Some Follow Up Questions (And Recommendations) For Brian Moynihan

Tyler Durden's picture

In the aftermath of Bank of America's direct answer to Henry Blodget, and indirect response to Zero Hedge, we would like to counter with some additional attempts to bring clarity, and hopefully closure, to the extremely (and regrettably) opaque situation that the bank and its investors (not to mention employees) find themselves in, and which has so far cost Bank of America about $80 billion in market capitalization. Indeed, as Bank Of America has noted, "The mortgage analysis was provided by a hedge fund that has acknowledged it will benefit if our stock price declines" - we fail to see how this is a credible defense: one simple case study reminds us that David Einhorn was publicly short Allied Capital and Lehman Brothers, yet his thesis was absolutely spot on, and the financial institutions in question ended up in bankruptcy. We offer Bank of America the chance to respond to two simple questions, which should eliminate the specter of a litigation induced liquidity crunch. As for the prospect of bank insolvency, we are confident that the reinstatement of Mark to Market any minute now will provide sufficient color on that particular issue.

Dear Mr. Moynihan,

 

Your financial statements make some assumptions which belie your mortgage putback reserves.  To help us understand why you are adequately reserved, please tell us.

 

a).  If the repurchase rate assumption in the Bank of New York settlement is changed from 40% to 100%, how much will that increase your mortgage putback liability and, hence, your reserves?  David Grais, in his opposition to the settlement, says that changing that assumption alone could increase private label putbacks to $27bn versus the $8.5bn expected in your financial statements.  IF that scenario played out, are you under-reserved by $18bn+?

 

b).  If you lose the loss causation ruling which is coming up in MBIA vs. Countrywide, why will home prices matter – in your Fairholme conference call, you told us that BAC’s mortgage putback reserves incorporate a 3% decline in home prices followed by a 1% increase.  MBIA states that their estimates “of breach rates primarily based upon loans with credit breaches or credit and compliance breaches ... these types of breaches are not judgmental and cannot be cured.”  So if you lose the loss causation ruling, by how much will your putback reserves change and why should we have confidence in your methodology?

 

Please note that your own 10-Q highlights that if BAC is incorrect in these assumptions, your mortgage putback reserves could prove to be insufficient.

And a few practical ideas...

A simple way Moynihan can put a lid on this stuff: PICK UP THE PHONE, CALL YOUR COUNTERPATIES AND SETTLE TO PUT EXPOSURES BEHIND.  Things I would do:

 

a). Step 1: Write a check to resolve FGIC, AMBAC, SYNCORA and MBIA litigation: cost $9 billion.  After settling Assured, it doesn’t make any sense to try and fight the validity of monoline claims.

 

b). Step 2: Use the goodwill you have left with the Federal Government and pressure GSEs into modifying your agreement to pay more and conclusively put a cap on the exposure – not report increase in GSE claims and reserves every quarter.

 

c). Step 3: Resolving steps 1 and 2 gives a little breathing room in resolving the third bucket.  Enter negotiations, bite the bullet and take the pain to reach a comprehensive settlement.

 

HAND TO HAND COMBAT’ has cost you over $80 billion in market value, perhaps it’s a flawed strategy...

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IMA5U's picture

too many words

 

all market participants and "the folks" need to know is that europe is smarter than us and jackson hole is right around the corner

bankrupt JPM buy silver's picture

did Brian Hedge his $2 mill at $4 after he saw the bears 7 vid? lol....loser.

AldousHuxley's picture

Bank of America, please take Shitty bank down with you when you guys disappear. You banksters make communist state-owned Chinese banks look more capitalist!

TruthInSunshine's picture

 

 

 

I'd like Obama, Geithner, Bernanke & Congressional leaders to pledge that the era of disastrous, taxpayer punitive BAILOUTS IS OVER.

/sarc/

Prepare for AIG 2.0

C'mon, Bernank, give 'em what they want at Jackson Hole, but at least wear rubber gloves and lots of lube for the sake of taxpayers' rights.

Poetic injustice's picture

I promise it is over. Further necessary actions will be taken on off-balance sheet and surface much later when nobody will care anymore.

NewThor's picture

Dear Bryan Morenehand,

Does Bernanke's sperm taste like sulfur and brimstone?

Why does your bank suck so bad?

Where is your Elenin bunker?

IF you fucking evil fucking bastard America raping fucks are always bitching about US GOV intervention and regulation, shouldn't you be standing on the highest building screaming "LET US FAIL!"

Do you think God is going to have mercy on your money loving soul?

Can I kick you in the balls?

Or would you like a good old fashioned fist fight?

 

Robslob's picture

But We Will Win in the End...said Custer as he bravely charged into battle...

ZeroPoint's picture

How about also not trying to foreclose on properties that don't even have a mortgage with Bank of America or anyone else for that matter?

And a $12.00 a month maintenance fee? I'll take my business elsewhere.

 

lolmao500's picture

A few facts.

- 1 trillion : BAC deposits.

- 10 billion : FDIC $$ to cover failed banks

Rumors that JPMorgan takes over with the US government providing $100 billion in exchange of prefered shares.

Me thinks, doesn't matter how it ends up, the taxpayers will get shafted.

Gubbmint Cheese's picture

Or, step down as CEO to, "devote more time to your family".

BlackholeDivestment's picture

just had a massive quake in dc, shook the whole house, stuff fell

NewThor's picture

Maybe Comet Elenin will open an account with Bank of America.

Oh. did you hear the latest news, the 3 million mile tail is full of cyanide.

"1/3 of the stars were swept to Earth. And the waters became bitter. Many men died from drinking"

goldfreak's picture

anybody felt a shake in New York?

Clampit's picture

I felt it in Colorado...vee haav very sensitive instruments here.

Captain Queeg's picture

Although Einhorn's analysis was proven out, Allied Capital was never in bankruptcy.

kito's picture

tyler, what about their market exposure in europe, what about the continued writeoffs that will occur as home prices continue to tank down to cash value?

baby_BLYTHE's picture

how can Brian M justify putting his entire networth in one single entity?

Does the man want to crucify himself? He is damning himself to living in a gutter. What stupidy. Power really does corrupt.

 

Random_Robert's picture

"how can Brian M justify putting his entire networth in one single entity?"

- Simple... he really is THAT stupid.

SILVERGEDDON's picture

Buttfucked On Account of Being Ordinary Americans. New age double entendre, countered by Bringing On Armageddon, and Buying Obvious Assets, bitchez! 

gookempucky's picture

As for the prospect of bank insolvency, we are confident that the reinstatement of Mark to Market any minute now will provide sufficient color on that particular issue.

We all know that is not going to happen.....whoa almost forgat that AU will set all things mark to market regardless.

Sudden Debt's picture

Oke BAC, ANSWER THIS:

FOR HOW MANY YEAR IS YOUR DIVIDEND NOTHING MORE THAN NEARLY NOTHING?!

HOW MANY YEARS BEFORE IT MIGHT ACTUALLY MEAN SOMETHING WITH HAVING TO RS THE STOCK X100 TO GET 1$ PER SHARE?!

 

Dick Darlington's picture

As for the prospect of bank insolvency, we are confident that the reinstatement of Mark to Market any minute now will provide sufficient color on that particular issue.

Exactly! If all is golden as the global banking cartel keeps telling us then there's no need for mark to unicorn. So please, Bank of Scamerica, prove us all wrong.

monopoly's picture

"Mark to market." Right Tyler. You bet. Give them an hour or two and they will change their accounting. You want honesty, integrity and correct financial numbers. I wish.

NOTaREALmerican's picture

Re: we are confident that the reinstatement of Mark to Market any minute now will provide sufficient color on that particular issue

BAC would like to point out that Mark to Market is a CULT accounting movement that is on record as seeking to destroy the very fabric of American society which BAC is heroically determined to defend.  

Only trrrrssss and others who hate Merica - and hate the flag and hate eagles and hate the troops - would publicly support an un-Merican accounting THEORY like Mark to Market.  

BAC calls on the SEC to investigate Zero Hedge and other unpatriotic economic trrrssss organizations that seek to destroy this great and glorious nation.  

unununium's picture

What an incredibly succinct summary of the Wall Street Journal comment board.  Thank you!

ZeroPower's picture

Nicely done.

Might even solicit a response from their PR team like Goldmans did last year or so.

Surly Bear's picture

ZeroPower, I love your avatar!

~S. Bear

JW n FL's picture

http://www.youtube.com/watch?v=YOCzc4xyBao

$1.2 Trillion in Secret Loans to how many NON-U.S. Companies?

$20 Million a Day?

JW n FL's picture

 

 

http://www.youtube.com/watch?v=W-7Na5HRU_Y

This week Max Keiser and co-host, Stacy Herbert, look at how quantitative easing is good for the rich, bad for the poor and how sterling is offering no refuge. In the second half of the show Max talks to Richard Heinberg, author of The End of Growth, about the role of energy in the current debt crisis.

Cone of Uncertainty's picture

Dear Mr. Moynihan,

You are fucked.

Sincerely,

Cone of Uncertainty

RobotTrader's picture

 

 

Looks like TPTB pulled off the "impossible"

Giant bids coming into KRE while gold and the XAU are being decimated.

Amazing how they are able to pull rabbits out of their hats time and time again.

topcallingtroll's picture

Yep.

I was petrified to short gold yesterday, which means I probably should have.

I want to buy stocks today......hmmm....

unununium's picture

Look what the cat dragged in.

d00daa's picture

KRE STILL CAN'T GET ABOVE THE 11EMA, TOTALLY DEAD AND BROKEN, WTF ARE YOU TALKING ABOUT???

 

"the market isn't pricing in qe3, THE MARKET IS PRICING IN AN ECONOMIC BOOM, LED BY THE US CONSUMER" - momofader

 

amazed you still have the balls to show yourself around here.  do you still have a job?

killben's picture

http://247wallst.com/2011/08/23/jp-morgan-may-take-over-bank-of-america/ ...

"The government will support the deal with a $100 billion investment in preferred shares issued by the combined entity"

Our Timmy is hard at work.One has to salute Brian Moynihan. He picked the right dog to do the job.

 

When Timmy wanted to leave ... it was good news for America. Hopefully at least Obama will be sent packing in 2012..

 

sheep92's picture

quick question for those more knowledgable in mortgage put backs.  If they have 18 billion dollars of mortgages put back why would they have to increase reserves by 18 billion.  Doesn’t that mean that all the put back mortgages are worth exactly zero ?

seems odd but what do i know

Surly Bear's picture

My understanding is the mortgages they hold are assets. If they are 'putback,' then they are repurchased by the loan originator. If that happens then BAC does not have 18 billion in assets backing their liabilities, and they would need to raise capital through a stock offering, bond sale, or government bailout. I am an accountant, and I could be wrong, but this is my 2 cents.

steveo's picture

I did some work last Thursday on Comet Honda possibly causing earthquakes, check it out.

http://oahutrading.blogspot.com/2011/08/comet-honda-causing-earthquakes....

firstdivision's picture

Dear Tyler,

Well I'd like to first touch upon that first question. You see.....oh shit there's an earthquake. Gotta go.

B. Moynihan

jaek117's picture

Any Ron Paul supporters in here?  We're trying to organize a Revolution Super Concert.  Please check out the thread on DailyPaul.com.  Thanks.

 

http://www.dailypaul.com/175693/ron-paul-r3vo-ution-super-concert#new

fishface's picture

meanwhile back at Fight Club...

 

"Tyler, if you would fight a bank which one would it be?"

Smokey1's picture

BOA eats shit.

Texas Ginslinger's picture

In 2002 Henry Blodget was banned from the securities industry and paid a $4 million fine for emailing conflicting info that his employer, Merrill Lynch published.  Merrill Lynch paid a $200 million fine for issuing fraudulent research.

Why should we believe him..??

Poetic injustice's picture

Because he is honest this time. *wink wink* Just believe and buy what he says to buy.

If still unsure, ask Robotrader for advice on investments.

Poetic injustice's picture

Because he is honest this time. *wink wink* Just believe and buy what he says to buy.

If still unsure, ask Robotrader for advice on investments.

BetTheHouse's picture

 BAC is going bankrupt, the european banks are insolvent and exposed, and my FAZ is still getting raped.  Where does a regular guy get a break in this crooked town?

Irish66's picture

up 270 and BAC at 6.18 nothing more to see here

MoneyWise's picture

Buy BAC, sell GOLD, bitchez!!! Told ya.. :)))