Bank Of America Merrill Lynch Gets Paid To Pay Itself Back In Developers Diversified

Tyler Durden's picture

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Anonymous's picture

lets not forget that for the most part, almost all of BofA's REIT upgrades actually worked and made clients money. right?

this whole conspiracy theory of using proceeds of a new capital markets deal to pay down a bank line AND using the same bank to do the deal holds absolutely no water whatsoever.

Tyler Durden's picture

I am pretty confident Madoff's investors thought the same month after month, until at the end, they didn't.

lizzy36's picture

What conspiracy theory are you talking about? 

Was there a fundamental reason in the business model of the individual reits that merited an upgrade (if you see one please point it out to me)?

Since the bank is the biggest winner in these deals (underwriting fee's, trading commission and they got their money back on the reits bank line) is it not appropriate to question the methodology by which these upgrades are handed out?

And by your reasoning, as long as clients make money in the short term, there is nothing wrong with this process?

Let me guess, you work for Moody's, S&P or Fitch, right?

deadhead's picture

Was there a fundamental reason in the business model of the individual reits that merited an upgrade (if you see one please point it out to me)?

Perhaps it was Bianco's 9-18-09 report?

Comrade de Chaos's picture

Reminds me of 1999 with all upgrades prior to IPO's and invetors making tons of cash as well.

Damn where is Eliot S & Co, when one needs him?

flabuf's picture

Spitzer is right where he should be.  He was no help in cleaning up anything and, most likely, made it more difficult for reputable financial consultants to do well for their clients.  Over disclosure Ex: prospectuses, results in nothing being read at all.

JohnKing's picture

I'd really like to see who the "clients" are. My guess is they are pension fund managers getting nice commissons to do these deals. I can't believe any legitimate investor would be buying this junk (knowingly).

Gilgamesh's picture

Sure, if the clients are traders and have already sold what they bought.  Oddly, I suspect that is not the profile of the average purchaser.

 

Those subprime derivatives issued in 06-07 worked and made clients money too, right?

deadhead's picture

Those subprime derivatives issued in 06-07 worked and made clients money too, right?

I believe we have a winner here.

Hephasteus's picture

And by consipiracy theory you mean systemic financial analysis?

Audit the fed=consipiracy theory the fed

Consipacy theory is just a misnomer applied to aggressive unwilling analysis of a secretive system.

Assetman's picture

It's oddly incredulous to me how investors fall into the same trap time after time.

It was only a decade ago that investors were clamoring for inital and secondary equity offerings for TMT firms that had didn't stand a chance to show earnings for several years.  Not only that, some of these deals had imbedded sales from their own "creators".  Yet many of those offerings were 10 times oversuscribed.

Fast forward to today.  Simply put, investors should question why a firm like BofA would underwrite something that would effectively take their exposure to a REIT out of the loop, while the REIT (in effect) makes a very inefficient capital allocation decision.

These deals are being done because the demand appears to be there-- not becuase the fundamentals of the business are improving.  As TD so aptly put, BofA and other underwriters are more than willing to divest themselves of this revolving facility crap with the REITS if investors want to play along.

Why anyone would follow a Craig Schmidt or any broker underwriting deals like this escape me.

Mos's picture

When you're investing OPM what do you care?

Comrade de Chaos's picture

"Why anyone would follow a Craig Schmidt or any broker underwriting deals like this escape me."

because for the WS sheepe there is a direct correlation between a conflict of interest and the annual bonus.

Anonymous's picture

Hey 81404:

What's your time line for stating: "almost all of BofA's REIT upgrades actually worked and made clients money"? Not very long. We'll see if the fundamental bear call noted on ZH -- that too much leverage, overhang of commercial RE supply, downward pressure on vacancies, rents, etc. -- proves correct compared to your greater fool observation about "making money."

ZH rightly beats up on these banksters for the coordinated research/banking/lending shenanigans (ZH to lesser extent beats up FINRA for relaxing sensible rules on dissemination of research by lead managers for companies they do ibanking business with). ZH could do much better job beating up said banks for "tying" their investment and commercial banking business (hint, hint Tyler). In ZH's defense, there probably are too many targets for them to focus on this one (not when the Feds have punted on tying).

Tell us why "this whole conspiracy theory of using proceeds of a new capital markets deal to pay down a bank line AND using the same bank to do the deal holds absolutely no water whatsoever" -- care to mention any facts or evidence beyond greater fool equity arcana? Have a fundamental thesis to back this up? You don't -- "pretend and extend" may help the CMBS lenders and REIT investor run, but they can't hide forever....

Anonymous's picture

Hey 81404:

What's your time line for stating: "almost all of BofA's REIT upgrades actually worked and made clients money"? Not very long. We'll see if the fundamental bear call noted on ZH -- that too much leverage, overhang of commercial RE supply, downward pressure on vacancies, rents, etc. -- proves correct compared to your greater fool observation about "making money."

ZH rightly beats up on these banksters for the coordinated research/banking/lending shenanigans (ZH to lesser extent beats up FINRA for relaxing sensible rules on dissemination of research by lead managers for companies they do ibanking business with). ZH could do much better job beating up said banks for "tying" their investment and commercial banking business (hint, hint Tyler). In ZH's defense, there probably are too many targets for them to focus on this one (not when the Feds have punted on tying).

Tell us why "this whole conspiracy theory of using proceeds of a new capital markets deal to pay down a bank line AND using the same bank to do the deal holds absolutely no water whatsoever" -- care to mention any facts or evidence beyond greater fool equity arcana? Have a fundamental thesis to back this up? You don't -- "pretend and extend" may help the CMBS lenders and REIT investor run, but they can't hide forever....

Vinet's picture
Vinet (not verified) Sep 28, 2009 7:47 PM

Since the bank is the biggest winner in these deals (underwriting fee's, trading commission and they got their money back on the reits bank line) is it not appropriate to question the methodology by which these upgrades are handed out?
Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.

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Anonymous's picture

Does anyone know of sanctions against BAC in 2007? If so, can you tell me where to find information?