This page has been archived and commenting is disabled.
Bank Of America's $8.5 Billion Settlement Deal Falls Apart
While Morgan Stanley only recently became a second derivative for everything European-related (thank you financial short selling ban in Europe, and also thank you Mr. Gorman for updating investors on your firm's $39 billion gross derivative exposure to French banks (not France the country). What's that? You didn't provide one? Oh, our bad, just as it is "anonymous bloggers" bad that your CDS blew out this quarter and generated over $3 billion in "income" for your firm - you are truly welcome), Bank of America has, for quite a while, been a proxy for all that is wrong with America's mortgage industry, courtesy of that most value-destroying purchase of the insolvent criminal entity that was Countrywide Financials. For a while the market was content that the proxy would not be in need of a shallow grave, unlike the US housing market (go ahead, ask where PrimeX closed today), after the bank managed to bribe enough "plaintiffs" and proceed with a quick and painless $8.5 billion settlement on all of its mortgage putback claims. A settlement that, however, had a very weak link: "Article 77", a critical provision enabling the deal in its current form. And as we first reported and explained back on August 26, said weakest link was attacked by David Grais of Walnut Place, who "filed a request to transfer the lawsuit from State Court to Federal Court where everything basically begins a new." Well, today Grais won, and Bank of America lost after US District Judge William Pauley ruled that "Bank of America Corp.’s proposed $8.5 billion settlement with Countrywide Financial Corp. mortgage-bond investors must be considered in federal court instead of the New York state court where it was first filed." Not content with making a factual statement, the Judge proceeded to skewer the bank which, on top of evertyhing, recently decided to stuff its depositors with a bill as large as $53 trillion should things turn sour, added "The settlement agreement at issue here implicates core federal interests in the integrity of nationally chartered banks and the vitality of the national securities markets." Integrity? From a bank which secretly, though with the Fed's blessing, has tried to put its client interests over those of depositors of over $1 trillion, and over the objections of the FDIC? Don't make us laugh.
The good news is that yet another rating downgrade is imminent once the rating agencies realize that as a result of the Article 77 clause elimination, BofA is now on the hook for tens, if not hundreds of billions in putback liabilities and civil liability exposure, and potentially the forced bankruptcy of its Countrywide unit. In other words: the financial meltup over the past 2 weeks was fun while it lasted.
While it is of secondary relevance, and interested readers can read more in the attached ruling, the specific reason for why Pauley demonstrated balls of brass is explained by Alison Frankel:
The settlement agreement at issue here implicates core federal interests in the integrity of nationally chartered banks and the vitality of the national securities markets," Pauley wrote. "A controversy touching on these paramount federal interests should proceed in federal court."…That sentiment infuses the judge's analysis of where BofA's proposed deal should be evaluated…before Pauley in federal court, where there's no analogous procedure for binding thousands of investors in 530 trustees to a settlement only 22 of them had a hand in negotiating. Pauley's decision to keep the case in federal court throws the settlement off the carefully-designed track the bank, the trustee, and the investor group that supports the deal hoped to keep it on.
Pauley seemed to find the settlement supporters' Article 77 gambit to have been too clever by half. He noted that his research uncovered only 28 Article 77 decisions in the last 40 years, many of which involved uncontested proceedings and garden-variety trust administration issues. He said, in fact, that he could find no authority to support the idea that a single Article 77 proceeding can be used to evaluate a decision affecting 530 trusts…Pauley concluded, however, that BNY Mellon was once again looking at form rather than substance, calling its argument "crabbed." Walnut Place, he wrote, was adverse to BNY Mellon, the Article 77 plaintiff, so it is a defendant for the purposes of removal…
If the Second Circuit upholds the ruling, it's very bad news for BofA. Given the harsh treatment Pauley has dished out to settlement supporters in two hearings and in Wednesday's ruling, it's clear the lawyers who crafted the $8.5 billion dollar deal have a long way to go before they get Pauley to sign off.”
While the clear loser here is Bank of America, and those who are long the stock and short the CDS, the winners are once again all those monolines whose full putback claims are about to see multiple expansion. Especially those with massive short interest, and whose core investors are in dire need of any form of short squeeze to bring their overall P&L higher.
Below is the full Pauley ruling blasting everything that is corrupt at Bank of America, and those collusive "plaintiff" who sought nothing less than to find a solution that barely dents Bank of America. You know who you are.
»
- 14847 reads
- Printer-friendly version
- Send to friend
- advertisements -
Bullish?
Oh definitely. And it'll be extra bullish if their credit rating gets downgraded.
Of course! Everything is.
Should I sell my BA CDS or buy more?? Think I'll buy more on the pullback- gold and silver that is...
Yes, if you bought FAZ in April.
Bullish?
They knew it when they reported a few days ago. They added a disclaimer to the fine print on Page 32 (i think).
They assumed purposefully wrong but they assumed anyway.
Assume makes an ASS out U and ME
Somehow an image of the Simpson's Mr Burns character rubbing his palms together wearing a sheepish grin come to mind.
no mr burns is blankfein
RE-INSTITUTE GLASS-STEAGALL. After the total destruction of TBTF of course.
Yep. I also want the option of a full reserve bank.
>From a bank which secretly, though with the Fed's blessing, has tried to put its client interests over those of depositors of over $1 trillion, and over the objections of the FDIC?
Soooo...where is the grand Fartmaster Bawney Fwank on this one?
Far[t] away.
Mr. Burns?
filthy beast
Now I know why Moynihan always looks like he has a rat chewing on his crotch.
He inherrited that mess. I doubt he had any idea how bad it is when he took that job.
I wonder if he is an alcoholic.
If he wasn't an alcoholic before, he will be soon....
anyone so stupid to jump in and buy Countrywide after the real estate bubble could not have been an alcoholic. maybe on crack, heroin, lsd, shrooms, I think all at the same time. there is no definition of stupid that will explain this! lewis should be in jail with the orange man.
none of this matters. feds will not prosecute, bernank will buy all of the trillions in junk mbs, cmbs, etc. The ponzi must go on! Get long BAC, its going to $40 a share.
Lets get this straight - BoA was forced into that marrage - a shotgun wedding so to speak.
And someone above is correct It is going to $40/share after a spit in reverse 10:1
divided goes from 50c to a borrowed 1c
It got a future . Trust me
Signed Cramer
Now you know why gold is getting smashed in Asia.
We need a giant bailout and major bank rescue package to get gold up and over $1,650 again
Just wondering how deflationary this can really be if Bernank is going to have to print $53T to offset FDIC's liability if the BofA house of cards folds?
gold, AUD got taken out by the Copper 5% collpase on the Shanghai futures
The gold aud correlation is broken. Has been for 3 weeks. Copper is pressing lows.
I like your aud short though. more complex reasons keep an eye on the 200 day moving average 1.0450 / 100day sma just below, and the 61 fibi on the big move.
Keep an eye on 1.0150. Keep an eye on .9860/80 area . i checked out of my xag trades. Thanks to Tylers overlays.
I'm in no rush.
When will it finally be over?
How much time and money do you have left for it all?
When you answer that question your question will be answered.
sorry but "it bears repeating" as they say:
http://www.youtube.com/watch?feature=player_detailpage&v=sBksHaTQCbU
i told a friend of mine today to get her money out of this bank. a bank run on this bank would be a fun thing to see.
"Its a Wonderful Life"
a few friends told me they were going to take thier money out nov. 5 th....from the tbtf banks...
i said 'i wouldnt wait till nov 5 th....do it NOW...IMO...'
I'm not so sure a retail deposit run on this bank would do it harm. it's a mortgage house like Fannie Mae...now everyone defaulting on their loans would kill it, but that's too ambitious.
But if you can find an S&L which gives you a better deal, what is the harm in switching? The TBTF banks gave us banking deregulation which gave us the housing crisis. So why not weaken them as much as possible.
They are also in the process of buying the next president:
http://endoftheamericandream.com/archives/the-big-wall-street-banks-are-...?
A bank run has the potential of a dollar for dollar savings for the FDIC/government/taxpayers. Get your money the heck out ASAP.
(Still fantasizing about a Friday 5:01pm Hawaii time seizure by the FDIC. Bring it on.)
HPD/ You can indoctrinate my friends any day! I always appreciate your comments.
5% drop on Shanghai Copper...BRUTAL!
Buy the gap on any of these PM selloffs (including copper). It will be short term and you will be a hero by december-keep the faith and buy pullbacks. But I'm preaching to the Choir...
copper as pm. LOOOOOOL
copper is gonna see 250 before it sees 4 again
Judicial restraint bitchez.
heh
The ten commandments are posted bitchez!
http://www.youtube.com/watch?v=VaI2a3L6bJU&list=FLlGQoQeJ2TA2VfybRcHWqAw...
Brother Miles speaks the truth.
I've always been partial to 3 & 4. But thats a number nine plan everyone can get behind ;-)
As the simplicity of complexity reflected in dimensionality and sophistication renders the x and y axis fully interchangeable fetchingly becoming 1:1 actualization. Eternally vibrant art renders artifice to the realm of the artless. ;-)
While we the willing, led by the unknowing, have for so long, done so much with so little, we are now qualified to absolutely anything with nothing at all.
Yeah, its an oldie...but a classic ;-)
Yeppers. A primary contributing factor to the absurdly dynamic dynamics currently going through accelerated maturation and my supreme enjoyment of both observing and participating in same.
Eventually it's gonna get done.
This is a little story about four people named Everybody, Somebody,
Anybody, and Nobody.
There was an important job to be done and Everybody was sure that
Somebody would do it.
Anybody could have done it, but Nobody did it.
Somebody got angry about that because it was Everybody's job.
Everybody thought that Anybody could do it, but Nobody realized
that Everybody wouldn't do it.
It ended up that Everybody blamed Somebody when Nobody did what
Anybody could have done
Cheers
Somebody else did it...its not my fault!!!
(Cue John Belushi)...the was a tornado...a massive flood...lol.
Hahahahahaha. I bet Buffet was told the deal was done. Sucker.
Wouldn't be surprised if he cut his loses out Monday.
At any rate I'm sure he is properly hedged for any possible outcome.
negative. 'ol warren will pay a visit to barry in the oval office and ride his black ass to shalom bernanke's house where they decide on the details of QE squared before they bust out the printing press to make more jew confetti.
.
Buffet may have had the last laugh...the $53T in Derivatives exposure was transferred to the bank...you know, the one that won't be able to settle.
Can BNYMellon or B of A appeal? They'll have to, though if the Second Circuit has any -- and I mean any -- integrity at all they will uphold Pauley's ruling (and send him some Dom Perignon and a cold cut platter for a job well done).
Courts willing to stand up to these fucking bankers need our full support, they are truly, truly the last line of defense. After that, it's guns and lead. Truly.
Integerity in a US Court? That's a rare commodity.
That's what I was afraid of. The whole kabuki theater is to have totally corrupt federal judge to sugar coat this issue, and screw up all investors in an irreversible way. Under the watchful eye of Eric Holder of course. Bank of America contributions are rolling to the Obama campaign.
"The whole kabuki theater is to have totally corrupt federal judge to sugar coat this issue, and screw up all investors in an irreversible way."
sounds more like a bukkake theater
Only at the federal level, right where this was moved.
This win will go to the banks, guaranfukinteed.
Justice abortion in 3...2...
Too true re last line of defense (or common sense?).
I mean, if some of the bad guys don't get punished real soon, then people will lose hope that the system will ever work for them, and as you say it's guns and lead then.
Too bad you can't take a corporation out into the back yard, give it a dish of its favorite food, and then shoot it in the back of the head.
What part of record bonuses for national security don't you understand?
Bad scale
Bad
Ebil
Evil
Foul
Kung Fu Treachory
Anonomous Blogger.
Man that Timberwolf was an anonomous blogger deal.
Any moment Paulie is going to be caught blowing dudes in a porn shop wearing a frilly tranny outfit and the 2nd Circuit will overturn this.
Didn't you see the news update/crawler on the bottom of the TV?
There will be a new NBC Series about it.
"CSI 2nd Circuit - Deep Throat Court."
+1 Blahahah!!! Good one
paulie walnuts shoelaces, BiCheZ!
Slewie, Just thought I'd drop a message. Most of Asia has been selling USD, during the session ( Tokyo) , building F/X warchests.
Keep a keen eye on 10T notes. The (usd) selling has been going on all week. You do the math...
All pastense. RIP Paulie!
Rank of Amerrillica is toast.
good piece on Steve Wynn... haven't listened to tape that interesting since Nixon left the White House
so, I had to put his words to images - http://www.youtube.com/watch?v=jtDCg9-u1TM
Like I said before,THE usa NEEDS A JUSTICE DEPARTMENT
that should knock the BOA website offline for a few weeks
Tyler - can we get you to post daily PrimeX? That is very telling.
Bamk of America is a criminal organization. I get a massive boner when I see these fuckers get a little justice.
They were tipped to the ruling ... that's why they made their announcement yesterday ... in other words they have taken hostages.
Get your money out of BofA.
Hey Ben ... your days are numbered. You can't wash your hands of this one.
Even if they lose it will be years (if not decades) before they pay $0.01. They will tie it up in court on appeals for as long as it takes.
If by some miracle of justice they do end up having to pay, they will just borrow it from Uncle Ben's discount window at 0.0% interest
...followed by fees on anybody who walks past their branches, takes a withdrawl or visits their website. /sarc
>in other words they have taken hostages.
Nailed it. That's exactly what happened.
and so did the federal reserve...
Soc sec trust fund holds 18% of the national debt in treasuries....
if they END THE FED, all those elderly starve....
man, this game is so rigged...
the more i learn here...
Soc Sec needs to sell those bonds
Cash is a better investment. Just deposit it into regional banks or smaller.
.
all we need are leaders who will do just that....
Social security trust fund is held in nonmarketable special treasury obligations paying 1%. These are not regular Treasury paper. The funds are captive.
Alrighty then... anybody got a recipe for Sacrificial Lamb? I'll just hang up my pitchfork and use this torch to light the stove.
Ooo a piece of candy. Ooo a piece of candy. mmm, piece of candy...
Not to be too cynical, but maybe this is just a set-up so they get some sort of better deal.
In other words...court throws out $8.5 billion deal, then government comes up with a deal to write down mortgages and indemnify all the big banks involved.
I recieved a reply from AG Eric T. Sneiderman. It was a reply to my letter of support for not settling this case for 8.5B. Although I think the whole crack down on wallstreet is part of the elect a puppet in 2012 campaign, I am hoping that I'm wrong. Skepticism makes me believe that this will drag on through the elections with candidates preaching how wallstreet needs to be held accountable, then after the election they will be let off the hook again.
Dear Friend, Thank you for recently contacting my office regarding the latest developments in the 50-state national settlement of the mortgage probe. Though I was elected to work on behalf of New Yorkers, I am pleased that in pursuit of justice my office positively impacts the lives of all Americans. To that end, I am deeply committed to pursuing a full investigation into the misconduct that led to the collapse of America's housing market, and to seeking a resolution that gives homeowners meaningful relief, allows the housing market to begin to recover, and gets our economy moving again. Too many of our families have suffered for my office to sign onto an inadequate settlement that gives banks and others broad release from further legal action. As Attorney General, I pursue cases and settlements based on facts, so any agreement must not prevent those investigating the mortgage crisis from following the facts wherever they lead.eric sneiderman....could he be a principled jewish leader? nevermind the jewish overrepresentation in the government, i would vote for mr. sneiderman as a no-nonsense strongman who champions the cause of fairness, justice and equality of opportunity for all americans. i can see how some people could draw the adolf parallel, lest we forget before he became a crazed warmonger, adolf rebuild the middle class in germany and he helped to restore economic prosperity in the aftermath of the wiemar republic implosion. anyways...sneiderman will be in the Capitol soon, just watch
he is...and the question arises "where the hell is everyone else?" are there no politicians left in America?
russ feingold, ron paul, elizabeth warren just to name a few cause what they say and what they do are generally consistent.
TD
That was one of the longest and sarcastic sentence I've ever read except from Beowolf
Govt and fed own the judges. You know that right. Good nighttime story though
i figured they would change the venue & start the case over
remember, this motion virtually coincided with buffett's "american investment" of billion$ on BAC preferred
since justice delayed = justice denied, i'm not as confident as tyler regarding motives, here, as "american justice holds the big banksters' feet to the fire"
all these asswipes have already been investigated and decisions made not to prosecute, criminally. then, the FBI "inadvertantly" deleted all the investagatory files! so, there's no real "pressure" on the "defendants". it's not like anybody faces any jail time for any of this. so now we're s'posed to think: oh boy! they're really gonna make those guys pay now?
pardon a pi-rat for not coming along for the ice cream & cake, ok?
Slewie refer to the remark posted ^ Yen.
TYLER this is Mr. Gorman calling...... your surreal......surreal I said.....
That's "Sir Real" to you, bub. Jeeesh, Gorman get it straight for once, will ya?
MBI will never see the money, bi-lateral netting and all that stuff with EU exposure. There's a reason why they moved the $53 trillion and that's it.
Poof, it's gone!
pods
Tresspass/ I'll shoot ya again!
Tyler, it's not exactly clear at this point if this is net good or bad for Bank of Lynch America. Sure, litigation expenses just doubled, but given the TBTF banks own the Executive and Legislative branches of our fine country, is it such a stretch to imagine they might own the judiciary as well?
Actually, the funniest question is as follows:
Say 50 counterparties win $50 billion in litigation proceeds. So far so good. What happens next?
Why, they deposit it with Bank of America, and the fungible capital has been recycled.
Out of one pocket and into another.
Then what happens, T?
Naw don't tell me. Let me get my head around this one first.
50 counterparties with $50b in litigation proceeds should invest a bit in real estate in the form of a vault for the storage of $50b of precious metals.
Of course the litigants could always demand the proceeds in nickles a la Kyle Bass or even one dollar bills like Winthorpe and Valentine. The fed would love 'em for sure even more. Especially if the litigants used part of those proceeds to get broad society to transact their business in cash rather than plastic.
Fungible indeed
LOOOOOOL
sniff....sniff......Do I smell some justice?
BK the BAC
Paging Sheila Bair or whoever your successor is. Repeat. Paging the FDIC.
You must shut down BofA NOW, before any European banks fail and it funnels all deposits to CDS counterparties.
What's that you say? That will trigger CDS written on BofA? Welcome to the game of chess you just lost.
re B OF A as "a proxy for all that is wrong with America's mortgage industry, courtesy of that most value-destroying purchase of the insolvent criminal entity that was Countrywide Financials. "
h/t Kilowatt at emptywheel.net in a reply about BOA affairs:
Re the "Why" of it all… it almost seems that when AIG,GS, Leh, etc began the cascade of financial out-of-control liabilities circa late 2007 ,the Fed and/or FDIC understood the global system consequences would be overwhelming (e.g., at least, the FDIC would surely be overwhumped) via the next crims in line, Countrywide and MerrillLynch.
An acute crisis. Panic ensued, and Bernanke et al devised an anti-social clever-stroke to delay the imminent predictable consequences on some of TheVeryBestFamilies.
Thus, having BOA swallow CW’s toxic paper, followed by BOA swallowing ML’s liabilities would give the temporary relief…at the expense (who cares?)of growing the problem.
(The next acute crisis shortly arrived and was pseudo-handled with another "insane" temp relief, namely, TARP.)
As usual, each pseudo-handling becomes the problem.
So i posit a deal was made (w or w/o BOA Lewis or Board of Dirs awareness) to set-up BOA for climactic Grand Fail, allowing 1 or 2 years for global insiders to prepare for it.
(Perhaps Lewis was an unwelcome upstart, an interloper/intruder into the Big Club of Financial Families...that equates to an easy mark)
Recall his meeting w Paulson and Bernanke wherein they force-fed the pate de fois-gras (aka plan) down his gullet. If he did not know before, upon leaving the room he knew he was the mark…and could not fight back. Really, Moynihan’s moves after taking over from Lewis, seem to follow a script designed arrive at BOA’s doom.
I'll bet the Tan Man is smiling, as he lounges beside the pool at his French Riviera palace.
Paging The Bernank, more liquidity! deflation!
A simple question: Was BAC's seemingly absurd purchase of Countrywide an attempt to gain more control over Countrywide documents and the evidence of the RICO-able conspiracy which was their relationship for many years?
Bank of New York Mellon, trustee...evidentally, the friend of your enemy is an even worse enemy.