This page has been archived and commenting is disabled.

Can You Spell U-N-D-E-R-R-E-S-E-R-V-E-D? If Not, Here Is A Visualization Aid

Submitted by Tyler Durden on 10/19/2010 16:40 -0400

Following today's news of an imminent lawsuit to be filed against Bank of America by such entities as the New York Fed (which, by the way, it had to do, and not voluntarily, but merely as a function of its fiduciary duty to taxpayers through its Maiden Lane holdings, managed, conveniently enough, by Bank of America minority holding BlackRock) everyone promptly has taken a quick look back at the bank's earnings presentation, and especially one little piece of data: the putback reserve. Taking a quick look a page 23 on the pdf we read: "3Q10 reps and warranties provision of $872M is $376M lower than 2Q10, as the current quarter included an increase in expected repurchases from GSEs while 2Q10 included additional provision for monolines." So how does this stack up relative to the $47 billion in putback demands by such legal "dilettantes" as Bill Gross, Bill Dudley and Larry Fink? We have created the chart below to assist in that particular question. We are also confident that with each passing day we will have to add to the red-shaded area as more and more putback lawsuits come out of the woodwork. And as to where the deficiency amount will have to be funded from? Think cold, hard cash. The same cash that until recently would have been on the "sidelines."

- advertisements -

Tue, 10/19/2010 - 16:43 | 662554 Sausagemaker

Looks good to me. Nothing to see here. Move along... Oh look! an iPad!

Tue, 10/19/2010 - 16:54 | 662623 septicshock

iPad bitchez. I'm actually typing this on mine.

I wonder how Tyler feels knowing I visit his site a hundred times a day on an iPad...

Tue, 10/19/2010 - 17:01 | 662654 Agent P

100 times a day??? An iPad???

You must be unemployed and at least 90 days delinquent on your mortgage.

Tue, 10/19/2010 - 17:38 | 662772 AccreditedEYE

+1 lol

Tue, 10/19/2010 - 17:54 | 662823 Rasna

That's great!

LOL

Tue, 10/19/2010 - 17:06 | 662683 Horatio Beanblower

Every time you visit, please click on an ad.

Tue, 10/19/2010 - 17:13 | 662704 Sudden Debt

TYLER!!! USE FLASH!!!!

Tue, 10/19/2010 - 17:41 | 662783 Bob

That would make Harry Reams blush!

Wed, 10/20/2010 - 06:42 | 663711 lewy14

You know, in my twenty five years online, I have never - ever - seen a use of all-caps which I deemed effective and appropriate.

Until you showed up.

The avatar makes it work.

Tue, 10/19/2010 - 18:18 | 662900 HarryWanger

Hope you didn't pay full price. You can get them below retail on ebay. Or used ones by those who bought the hype then figured out they have a fairly useless toy.

Tue, 10/19/2010 - 20:34 | 663100 Bananamerican

I had one for a week and flipped it to Ebay.

It's an ergonomic monster....a la Quasimodo

Tue, 10/19/2010 - 16:44 | 662558 Sausagemaker

Hey is that one of the Kardashians?

Thu, 10/21/2010 - 13:25 | 667329 themosmitsos

Alot of people here with a lot of funny/stupid/goofy nicknames, but your's' made me LOL :) thx

Tue, 10/19/2010 - 16:45 | 662563 tecno242

red rocket red rocket.

Tue, 10/19/2010 - 17:52 | 662817 MarketTruth

It makes me think someone needs to send BoA either an:

Insufficient Funds Notice

-- or --

Bounced Check Fee
(wonder what the fee would be on bouncing such a check?)

Tue, 10/19/2010 - 16:45 | 662564 101 years and c...

You mean, the mark to myth accounting isn't working? Hmmmmm...

So, we can expect the same news from such firms as JPM, WFC, C, GS, etc??

When TARP 2 FAILS to pass Congress, the shit will really hit the fan.

Tue, 10/19/2010 - 16:55 | 662627 erik

Then when TARP 2 does pass Congress on the 2nd attempt, the stock market will crash just like it did last time.

Tue, 10/19/2010 - 20:38 | 663106 Bananamerican

Tarp II passes 1st Try, post election, in the same manner as the 1st...over our dead bodies.

....to "save the system" and all that.

Tue, 10/19/2010 - 17:02 | 662663 Reggie Middleton

With all of the yapping Ive done on JPM under reserving and there's still a doubt? Granted, they're better of than BAC...

Tue, 10/19/2010 - 17:58 | 662835 Rasna

TARP I passed despite the howls of outrage and specific, "don't pass this bill (TARP)" demands bythe electorate...

Tarp II will pass also...

The Congress and everyone else serves at the pleasure of Wall Street and the TBTF banks.

Count on it.

Tue, 10/19/2010 - 16:46 | 662565 Mentaliusanything

Thats taking gearing to a new high. But you don,t make money on self insurance

Tue, 10/19/2010 - 16:46 | 662566 jedwards

Isn't it likely that BAC and the other banks will just settle with Pimco, et. al. for a fraction of the amount?

Tue, 10/19/2010 - 17:00 | 662655 Sudden Debt

I'll light a little candle for it to be so...

HECK, I'LL LIGHT 2 CANDLES!!!

Tue, 10/19/2010 - 17:38 | 662774 ShankyS

That is not a candle - it is a fuse!

Tue, 10/19/2010 - 17:42 | 662790 TooBearish

+1 agree - but great fun with pictures Ty!

Tue, 10/19/2010 - 17:48 | 662808 eatthebanksters

Do you think Bill Gross will settle for a fraction of what PIMCO is owed?

Tue, 10/19/2010 - 18:05 | 662855 Quantum Nucleonics

He might.... buy at 50 cents (or whatever). Would you, (a) settle for 55 cents after a couple months and a little negotiating time, or (b) grind it out in court for a couple years (racking up $$$ in legal) for the hope of getting par.

Tue, 10/19/2010 - 18:01 | 662842 Rasna

Not a chance of that happening.

Tue, 10/19/2010 - 16:46 | 662569 Cyan Lite

Republicans will pass another TARP as soon as they take over the House.

Tue, 10/19/2010 - 16:48 | 662581 Careless Whisper

i think mister demint (and maybe mister paul) over in the senate may have a few things to say about that.

Tue, 10/19/2010 - 16:56 | 662629 DarkMath

Yes, if the Republicans even think about another bail out they are going to write a very strongly worded letter to John Boehner.

Tue, 10/19/2010 - 16:52 | 662614 Shameful

Only if the lame duck dems don't beat them to the punch. Remember both "parties" are eager to serve their banking masters.

Tue, 10/19/2010 - 17:46 | 662798 AccreditedEYE

I don't believe there is political will for it on either side. People in the know (who understood what was going on...and some that didn't! lol) were pissed we had the first TARP... post Dodd-Frank, people will want the institutions brought down. There is no repeats with this shit, not if you want to keep your seat.

I like Whalen's idea on the subject...

http://us1.institutionalriskanalytics.com/pub/IRAMain.asp

Tue, 10/19/2010 - 17:49 | 662809 eatthebanksters

And then they will be gone in two years...

Tue, 10/19/2010 - 18:03 | 662845 Rasna

Agree.

No debate, no hand-wringing trying to get Dems on board... They'll give the Dems and everyone else the middle finger salute as they trot it over to O, who will sign it while looking for his balls.

Tue, 10/19/2010 - 18:07 | 662862 Quantum Nucleonics

Ehh, if Republicans controlled the House in 2008 there might not have been TARP 1. It was Democrats carrying water for a lame duck President.

Tue, 10/19/2010 - 16:46 | 662570 Careless Whisper

that is an aaa owner-occupied mortgage, dammit. and so are the other 20 miami condos that the same guy owns.

Tue, 10/19/2010 - 21:12 | 663154 SpeakerFTD

I think you meant, "so is the condo that 20 different pension funds think they own."

Tue, 10/19/2010 - 16:46 | 662572 Dr. No

"Following today's news of an imminent lawsuit to be filed against Bank of America by such entities as the New York Fed" In order to meet the reserve obligation, BofA will use the discount window. It will exchange more toxic assets for cash to shore up its reserves. Back door bail out.

Tue, 10/19/2010 - 16:46 | 662573 TheGreatPonzi

Bofa will end up in the hands of GS or JPM in less than 3 months.

Tue, 10/19/2010 - 17:09 | 662693 erik

I vote they will end up in Govt control. The real concern here is how quickly this will spread to Wells Fargo (Wachovia/Golden West) and JP Morgan (WaMu/Bear Stearns).

Tue, 10/19/2010 - 17:39 | 662780 Oracle of Kypseli

Last year I had predicted that Citi will go to GS.

Now it looks that you may be right. GS is most likely the one as it does not have any branches.

Tue, 10/19/2010 - 17:51 | 662811 eatthebanksters

It will never happen...the days of TBTF getting bigger, fatter and more systemically dangerous, are over. Dimon should get his RV and take his daughters on another cross country trip.

Tue, 10/19/2010 - 18:05 | 662857 Rasna

I'm thinking GS... JPM/Chase/BAC won't be allowed... Really TBTF.

Tue, 10/19/2010 - 18:15 | 662886 Quantum Nucleonics

Not a chance. Both are smart enough not to touch the Countrywide corpse. Not even if it were sanitized. What would GS want with (a) the little people (i.e. retail banking op) or (b) all the people they turned down for a job, i.e. Merrill. JPM wouldn't want the anti-trust scrutiny (yes, that's laughter in the background).

More likely, if one of the big banks bit the dust, we'd get a look at all the deep flaws of Dodd-Frank, and Ben & Tim would have a bank to add to their conglomerate of car, mortgage, and insurance companies.

Tue, 10/19/2010 - 16:46 | 662575 SignsAndWonders

Sure, I can spell that:

T-A-X-P-A-Y-E-R-P-R-O-B-L-E-M

Tue, 10/19/2010 - 17:05 | 662671 Sudden Debt

http://upload.wikimedia.org/wikipedia/commons/7/7b/United_States_one_dollar_bill%2C_obverse.jpg

Look at the left upper corner: THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE

For me, that says it all.

Tue, 10/19/2010 - 17:08 | 662687 Sudden Debt

and if you want the know the answer on how this will play out:

Read the 4 words above the 3 letters "O N E"

http://upload.wikimedia.org/wikipedia/commons/1/1d/United_States_one_dollar_bill%2C_reverse.jpg

CAN I HAVE A AMEN BROTHERS AND SISTERS!!

Tue, 10/19/2010 - 21:14 | 663158 SpeakerFTD

Clearly counterfeit. It's "In GS We Trust".

Tue, 10/19/2010 - 17:47 | 662800 Bob

How about F-F-F-F-U-U-G-G-E-E-T-T DEM B-B-B-B-B-O-O-O-O-N-N-U-S-S-E-S,

B-I-T-C-H-E-Z!

Tue, 10/19/2010 - 16:50 | 662590 Cognitive Dissonance

Tyler,

You're taking all the fun out of the final quarter of "managed" earnings and profits for the To Big To Fail banks before the Fraudclosure fecal matter begins to hit the fan. Make sure you wear your Level 5 hazmat suits whenever you write on this subject from here on out. Oh, and make sure your tetanus shots are up to date.

Oh hell, you better wear a full body condom just to be safe. Pictures please. :>)

Tue, 10/19/2010 - 18:11 | 662876 His Dudeness

CD,

First it's movies with noodle shops...

"Gentlemen. You had a hell of a first day."

Let's Define Something First Before That Something Becomes Obsolete...

When the shit hits the fan

Meaning

Messy and exciting consequences brought about by a previously secret situation becoming public.

Origin

This expression alludes to the unmissable effects of shit being thrown into an electric fan. It appears to have originated in the 1930s. I can't say better than 'appears' as the earliest citation of it that I can find is in the 1967 edition of Eric Partridge's A dictionary of slang and unconventional English:

"Wait till the major hears that! Then the shit'll hit the fan!"

Partridge lists the phrase as Canadian, circa 1930, but as he gives no supporting evidence we have to go by the 1967 date, although it is undoubtedly earlier.

Other, more polite, forms of the phrase, involving eggs, pie, soup and 'stuff', can certainly be dated from the USA the 1940s. For example, Max Chennault's Up Sun, 1945:

"Sounds like the stuff was about to hit the fan."

The Fresno Bee Republican, May 1948, reported on a psychiatrists' convention, under the heading See How Brain Boys Also Run Wild:

"However, once that opening point was settled, the psychiatrists entered wholly in the business of the convention, which culminated, of course, in the selection of officers for the coming year. And that, as the saying goes, was when the soup hit the fan."

The other versions followed soon afterwards.

OBSOLETE REASON: The Dyson Fanless Fan

Wed, 10/20/2010 - 01:19 | 663576 LowProfile

Can't believe this hasn't been posted here yet...

http://www.youtube.com/watch?v=OIlIL5pPFmY

Tue, 10/19/2010 - 16:50 | 662594 lizzy36

Well according to Moynihan BofA's capital markets business "for the second quarter out of the last three ... made money every trading day."

So problem solved.....they will trade their way out of the hole. That always works.

Tue, 10/19/2010 - 17:43 | 662794 RichardENixon

Might work if they short their own stock. Heavily.

Tue, 10/19/2010 - 18:08 | 662869 Rasna

Just like GS... Use ZIRP free-money, speculate, front-run the market with their HFT algo running full blast... rinse and repeat...

Tue, 10/19/2010 - 16:50 | 662595 Spigot

Of the $15 Trillion in outstanding mortgages, what percentage does $50 Billion represent? (3/10%)

Of those $15 Trillion what percentage were bundled MBS's and sold but will now be forced back onto the "Banks"? (care to guess?)

If the Banks do not have the money sitting in coffe cans in the back room, what will they have to do to buy back those loans? And what will they do with those loans once they have them?

"Mr. Bernanke, you have a call on line three!"

Tue, 10/19/2010 - 16:51 | 662602 Oso

i almost spit my drink out laughing at how absurd this is visually.

Tue, 10/19/2010 - 16:53 | 662604 Astute Investor

Not to be overly pedantic, but isn't the amount reserved (ending balance) $4.4 billion? A number still way below the $47 billion claim in any case.

Tue, 10/19/2010 - 17:13 | 662705 csmith

not pedantic at all...correct!

Tue, 10/19/2010 - 17:16 | 662719 TemporalFlashback

That's what I am reading, as well.

Tue, 10/19/2010 - 16:53 | 662616 Sophist Economicus

Is that a REPO in your hand, or are you just happy to see me?

Tue, 10/19/2010 - 16:53 | 662622 Spigot

The Federal Reserve system will be the largest owner of unsecured loans on real property on the planet, all the the cost of counterfeiting electronic digital dollars and flooding the coffers of fools and criminals with free money (destroying the savings and fixed incomes of a large swarth of hard working Americans).

This will not sit very well with folks on Main St.

Tue, 10/19/2010 - 17:07 | 662686 Horatio Beanblower

I think that's why the FEMA camps are being built.

Tue, 10/19/2010 - 16:56 | 662635 HEHEHE

What does Dick Bove have to say about BofA? "I am a long term buyer of BofA".

Tue, 10/19/2010 - 16:57 | 662644 tallystick

That red bar looks like a hotel on Boardwalk.

Tue, 10/19/2010 - 17:55 | 662826 eatthebanksters

Or the 'Ho House' on Baltic...

Tue, 10/19/2010 - 16:59 | 662650 barliman

Chant it with me now, brothers & sisters!

Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman, Lehman ........

Hallelujah!

Barliman ;->

Tue, 10/19/2010 - 17:09 | 662697 Sudden Debt

HOLY ENRON! THAT REALLY FELT GOOD! :)

Tue, 10/19/2010 - 16:59 | 662651 Sudden Debt

Didn't the waranty expire when they put those papers in their pockets and drove of the lot?

Tue, 10/19/2010 - 17:34 | 662766 boricuadigm-shift

Well... They can reference the "Lemon Mortgage Note" protection clause and the warranty terms are not valid.

Tue, 10/19/2010 - 17:02 | 662659 TuesdayBen

Here is another visual aid:

http://conidayvuelta.files.wordpress.com/2010/02/world-tallest-shortest-...

Tue, 10/19/2010 - 17:11 | 662698 Horatio Beanblower

Good girls...

http://www.telegraph.co.uk/news/newstopics/howaboutthat/2969038/Worlds-smallest-man-meets-woman-with-worlds-longest-legs.html

Tue, 10/19/2010 - 17:52 | 662818 kathy.chamberli...

who do you think crowned her having the longest legs, herself?

i got damn long legs, like 38 inch inseam.

Tue, 10/19/2010 - 17:58 | 662834 eatthebanksters

niiccceee!

Tue, 10/19/2010 - 18:08 | 662867 Rusty Shorts

Hey baby, what's cooking?

Tue, 10/19/2010 - 19:14 | 662999 frankTHE COIN

At the Zero Hedge member get together you will get a lot of conversation.

Tue, 10/19/2010 - 17:18 | 662728 SteveNYC

Pure....fucking......gold!!! Hilarious!!

I think Ping Ping is dead though, so no longer the shortest man in the world.

Tue, 10/19/2010 - 17:05 | 662672 frankTHE COIN

Gen Custer could have used his ipad to order more reserves.

Tue, 10/19/2010 - 17:08 | 662690 Mitchman

The graphic looks like it was put up by Billy Banzai 7.

Tue, 10/19/2010 - 17:13 | 662706 Chemba

While it does not change the conclusion, it would help if ZH understood the difference between a flow and a balance or reserve. the provision in the Q is $872. The balance in the reserve is $4,400. So, yes, that is <<< than $47,000. Also note that $47,000 is the notional value, and losses against that reserve would be substantially less than notional.

Tue, 10/19/2010 - 17:23 | 662727 Spalding_Smailes

Yes but this is just the first wave.

Do you know how to sew ?

GS would be in the same boat as Lehman without the bailouts ... Goldman derivative book is toast just like the rest .... Securitization is in the history books the ponzi is falling onto itself, Blackrock ect going after the banks I LOVE IT !!!

Tue, 10/19/2010 - 20:38 | 663108 Kali

dsc.discovery.com/videos/air-jaws-?sharks-of-south-africa-shark-feeding-frenzy.html

Tue, 10/19/2010 - 17:23 | 662743 Fed Supporter

"47,000 is the notional value, and losses against that reserve would be substantially less than notional."

Is that marked to market? If not what would the real value be? Does anyone have an estimate on the losses?

Tue, 10/19/2010 - 19:39 | 663032 Astute Investor

Unfortunately, your comment was 20 minutes late.....

Tue, 10/19/2010 - 17:16 | 662716 Howard Bork

Tyler - quick correction: The reserve balance is $4,402MM, not $872MM. The $872MM was the provision during Q3.

Tue, 10/19/2010 - 17:34 | 662764 ReallySparky

Howard,

Million - Smillion. And your point is? They are still toast. However I do appreciate your attention to detail during this crisis.

Tue, 10/19/2010 - 18:28 | 662916 Quantum Nucleonics

Just to throw some numbers at the issue, $47 billion in face value, say 70% recovery rate, would be $14.1 billion in losses. That means they need to come up with anothere $10 billion-ish. 60% recover would be about $15 billion in additional exposure. And that's just $47B that BAC is disclosing in exposure.

Tue, 10/19/2010 - 17:35 | 662763 deepsouthdoug

Where’s the 'helicopter ben' column?

Tue, 10/19/2010 - 17:40 | 662781 economessed

Red candle? Did someone page a red candle?

Mmmmm -- melty burning red candles........

Tue, 10/19/2010 - 17:41 | 662785 FortyTwoIsTheAnswer

Perhaps they are under-reserving because they know they will be bailed out?

Tue, 10/19/2010 - 17:42 | 662788 Real Estate Geek

What is this "fiduciary duty to taxpayers" of which you speak?

Tue, 10/19/2010 - 18:05 | 662854 trav7777

this is hilarious...where the hell are the fiatsco FRNs going to come from to paper over this gigantic black hole other than the FRBNY?

Tue, 10/19/2010 - 18:15 | 662885 Sudden Debt

They are planning a brainstorm weekend in Malibu and you'll get a short answer after the weekend.

Tue, 10/19/2010 - 18:14 | 662879 goldmiddelfinger

Wasn't Stan O'Neal brilliant to buy First Franklin Financal for $1.9 BILLION in September 2007? It's now buiried inside BAC like an ecoli viral bomb.

Tue, 10/19/2010 - 18:17 | 662895 goldmiddelfinger

BTW the "Mortage Lender implode-a-Meter" website is still running strong. Since 2006! Plentey-o-meat still around since NO ONE has taken a hit yet!

http://ml-implode.com/

Tue, 10/19/2010 - 18:15 | 662887 Charley

Tue, 10/19/2010 - 19:34 | 663022 themosmitsos

loooooooooooooooooooooooooooooooooooooooooooool

on that chart Tyler! :)))

Tue, 10/19/2010 - 19:44 | 663037 boricuadigm-shift

Isn't the FDIC responsible for these losses? I mean BAC was force to acquire Countrywide , right?

Tue, 10/19/2010 - 20:05 | 663061 Cdad

No, the fed held them to the agreement they had previously made...and wanted to back away from. Some might say semantics...but I think there is a material difference between that and "made/forced" them to buy.

But hey...whatever...

Wed, 10/20/2010 - 03:21 | 663663 Bear

The Gov didn't force them to takeover Countrywide, they just said if they wanted to be in the banking business, they had to help out the Gov by taking over Countrywide

Tue, 10/19/2010 - 20:15 | 663075 toros

Everyone has a bad that they tried defend, and it would just get worse and worse... I think the FED is having one of those trades.

Wed, 10/20/2010 - 02:33 | 663644 StychoKiller

Reminds me of what a commentator once said about the Red Sox' losing streak in the World Series: "Hey, anyone can have a bad Century!"

Tue, 10/19/2010 - 20:37 | 663105 subscriptionblocker

Wonder if Bernanke ever reads ZH :)

Wed, 10/20/2010 - 03:18 | 663662 Bear

Everybody reads ZH

Tue, 10/19/2010 - 22:05 | 663239 Buck Johnson

This is just the beginning and it will be extremely bloody.

Tue, 10/19/2010 - 22:13 | 663247 antidisestablis...

antidisestablishmentarianismishness's picture

No ridicule heaped on Doug Kass for buying boatloads of BAC right here due to overblown concerns?

Tue, 10/19/2010 - 22:37 | 663289 Destinapp

Their reserves for loan buybacks, Liability for Representations and Warranties, have only increases $900M since Q3 2003, but their Outstanding Claims by Counterparty have increases $5B to 12.8B. If you look at claims approved versus claims rejected, they have been running about 50-50 over the last year. Net-Net, if they have $10 in claims, they have been paying about $5. So if they now have $13B in claims, the reserve should be at least $6B and they only have reserved $4.4B. The $64 question is, What are the total claims going to be once the investors we've been hearing about jump on board, because most of the claims so far have been from the GSE's?

Tue, 10/19/2010 - 23:24 | 663381 Occams Aftershave