pressure on NIM and legal/operating expenses from the mortgage issues, BAC's pre-provisons earnings are still massive. Given enough years, they chew through the problem. I think the question is more whether they even make it to eventually. These problems sinking BAC in the next year or two seems more likely than a five year slow motion train wreck.
For these purposes, I consider "sink" to include going back to the Treasury well and/or the public markets to raise equity that dilutes the crap out of the current shareholders. Recall that Citi's pre-crisis shareholders now own something like 15% of the company after being diluted in the bailout (round numbers 5 billion shares went to 30 billion, then back to 3 billion in the 1-for-10 reverse split). A disorderly failure of BAC just isn't in the cards for public policy reasons.
You've just described a zombie bank.
Unfortunately this is not really a potential earnings problem so much as a balance sheet issue. We're talking insolvency.
Yes, it is a balance sheet issue. Hence my references to extend and pretend, that time honored tradition by which current balance sheet problems are deferred/covered up and bled off slowly in the future, and to the possibility of going back to the Treasury well. A BAC that is de facto involvent will end up a ward of the state (see RBS, Lloyds, Citi) before it goes into free-fall involvency.
As an alternative to a dilutive recapitalization, one could speculate that the government might use it's Dodd Frank to-big-to-fail resolution authority to wipe the common equity entirely and wind the thing down, but I really wonder whether they want to be taking their new authority for a test drive when the stakes involve the country's biggest bank balance sheet...
Doesn't work with a big bank. Nobody will want counter-party risk.
Rochdale Securities analyst Dick Bove told FOX Business Network (FBN) Senior Correspondent Charlie Gasparino that despite worries, Bank of America (NYSE: BAC) doesn't need to to raise more capital in order to survive.
Bove said, "BAC can go to one dollar and it won't need to raise capital."
Now I'm sure BAC is in trouble. The Bove endorsement is a contrarian indicator if there ever was one.
What does it mean when your head global debt strategist leaves to join Blackrock?
He got a better offer.
Reuters) - Bank of America Corp (BAC.N) has held exploratory talks with the principal investment funds of Kuwait and Qatar about selling part of its stake in China Construction Bank (0939.HK), sources with direct knowledge of the talks told Reuters.
Bank of America, which owns about 10 percent of CCB's (601939.SS) Hong Kong-listed shares and is scurrying to raise capital for its mortgage-scarred balance sheet, will be contractually free to sell the bank shares after August 29. They are valued at about $17 billion.
Do you think that is a core asset?
Kind of like cream cheese is t o you?
Brian Moynihan, chief executive of Bank of America, rejected calls to raise new equity capital
“My performance with the management team ... has been strong,” he told investors on a conference call on Wednesday, even as he acknowledged that the group’s share performance had “not been strong”.
“We’ve been in this business for 230 years. And we’ll be in business for another 230 years,” he said.
Chris Whalen: Geithner lacks the financial skills to understand that he may need to authorize DODD FRANK receivership for BAC
Like a Slinky walking down a flight of stairs, though, all it may take is the slightest push for inertial energy to set the writedown cycle in motion again. For instance: Bank of America, at 33 percent of book value, finished yesterday with a $68.6 billion market capitalization. That’s less than the $71.1 billion of goodwill on its June 30 balance sheet. (Goodwill, which isn’t a saleable asset, is the ledger entry a company records when it pays a premium price to buy another).
You Gotta Believe
So, Bank of America would have us believe the goodwill by itself was more valuable than what the market says the entire company is now worth. Investors don’t buy that. They see a company that needs to raise fresh capital, judging by the discount to book value, in spite of the company’s claims it doesn’t need to. The more the stock price falls, the more shares Bank of America would need to issue to appease the markets, leading to fears of even more share dilution.
Bank of America Corp. has agreed to sell part of its home-loan portfolio to government-controlled housing giant Fannie Mae, as the bank looks to shed assets and pare its exposure to an array of mortgage woes.
The rights being picked up by Fannie Mae were originally worth more than the purchase price, said a person familiar with the deal. The bank decided to sell the portfolio at a loss because its value is expected to deteriorate further, this person added. The loans have a 13% delinquency rate, and more than half of the loans are in troubled U.S. real-estate markets.
> Once a stock goes to $5 vultures pound
Can you explain what you mean by this?
Do you have any idea about what you're talking about?
A couple of factors.
Exchange requirements have a price component
Many institutions have guidelines about what stocks they can own. These often have minimum prices.
Between $3-$5 we're in very dangerous territory. Under $3 there's virtually no hope.
of course the stock closed at 7.25 which last time i looked is 50% more than $5. and of course the NYSE price requirement is $1. so tell us again about your brilliant and useless analysis.
>7.25 which last time i looked is 50% more than $5
You had an actuarial table you looked at, or did you use your slide rule?
Riversider, your arguments are ridiculous. Reverse splits are a possibility, like Citi.
columbiacounty, yes, the NYSE has a $1 price requirement, but there are many institutional investor guidelines on stock price.
The two of you make a good pair.
Aug. 12 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Brian T. Moynihan met Treasury Secretary Timothy F. Geithner to press for a settlement of probes tied to the industry’s shoddy foreclosure practices, said two people with direct knowledge of the event.
The meetings occurred as Moynihan tried to shore up confidence in the biggest U.S. lender after Bank of America’s stock lost almost half its value this year. He’s recorded $30 billion in costs trying to put the “mortgage mess” behind the Charlotte, North Carolina-based company and could face more as attorneys general from all 50 states probe whether banks and loan servicers used faulty documents to justify foreclosures.
Bank of America Corporation announced today that it has agreed to sell its credit card business in Canada to TD Bank Group and that it will exit its credit card businesses in the U.K. and Ireland
Holy Cow. This story needs to get off the biz pages and move to the front pages. Unfortunately all the top editors are on vacation this time of year--known in the journalism world as the "silly season." It's a great time of year for any company or politician to make a move that receives minimal press attention.
>It's a great time of year for any company or politician to make a move that receives minimal press attention.
Like Michelle Bachman and Rick Perry. And the unemployment rate.
US Treasury yields have fallen below a scenario used by the Federal Reserve to stress test banks, raising concerns about the financial sector’s resilience to the unusual interest rate environment caused by the rush for safe haven debt.
Bank of America said its provisions for credit losses were based on a 3 per cent decline in house prices this year and a 1 per cent increase next year. Like the Fed’s stress models, those assumptions are vulnerable to a double-dip recession.
Fluter, This has to be an embarssment for Moynihan who not too long ago argued that the bank was strong enough and should be allowed to increase the dividend rate. My guess is that the banking regulators(FDIC most likely) are pressing for them to beef up capital.
and that's why the stock went up 8% today?
BAC in talks to sell up to one billion of Merrill's Real Estate investments according to FT
RETRO MOYNIHAN(LAST WEEK)
Moynihan reassured investors there`s no need for the firm to raise additional capital, because conditions are improving.
Bank of America Corp. (BAC) may face billions of dollars more in liability for faulty mortgages if a judge agrees with insurer MBIA Inc. (MBI) that the lender must buy back loans even if the errors didn’t cause a borrower’s default.
up 20% to $8.30 on $5B investment from warren buffet... Good for Warren.
i guess he didn't get the word from riversider.
poor warren, if only he'd read redbaiter's posts
So Buffet got 6% basically guaranteed by the U.S. gov't at a time when treasuries pay next to zero with options should BAC get lucky. You and I can't get this, short of investing in Berkshire. Good for Buffet, but the fact that BAC took this deal while denying they needed to speaks of their desperation.
riversider is an asshole.
With the upcoming hurricane, who will be watching columbiacounty to make sure he doesn't blow away? We should all chip in on this, columbiacounty, despite it all, is too valuable to us all here on streeteasy.
"You and I can't get this, short of investing in Berkshire."
Yes, that is only the domain of those rich with $68.99 to their name. The rest of us must sit by and watch while our NYC RE investments yield 2%.
Sounds like BAC bought Buffet's name. Five billion is nothing when you hear of 200 billion in potential write downs. Buffet is ahead of every common stock holder in terms of getting paid and should the stock do well, he dilutes it and gets out.
The Federal Deposit Insurance Corp. filed an objection to Bank of America Corp. (BAC)’s proposed $8.5 billion mortgage-bond settlement with investors, joining investors and states that are challenging the agreement.
In the U.S., one bank is in the crosshairs more than any other. Ask a trader for whom the bell tolls in American financials and tolls for BofA. Bank of America is suffering. It has loans on its books that no analyst can truly explain, and that’s not counting the off balance sheet loans.
A A A
Bank of America has over $100 billion in mortgage liabilities, says Chris Whalen Co-founder of Institutional Risk Analytics.
On a web broadcast published on KingWorldNews, he advocates "the classical American way of dealing with this problem"-- complete and total restructuring through Chapter 11. Before its too late.
Read more: http://www.businessinsider.com/chris-whalen-says-bank-of-america-should-declare-bankruptcy-2011-9#ixzz1XDPHT7bW
King World News? The same people who do Wheel of Fortune?
Many of the country's largest banks received $6 billion in kickbacks from mortgage insurers over the course of a decade, according to a previously undisclosed investigation by the Inspector General of the Department of Housing and Urban Development.
In exchange for the their business, companies such as Citigroup Inc, Wells Fargo & Co, SunTrust Banks Inc. and Countrywide allegedly required reinsurance partnerships on generous terms that violated the Real Estate Settlement Procedures Act, a 1974 law prohibiting abusive home sales practices.
During a two-day presentation in the summer of 2009, HUD's team presented DOJ attorneys with a thick binder of evidence that major banks had engineered a decade-long kickback scheme, people familiar with the investigation say.
Documents from the investigation show that the inspector general's staff concluded that banks and insurance companies had created elaborate financial structures that had the appearance of reinsurance but failed to transfer significant amounts of risk to their bank underwriters.
Some of the deals were designed to return a 400% profit on a bank's investment during good years and remain profitable even in the event of a real estate collapse.
Making matters worse, banks allegedly forced unknowing consumers to buy more insurance than they needed and failed to properly disclose the reinsurance agreements, another RESPA violation.
Mortgage insurance, often required for borrowers without sizable down payments, is a substitute for equity that serves to protect a loan's owner in the event of a borrower default. Banks typically choose the insurance carrier, but borrowers pay for the coverage in the form of higher net mortgage payments. In the industry's early years, there were no financial ties between banks and the insurers.
But Kubesh, a former IRS agent, found that the insurers had taken out reinsurance from subsidiaries of the banks that had produced the loans. Virtually all major lenders had established such ventures, which supposedly shared insurers' risk in exchange for a portion of the insurance premiums.
Kubesh was skeptical of the captive reinsurance agreements, which were entrenched in the mortgage insurance market but at best grudgingly tolerated by HUD in other areas. In a May 2007 settlement, for example, HUD slapped Beazer Homes for using a captive subsidiary to share in the proceeds of title insurance. "There is almost never any bona fide need or business purpose" for captive title reinsurance, HUD noted at the time, adding that the deals' outsized profitability was "strong evidence there is a sham arrangement" to circumvent RESPA.
For a reinsurance agreement to be legitimate, it has to transfer risk from an insurer to a reinsurer. One simple way to do that would be for the insurer and the reinsurer to each collect a portion of the insurance premiums and each pay a similar portion of the insurance claims. In reinsurance, this is called a "quota share" structure.
A different way to split the risk is what's called an "excess of loss" arrangement, in which the insurer has to pay all claims up to a certain point, when the reinsurer steps in. Figuring out how to divide the premiums is now harder, because in the event of a loss the insurer and the reinsurer will no longer bear the load evenly — if the losses are modest, the reinsurer might not have to pay anything at all.
Still, so long as both the insurer and reinsurer hire actuaries and bargain for their own interests, the resulting agreement should make the reinsurer's reward proportionate to its risk.
Banks started demanding the excess-of-loss reinsurance deals in the mid-1990s. Unlike in the example above, however, the two parties didn't have equal leverage.
The mortgage insurers' entire business depended on keeping the banks happy, and HUD investigators concluded that they gave banks reinsurance deals that would be profitable in virtually every circumstance.
This was partly because the initial terms of the deals were generous — the reinsurance vehicles collected 40% of the premiums, but were responsible for a maximum of 10% of the losses — but also partly because insurers let banks tweak the terms of deals in their favor.
Conceptually, such arrangements are analogous to letting a gambler with $10 in casino chips place a $100 bet at a blackjack table on the assumption that he'll win. A 2003 Standard & Poor's analysis modeled the most popular type of deal and found that in the event of high claims, the reinsurance vehicle's funds wouldn't be enough to cover the losses it was supposed to take on.
"The captive is unable to pay its full contractual exposure," S&P wrote.
The deals had yet another unusual sweetener, investigators alleged.
Each of a bank's reinsurance vehicles was legally separate not only from the bank's main reinsurance subsidiary but also from all the other funds. If a reinsurance deal didn't have enough money to pay its obligations, the bank could abandon it and leave the mortgage insurer with the unpaid bill.
At one point, Countrywide's Balboa Insurance division crunched the numbers to determine how much it should reserve for potential losses from the deal. The answer, the actuaries concluded, was "$0," according to a reserve analysis obtained by investigators and cited in a report to the Department of Justice.
SAN FRANCISCO – The U.S. Department of Labor’s Occupational Safety and Health Administration has found Charlotte, N.C.-based Bank of America Corp. in violation of the whistleblower protection provisions of the Sarbanes-Oxley Act for improperly firing an employee. The bank has been ordered to reinstate and pay the employee approximately $930,000, which includes back wages, interest, compensatory damages and attorney fees. The findings follow an investigation by OSHA’s San Francisco Regional Office, which was initiated after receiving a complaint from the Los Angeles-area employee.
“It’s clear from our investigation that Bank of America used illegal retaliatory tactics against this employee,” said OSHA Assistant Secretary Dr. David Michaels. “This employee showed great courage reporting potential fraud and standing up for the rights of other employees to do the same.”
The employee originally worked for Countrywide Financial Corp., which merged with Bank of America in July 2008. The employee led internal investigations that revealed widespread and pervasive wire, mail and bank fraud involving Countrywide employees. The employee alleged that those who attempted to report fraud to Countrywide’s Employee Relations Department suffered persistent retaliation. The employee was fired shortly after the merger.
“Whistleblowers play a vital role in ensuring the integrity of our financial system, as well as the safety of our food, air, water, workplaces and transportation systems,” added Michaels. “This case highlights the importance of defending employees against retaliation when they try to protect the public from the consequences of an employer’s illegal activities.”
Both the complainant and Bank of America can appeal the monetary damages to the Labor Department’s Office of Administrative Law Judges within 30 days of receiving the findings.
OSHA enforces the whistleblower provisions of the Sarbanes-Oxley Act and 20 other statutes protecting employees who report violations of various airline, commercial motor carrier, consumer product, environmental, financial reform, food safety, health care reform, nuclear, pipeline, public transportation agency, railroad and maritime laws. Under these laws enacted by Congress, employers are prohibited from retaliating against employees who raise various protected concerns or provide protected information to the employer or to the government. Employees who believe that they have been retaliated against for engaging in protected conduct may file a complaint with the secretary of labor to request an investigation by OSHA’s Whistleblower Protection Program. Detailed information on employee whistleblower rights, including fact sheets, is available at http://www.whistleblowers.gov.
Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA’s role is to ensure these conditions for America’s working men and women by setting and enforcing standards, and providing training, education and assistance. For more information, visit http://www.osha.gov.
I interviewed to do the junior version of my current job at CWF in 2005. Lets just say RS's story does not surprise me.
So in 6 years, that's as far as you've gone?
Sept. 21 (Bloomberg) -- Mortgage Electronic Registration Systems Inc., along with Bank of America Corp., was sued by Dallas County District Attorney Craig Watkins over claims its mortgage-tracking system violates Texas law.
"So in 6 years, that's as far as you've gone?"
From Manager of Investor Relations to Managing Director? Yes. And was Director and VP at two different companies along the way.
The headline numbers in the various BAC suits are starting to add up. Another $50bn here...
"A $50 Billion Claim of Havoc Looms for Bank of America
By STEVEN M. DAVIDOFF
Bank of America’s potential liability for bad mortgages — in the tens of billions of dollars — is well known. But Bank of America is haunted by other demons from the financial crisis, the most significant one being a lawsuit arising from its troubled Merrill Lynch acquisition.
This lawsuit, brought by Bank of America shareholders, claims that Bank of America and its executives, including its former chief executive, Kenneth D. Lewis, failed to disclose what would be a $15.31 billion loss at Merrill in the days before and after the acquisition. The plaintiffs contend that this staggering loss was hidden to ensure that Bank of America shareholders did not vote against the transaction.
Bank of America disclosed this loss after Merrill was acquired. At the same time, Bank of America also disclosed a $20 billion bailout by the government. The bank’s stock fell by more than 60 percent in a two-week period, a market value loss of more than $50 billion."
NEW YORK (Dow Jones)--Bank of America Corp. (BAC), the largest U.S. bank by assets, plans to charge customers a $5 monthly fee for making debit card purchases starting early next year, according to an internal memo sent to bank executives Thursday.
The fee will apply to customers with various checking accounts during any month they use their
I don't use debit cards. If it gets stolen, now the thief can clean out your bank account. I only use credit. Plus credit cards give you all the goodies like airline miles and cash back. Debit does not.
Did BAC give back it's TARP $$$ too soon?
US regulators "missed an opportunity" to force banks to hold higher quality capital after giving in to pressure allowing them to repay their troubled asset relief programme bailouts early, a new government audit has revealed.
Bank of America, Citigroup, Wells Fargo and PNC Financial were found to have pressured regulators to approve their exit strategies from the scheme - despite not meeting capital targets.
Following stress tests conducted in 2009, the regulators developed a benchmark ensuring that banks would have to raise $1 in new common equity for every $2 of Tarp aid they had repaid.
However the report said this strategy - which was never revealed to the public - was thrown out just weeks later, resulting in an "inconsistent" process where banks could escape without raising these higher capital requirements.
Instead, BoA looked to meet capital levels through lower-quality methods such as employee stock issuances and asset sales.
A proposal from Bank of America to leave the assistance programme by raising $4.8bn (€3.5bn) less common equity than originally required was initially approved by the Treasury, the report says. The proposal was eventually reconsidered.
The bank had also requested that it be allowed to repay a part of the rescue package that would have ended restrictions on executive pay, indicating that it was predominantly concerned with the matter, the report said.
The oracle of Omaha is looking more like Johny Carson's carnac. bac is now $5.91.
Below $5 lots of funds have to sell.
Bank of America Corp. (BAC), the biggest U.S. lender, should face fraud claims after its Countrywide unit submitted faulty borrower data for federally insured mortgages, according to an audit by a U.S. watchdog.
“Countrywide did not properly verify, analyze, or support borrowers’ employment and income, source of funds to close, liabilities and credit information,” Kelly wrote in the audit. “This noncompliance occurred because Countrywide’s underwriters did not exercise due diligence in underwriting the loans.”
HUD’s inspector general identified 4,050 Countrywide loans originated between July 1, 2008, and May 26, 2009, that were at least 60 days overdue within their first six mortgage payments.
In one instance, Countrywide said a borrower earned $6,192 a month when pay stubs reflected their income at $4,377. In other cases, Countrywide failed to properly review bad loans to ensure they met HUD’s guidelines before submitting claims, the department said.
Bank of America should perform a review of all mortgages that defaulted within the first six months of their creation, implement a quality-control program, and repay the government for the $720,000 in losses, according to the report.
Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.
The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.
“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”
Oct. 20 (Bloomberg) -- One of the reasons so many Americans are ticked off at the Federal Reserve is a lingering sense that it puts big banks’ interests above those of ordinary taxpayers. The news that the Fed is taking Bank of America Corp.’s side in a dispute over where to park some of the company’s holdings only reinforces that impression.
Here’s the gist of the story, broken two days ago by Bloomberg News. Bank of America, which got hit with a credit- rating downgrade last month by Moody’s Investors Service, has moved an undisclosed amount of derivative financial instruments from its Merrill Lynch unit to its biggest commercial-banking subsidiary. The latter is loaded with insured deposits and has a higher credit rating than Merrill or the parent company.
On a similarly outrageous note, Bloomberg reported last week that " Bank of America , hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits... The Federal Reserve and the Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by the counterparties. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC is objecting. The bank doesn't believe regulatory approval is needed." Well, other than that it goes against Section 23A of the Federal Reserve Act , but then, the Fed can make an exemption whether the FDIC likes it or not . And that's what we've come to - government of the banks, by the banks, and for the banks (because banks are people too) .
The Bloomberg report continued, "B ank of America's holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA [the FDIC insured entity], according to the data, which represent the notional values of the trades. That compares with JPMorgan's deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm's $79 trillion of notional derivatives."
Note that the figures are in trillions, not billions (U.S. GDP is $15 trillion). That said, the vast majority of the "notional value" of derivatives in the financial system represents multiple fully-hedged links in a long chain between final users who actually take the risk, so Bank of America's true risk is most probably a tiny fraction of that notional amount. Unless those derivatives include unhedged short positions in credit default swaps on Greek debt (which we can't really rule out), it's not clear that the derivatives themselves are underwater. The real problem, in my view, is that the transfer is clearly driven by the intent to get around capital adequacy regulations, and runs precisely opposite to the right way to create a good bank and a bad bank . It saddles the good bank - the taxpayer insured one - with the questionable liabilities, while "giving relief" to the holding company. This is really preposterous.
Bank of America has managed to step into the kimchee several times over the past couple of months, an achievement that only warms the hearts of crisis communications professionals.
CHARLOTTE, N.C. — Bank of America will sell most of its remaining shares in China Construction Bank as it raises cash and shores up its capital base.
The latest sell-off in the Chinese bank, announced Monday, is expected to generate an after-tax gain of about $1.8 billion. Last month Bank of America posted a $3.6 billion third-quarter gain by selling shares of China Construction.
6 minutes ago
ignore this person
alter ego? I am Riversider.
By DAN FITZPATRICK
Bank of America Corp.'s board has been told that the company could face a public enforcement action if regulators aren't satisfied with recent steps taken to strengthen the bank, said people familiar with the situation.
The nation's second-largest lender has been operating under a memorandum of understanding since May 2009, following repeated tussles with regulators over the purchase of securities firm Merrill Lynch & Co. and a downgrade of the company's confidential supervisory rating. The memorandum, which isn't public, identified governance, risk and liquidity management as problems that had to be fixed, according to people familiar with the document.
up 20% to $8.30 on $5B investment from warren buffet... Good for Warren.
NOT SO GOOD. IT'S DOWN TO %5.16
Down to $5.00 intra-day.
Dec. 1 (Bloomberg) -- JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. were among five banks sued by Massachusetts for allegedly conducting unlawful foreclosures and deceiving homeowners.
Massachusetts Attorney General Martha Coakley filed the lawsuit today against the three banks, as well as Wells Fargo & Co. and Ally Financial Inc., in state court in Boston. The banks are accused of engaging in unfair and deceptive trade practices in violation of state law, according to the attorney general.
Bad news for the banks today....
The federal watchdog overseeing US mortgage finance companies Fannie Mae and Freddie Mac is joining forces with New York’s attorney-general to investigate banks’ mortgage securitisation practices, a partnership that could make it easier for authorities to bring fraud charges against Wall Street companies.
Buffet premium GONE
but he's still richer and way smarter than you are.
But not you columbiacounty?
So what's the verdict? Are you guys buyers at $5.56?
I guess BAC isn't dead yet. Riversider must be in mourning.
In addition, as is typical with people who don't know what they are talking about, Riversider is too dumb to be able to spell Buffett's name correctly.
Yes, bad spelling = evil person.
That's your opinion, I guess. I said dumb - I feel sorry for dumb people; I don't for evil people.
Yep, saw the BAC leap yesterday. Gosh stock guys are dumb. The stock went up while the bonds barely nudged. There was hype over another tax-payer bail-out on the mortgage side to benefit BAC. Who knows? It is possible, Washington does love to bail out the banks, but it is back down after hours.
First, in terms of the Fed stress tests this week, it is hard for us at IRA not to yawn. These stress tests are a complete fabrication, more a political process than a true risk management exercise. The Fed's mishandling of large bank supervision and these ersatz stress tests just proves why the central bank should be stripped of all legal responsibility for supervising large financial institutions.
BAC badly needs a restructuring due to the tens of billions worth of unliquidated claims pending in various state and federal courts around the country. These claims are being tried and, based on our reading of the process, BAC looks to be facing a defeat in court at the hands of insolvent mortgage insurer MBIA.
Thus when we saw reports of Giuffra accusing the head of MBIA of insider trading, we could not help but recall the play "Hamlett": "The lady doth protest too much, methinks." For a top-flight legal professional like Giuffra to behave this way in open court speaks volumes. The appeals filed by Trustee Irving H. Picard in his lawsuits against various third parties related to the Madoff fraud fall into the same bucket, namely lots of public theatrics but no real relief for the condemned clients. And of course both of these fine legal professionals work by the hour.
All of the law firms defending BAC/Countrywide have good reason to worry. In the second lawsuit discussed in the Times report, MBIA has accused BAC of "deliberate concealment of evidence highly probative of MBIA' s fraud claims" and is seeking sanctions against Countrywide and its counsel, though seemingly not Bob Giuffra. MBIA states in its filing:
"Countrywide's conduct in failing to disclose the existence of vast quantities of relevant and responsive documents, and withholding them from production, has been so persistent, systematic and egregious that it cannot plausibly be attributed to "inadvertence" or "error." Rather, it appears to reflect deliberate concealment of evidence highly probative of MBIA' s fraud claims, and willful and contumacious disregard both for Countrywide's discovery obligations and for the Court's scheduling orders and other discovery directives. Countrywide's objective from day one appears to have been to obstruct MBIA's prosecution of its claims or at least delay their resolution for as long as possible, in the knowledge that defendants can only benefit from delay."
Bank of America has sold collections agencies rights to sue over credit card debts that it has privately noted were potentially inaccurate or already repaid.
In a series of 2009 and 2010 transactions, Bank of America sold credit card receivables to an outfit called CACH LLC, based in Denver. Co. Each month CACH bought debts with a face value of as much as $65 million for 1.8 cents on the dollar. At least a portion of the debts were legacy accounts acquired from MBNA, which Bank of America purchased in 2006.
Congratulations on an irrelevant post on an irrelevant thread.
(Reuters) - A federal judge rejected Bank of New York Mellon Corp's bid to dismiss a lawsuit by investors over its role as trustee for mortgage-backed securities that led to an $8.5 billion settlement by Bank of America Corp.
U.S. District Judge William Pauley in Manhattan said on Tuesday that bondholders who invested in 26 trusts alleged to have contained risky mortgage loans from the former Countrywide Financial Corp may pursue claims against Bank of New York Mellon. He dismissed a variety of other claims.
Stocks are always over reacting, it seems that uninformed public is always messing with stocks, and they stay away from bonds, that is why I trade in such companies because people are willing to pay me copious amounts of money of stock like this.
Bank of America has been misreporting deferred interest income from customers holding adjustable rate mortgages by “millions, if not billions, of dollars,” according to a federal class-action suit filed in San Diego.
On certain negative-amortization loan products known as “option ARMs,” a borrower was allowed to make a minimum payment consisting of a portion of the interest due on the loan, with the rest of the interest then being added to the loan balance. Such loans were frequently issued by Countrywide Financial, which B of A acquired in 2008, and largely contributed to the housing crash when the loans “re-cast,” forcing borrowers to jump from making partial interest payments to ones covering the full interest due plus an amount to reduce the loan balance each month.
All of this interest is tax-deductible for homeowners, but instead of characterizing subsequent payments of this “deferred interest” for what it is, B of A is alleged to have instead categorized these payments as a “reduction of principal,” which cannot be written off on a borrower’s tax return.
However, while calling the interest payments principal reduction hurts the borrower, it’s of great value to the bank, which then does not have to report the interest it collects as taxable income.