Are German Banks Next To Seek Putback Claims From Bank Of America?
While everyone has been focusing on American institutions over the past several months looking for entities that may have claims on Bank of America and other domestic banks which have misrepresented their mortgage portfolios, a question that nobody is asking is why are European, and specifically German banks, not joining the fray? After all, when it came to finding idiot investors, Goldman et al's rolodex would always immediately jump to those in the Ruhr and Rhine valleys. And sure enough, as many German (Landes)banks ended up on the receiving end of Wall Street innovation, and thus bankrupt, it has been shocking that very little initiative has been demonstrated by German investors who lost most or all of their capital when subject banks ended up purchasing misrepresented securities. All this may be changing soon (see below). But even if it isn't, a key question is just what leverage does America have over Germany to prevent the country from pursuing rightful putback demands against the mortgage banks. Our guess: those lovely FX lines from Benny and the Inkjets. After all recall that the Swiss tax disclosure was the quid pro quo in exchange for the unlimited Fed credit facility to the SNB when the country was on the verge, and when UBS needed a bad bank to make sure the Swiss giant survived.
As for the recent developments in Germany we turn to Debtwire and Allison Pyburn:
Political pressure is growing in Germany for banks to collaborate with US RMBS buyback movements, according to a source with knowledge of the situation and German media reports.
The nation’s minority party is petitioning the German government to divulge names of banks that have not signed on to the coalition by 15 December, the source said. The country’s banks hold billions in US non-agency RMBS.
The US investor coalition, the RMBS Investors Clearing House, is in conversations with three German banks, said Greenwich Financial CEO Bill Frey. “There is an awareness in Germany now that if the German banks don’t take advantage of this they won’t participate in the recovery.” Among the German banks which have voiced interest in pursuing US banks for mortgage-related losses are KFW and WestLB, according to a 24 November report in German newspaper Handelsblatt. In August, Germany’s state-owned development bank KFW collected USD 150m from Goldman Sachs as part of a settlement with the SEC. KFW lost billions on bad mortgage investments following a controversial rescue of IKB Deutsche Industriebank after it collapsed, according to the report. (The German government sold 90% of the bank to Dallas, Texas-based Lone Star in Funds in 2008.)
For those who may wish to pursue this somewhat curious development further may do so by reading the following article in the Handelsblatt. Ultimately, we are convinced that with the Fed holding all the cards, not to mention the money, and with domestic voices already silenced courtesy of upcoming settlements, the foreign interests don't stand a chance in getting a fair and equitable treatment when faced with companies whose mere existence is the pureset definition of pervasive fraud (and where justice would doom thousands of corrupt thieves to a life of middle-class existence).
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