Bank of America
As Fed Allows Red Close, And All Time Record High Close In Gold, Is JPM's Commodity Trading Desk In Need Of A Bailout?Submitted by Tyler Durden on 11/08/2010 17:11 -0400
Since it is now obvious that the Federal Reserve treats the market as its plaything, it is refreshing that even Brian Sack's henchmen throw stocks a bone. Today it was in the form of a triple whammy: i) a red close (yes, imagine that), ii) on a POMO day, iii) as gold surged to fresh all time record highs. And while it is unclear or not if this was an orchestrated red close (as the Fed has now confirmed it does all it can to push stocks higher, various "conspiracy theories" as to why the market may ever go lower may emerge), the short covering squeeze that the LBMA is undergoing right about now as margin calls flood, are all too real. Forget Bank of America. Pretty soon the real bail out target will be JP Morgan's commodity "trading" desk.
People like Jennifer Fan and pretty much everyone at JPM have no clue what the impact of $87.50 oil is on their limo drivers and thus they can make idiotic predictions like that AND get paid for it. There simply is not enough money in the World to support $100 oil.
Today's fraudclosure (remember that?) court ruling of the day comes once again from Florida, where in the case of Merrill Lynch Credit Corp vs Karin Lenz (Southern Florida case 09-60633) courtesy of yet another massive fumbled mortgage note discovery process, Judge Marcia Cooke has found that Merrill was not allowed to foreclose on a property that had an IRS tax lien on it, that a tax lien is found to have priority over a mortgage, and that in a nutshell the (presumed) mortgage servicer does not have standing to foreclose when the IRS is involved and demands its pound of flesh. This will be the latest cog rammed right up the wheels of the foreclosure process, as another hundred thousand or so mortgage will now likely be derailed as the IRS seeks to recoup tax revenues in a way that implicitly impairs banks, and further delay foreclosures, now that there is affirmative case law precedent.
William Black ratchets his campaign for putting an allegely insolvent Bank of America into conservatorship by several notches, following up on Jonathan Weil's argument presented a few days ago that there is massive "book cooking" by Moynahan's henchmen, and that it is about time that BofA truly opens it books for all to evaluate just how undercapitalized the mega bank truly is.
Bank Of America Reports No Day With Trading Losses In Q3, Announces MBS Complaints Over $375 Billion Worth Of SecuritiesSubmitted by Tyler Durden on 11/05/2010 15:31 -0400
In its just released 215 page 10-Q, BofA announced it has just overtaken Goldman, and where even Goldman ended up having days with trading losses, Bank of America was perfect. Gotta love all those 3rd grade BofA prop traders (as an FYI to all, BofA is where you go where the safety school equivalent of prop trading dumps you). What is more interesting is that the seemingly flawless trading machine which is BofA has just disclosed it has received a complains by the Chicago FHLB, Cambridge Place, and Charles Schwab (and others) that allege misrepresentations in over $375 billion worth of RMBS. It appears the FRBNY is not the only entity that now is gunning for the scalp of the last remaining flawless frontrunner.
Fitch Puts Entire US Residential Mortgage Servicer Space On Negative Outlook Over Fraudclosure ConcernsSubmitted by Tyler Durden on 11/04/2010 14:32 -0400
What's that you say Bank of America and JPM, "it's all contained?" Hey Fed, it's not too late to add $8 trillion in MBS to QE2. On the other hand, now we know what QE3 will be buying. "Fitch Ratings has assigned a Negative Outlook for the entire U.S. Residential Mortgage Servicer ratings sector on increased concerns surrounding alleged procedural defects in the judicial foreclosure process. This industry-wide issue will cause all servicers to be under increased scrutiny from a wide range of state and federal regulators, state attorneys general, and GSEs. All servicers will be affected, even those fully in compliance with all foreclosure rules and regulations."
- Fed takes bold, risky step to bolster weak economy (Reuters)
- Oil rises towards $86 on Fed, weak dollar (Reuters), we expect $90 oil within a week
- Asia Girds for Stronger Currencies, Bubble Threat From Fed Move (Bloomberg)
- Obama Says He'll Negotiate With Republicans on Bush Tax Cuts (Bloomberg)
- Sarkozy To Meet Hu As France Takes G20 Lead (FT)
- Pettis Op-ed: Targeting Currencies Will Not Stop Trade Imbalances (FT)
- Bank of America Edges Closer to Tipping Point: Jonathan Weil (Bloomberg)
- Analysis: Strategic tensions threaten Asia as China rises (Reuters)
- Goldman's Pay Pool Shrinks Fastest as Traders' Fortunes Dwindle (Bloomberg)
Goldman Cuts Bank of America Price Target From $19 To $16 Even As It Continues Understating Putback ProblemsSubmitted by Tyler Durden on 11/03/2010 08:48 -0400
Goldman's Richard Ramsden has released another report whose only purpose is to prove that the market is wrong and that banks are angles, that putbacks already priced in by the market for the TBTFs are far greater than even the worst downside case, that business models are "robust", that Basel concerns are overrated, and more such things which, of course, are a self referential plea not to sell Goldman.... Oh yes, and despite all this he cuts the price target for WFC, PNC and, oops, Bank of America, from $19 to $16/share. If Goldman cuts Price Targets when all it sees are pots of gold and unicorns, one dreads to think what may happen if the bank was actually concerned about the fraudclosure situation that according to some rumors has brutalized the banks' October (and now November) mortgage-related cashflow.
Various rumblings started at Zero Hedge and a few other fringe sites, and now essentially mainstream (not to mention emanating from such firms as, oops, Goldman Sachs) as pertains to a rather curious correlation between POMO days and market outperformance, appear to have finally gotten to such institutional stalwarts as Bank of America and its traditionally imperturbable Jeff Rosenberg (whose opinion we tend to respect). In a piece released tonight titled appropriately enough, "The POMO Conspiracy Theory", Rosenberg (not to be confused with former M-Lyncher David) sets off to debunk that POMO days have an impact on risk assets. Alas, he fails. The conclusion: "Our analysis points to the correlation, but not causality of POMO with rising stock prices." Sure enough, if one could confirm definitive "causality" of Fed intervention in the stocks markets, that would pretty much be the ballgame right there. And it appears that even his correlation results force Rosenberg to step back: "We likely are about to get a lot more days of POMO if the market’s expectations of $500bn further expansion of the Fed’s balance sheet is confirmed at the conclusion of Wednesday’s FOMC meeting. If the correlation of POMO purchases and stock prices were to continue to hold going forward as it has since August, than we should expect more frequent days where stocks go up as the Fed pumps in liquidity into the financial markets." Thank you for proving our point Jeffrey. Amusingly, at the end of his "debunking", Rosenberg, in typical banker fashion inverts the argument by 180 degrees, and says essentially that even if POMO is goosing markets, it basically creates a self-fulfilling prophecy that "can contribute to a better economic outcome" as it boosts inflation expectations. Jeffrey: a better outcome yes, but for you. And nobody else.
S&P has released its first official estimate of what it believes the cost of Donk will be on the Too Vampiric To Fail. In a nutshell, the range of various costs could be as high as $22 billion, due to a drop in debit fees, lower derivative income, FDIC DIF replenishment, prop trading, and new compliance expenses. Additionally S&P expects another $85 billion in additional required Tier 1 Capital (which is a joke compared to its Tangible Common cousin). One thing is certain: just as Grayson yesterday said that nobody has any idea about what the charges associated with foreclosure and MERS-gate, and all are merely guessing, the same thing can be said of S&P. It is without doubt that the final outcome of Donk will either cost nothing or infinitely more. Yet for some reason this report made the headlines, so we present it for those 3 readers who actually care what S&P has to say.
Alan Grayson Demands Capital Buffer At TBTFs To Absorb Title Insurance Liabilities, Asks For New Stress TestSubmitted by Tyler Durden on 11/02/2010 00:16 -0400
When two weeks ago we highlighted the news that key title insurers such as Fidelity National are demanding indemnity and warranty from banks, we asked "what happens if the bank is once again caught to be, gulp, lying?
Who foots the bill then? Why the buyer of course. All this does is to
remove the liability from companies like Fidelity National and puts it
back to BofA, which is already so much underwater it has no chance of
really getting out without TARP, contrarian Goldman propaganda
notwithstanding." And while our speculation provided amusement to some of the more (vastly so) polemic elements in the blogosphere, it appears that Alan Grayson took this development seriously, and sent a letter to Geithner demand that a special capital buffer be established at the TBTFs, to absorb any and all losses that will arise from foreclosuregate (especially since earlier today it was made clear that certain banks such as First Horizon don't have any provision for putbacks). In Grayson's words: "Recently, Bank of America struck a deal with Fidelity National Title Insurance to indemnify the title insurer should legal problems with foreclosures create unanticipated title liability. Title insurers are clearly worried that they may face higher legal and policy costs if foreclosures are reversed, or should legal ambiguity cloud titles they already have insured...Since title insurers have in some cases just refused to insure this market, someone must pay for the liability these insurers have refused to incur. Both banks and regulators are claiming that the problems are simply process-oriented document errors that aren't really causing harm to the public at large. I suspect that no one really knows the extent of the problem, or the potential liability.With that in mind, it would seem prudent to require additional capital buffers for systemically significant institutions until the extent of the foreclosure fraud crisis is understood." We wholeheartedly agree with Grayson.
SEIU or not, here is a status update from Where's The Note, as the recently launched campaign to request proof of mortgage note existence approaches the 20 day limit by law within which banks have to respond to all properly-submitted verification claims.
The Inevitable Has Come To Pass and Those That Insured Guaranteed Blowups Are Being Blown Up - Finally!Submitted by Reggie Middleton on 11/01/2010 09:47 -0400
Ambac was the walking dead 3 years ago, but nobody wanted to admit it. Well, as they skirt with bankruptcy today, the same story applies to the big US banks, and again nobody wants to admit it. What are the chances you will be reading a bankruptcy blog post like this one about the big banks in a year or two?
An avalanche is not an “event”, it is an epic; a series of smaller events drifting and compacting one after another until the contained potential energy reaches an apex, a point at which it can no longer be managed or inhibited. A single tremor, an inopportune echo, an unexpected shift in the winds, and the entire icy edifice, the product of countless layered storms, is sent crashing down the valley like a great and terrible hand. In this way, avalanches in nature are quite similar to avalanches in economies; both events accumulate over the long span of seasons, and finally end in the bewildering flash of a single moment. The problem that most people have today is being unable to tell the difference between a smaller storm in our economy, and an avalanche. Very few Americans have ever personally witnessed a financial collapse, and so, when confronted with an initiating event, like the stock market plunge of 2008, they have no point of reference with which to compare the experience. They misinterpret the crash as a finale. Untouched, they breathe a sigh of relief, unaware that this is merely the beginning of something much more complex and threatening. So, without personal experience on our side to help us recognize a trigger point incident; the catalyst that brings down our meticulously constructed house of cards, how will we stand watch? Will we miss the danger parading right in front of our faces? Will we be caught completely off-guard?
As of October 27, the Fed's balance sheet was $2.3 trillion, of which the $837 billion in Treasury debt is of course a fresh all time record, soon to be eclipsed by the tens of billions added weekly as per QE2. There is roughly $13 billion left under the current POMO program ending in the second week of November, which by then will be supplemented by a new and improved almost daily POMO. In the past week, bank excess reserves increased by $16 billion after declining by $34 billion the week prior: total reserves stood at $1,008 billion, up from $993 billion the week before. And once again foreign holdings of agency/MBS debt dropped to a new 3 year low, dumping over $100 billion agencies in the Fed's custodial account over the past two months. Last, we take a look at the one topic that will soon be the most talked about subject by every pundit in the econosphere: the duration distribution of Fed holdings.