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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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Tue, 08/23/2011 - 13:54 | Link to Comment IMA5U
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

Tue, 08/23/2011 - 14:39 | Link to Comment bankrupt JPM bu...
bankrupt JPM buy silver's picture

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

Tue, 08/23/2011 - 15:30 | Link to Comment AldousHuxley
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!

Tue, 08/23/2011 - 13:54 | Link to Comment TruthInSunshine
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.

Tue, 08/23/2011 - 14:46 | Link to Comment Poetic injustice
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.

Tue, 08/23/2011 - 16:13 | Link to Comment NewThor
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?

 

Tue, 08/23/2011 - 13:55 | Link to Comment Robslob
Robslob's picture

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

Tue, 08/23/2011 - 13:56 | Link to Comment ZeroPoint
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.

 

Tue, 08/23/2011 - 13:56 | Link to Comment Chain Gun Smoke
Chain Gun Smoke's picture

oh snap

Tue, 08/23/2011 - 13:56 | Link to Comment lolmao500
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.

Tue, 08/23/2011 - 13:56 | Link to Comment Gubbmint Cheese
Gubbmint Cheese's picture

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

Tue, 08/23/2011 - 13:57 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

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

Tue, 08/23/2011 - 15:51 | Link to Comment NewThor
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"

Tue, 08/23/2011 - 13:59 | Link to Comment goldfreak
goldfreak's picture

anybody felt a shake in New York?

Tue, 08/23/2011 - 14:06 | Link to Comment Clampit
Clampit's picture

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

Tue, 08/23/2011 - 13:59 | Link to Comment Captain Queeg
Captain Queeg's picture

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

Tue, 08/23/2011 - 14:01 | Link to Comment kito
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?

Tue, 08/23/2011 - 14:01 | Link to Comment baby_BLYTHE
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.

 

Tue, 08/23/2011 - 16:26 | Link to Comment Random_Robert
Random_Robert's picture

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

- Simple... he really is THAT stupid.

Tue, 08/23/2011 - 14:03 | Link to Comment SILVERGEDDON
SILVERGEDDON's picture

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

Tue, 08/23/2011 - 14:03 | Link to Comment gookempucky
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.

Tue, 08/23/2011 - 14:04 | Link to Comment Sudden Debt
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?!

 

Tue, 08/23/2011 - 14:06 | Link to Comment Dick Darlington
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.

Tue, 08/23/2011 - 14:10 | Link to Comment monopoly
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.

Tue, 08/23/2011 - 14:16 | Link to Comment NOTaREALmerican
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.  

Tue, 08/23/2011 - 17:56 | Link to Comment unununium
unununium's picture

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

Tue, 08/23/2011 - 14:19 | Link to Comment ZeroPower
ZeroPower's picture

Nicely done.

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

Tue, 08/23/2011 - 14:51 | Link to Comment Surly Bear
Surly Bear's picture

ZeroPower, I love your avatar!

~S. Bear

Tue, 08/23/2011 - 14:25 | Link to Comment JW n FL
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?

Tue, 08/23/2011 - 14:35 | Link to Comment JW n FL
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.

Tue, 08/23/2011 - 14:27 | Link to Comment kito
Tue, 08/23/2011 - 14:29 | Link to Comment Cone of Uncertainty
Cone of Uncertainty's picture

Dear Mr. Moynihan,

You are fucked.

Sincerely,

Cone of Uncertainty

Tue, 08/23/2011 - 14:36 | Link to Comment RobotTrader
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.

Tue, 08/23/2011 - 14:49 | Link to Comment topcallingtroll
topcallingtroll's picture

Yep.

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

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

Tue, 08/23/2011 - 18:00 | Link to Comment unununium
unununium's picture

Look what the cat dragged in.

Wed, 08/24/2011 - 11:48 | Link to Comment d00daa
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?

Tue, 08/23/2011 - 14:37 | Link to Comment killben
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..

 

Tue, 08/23/2011 - 14:50 | Link to Comment sheep92
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

Tue, 08/23/2011 - 15:11 | Link to Comment Surly Bear
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.

Tue, 08/23/2011 - 15:00 | Link to Comment steveo
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....

Tue, 08/23/2011 - 15:01 | Link to Comment firstdivision
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

Tue, 08/23/2011 - 15:09 | Link to Comment jaek117
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

Tue, 08/23/2011 - 15:13 | Link to Comment fishface
fishface's picture

meanwhile back at Fight Club...

 

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

Tue, 08/23/2011 - 15:14 | Link to Comment Smokey1
Smokey1's picture

BOA eats shit.

Tue, 08/23/2011 - 15:17 | Link to Comment Texas Ginslinger
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..??

Tue, 08/23/2011 - 15:34 | Link to Comment Poetic injustice
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.

Tue, 08/23/2011 - 15:34 | Link to Comment Poetic injustice
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.

Tue, 08/23/2011 - 15:27 | Link to Comment BetTheHouse
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?

Tue, 08/23/2011 - 15:33 | Link to Comment Irish66
Irish66's picture

up 270 and BAC at 6.18 nothing more to see here

Tue, 08/23/2011 - 15:44 | Link to Comment MoneyWise
MoneyWise's picture

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

Tue, 08/23/2011 - 15:45 | Link to Comment Ausperity
Ausperity's picture

What's with the metals being crushed today?  I haven't read about margin hikes... Is this a profit-taking trend?

Tue, 08/23/2011 - 15:45 | Link to Comment buzzsaw99
buzzsaw99's picture

moynihan: how many nonperforming loans are you currently holding at face on the books? enuff sed.

Tue, 08/23/2011 - 15:48 | Link to Comment AldousHuxley
AldousHuxley's picture

US trying to make sure Euros take the first hit. Meanwhile Iran and China building up their gold reserves and military.

 

Western leaders must be eliminated. Corrupt AND ineffective.

 

Check out NBG breaking $1/share.

Tue, 08/23/2011 - 16:16 | Link to Comment buzzsaw99
buzzsaw99's picture

That's like the restaurant critic who said the food was terrible AND the portions were small.

Tue, 08/23/2011 - 17:10 | Link to Comment AldousHuxley
AldousHuxley's picture

I doubt the restaurants would charge critics money for review.

 

I'm ok with current leadership if I pay no taxes at all.

 

 

Tue, 08/23/2011 - 15:55 | Link to Comment youngandhealthy
youngandhealthy's picture

Tyler....5 stars!!!!

Eventhough I wouldnt like the general market outcome....this is a brilliant post.

Tue, 08/23/2011 - 15:59 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

See, you are between 40% and 100%.....that is a big swing...Like life itself...you are always better off expect the worst and hope for the best. Even if it isnt 100%- the worst- it wont be 40% either! Safe to assume 85% would be the worst but still...9B is better than 19B...no?

 

You cant blame them 100%....they had an uzzi stuck in their face and were made to "marry" Merrill Lynch...Cunt-rywide too....so they do get some credit...it's a fucking mess no matter which way you look at it....

 

And home prices are bottoming? Shit nigga please as Creeper would say on Dolemite.

Tue, 08/23/2011 - 16:02 | Link to Comment Tunga
Tunga's picture

Just put it on the card.

Tue, 08/23/2011 - 16:05 | Link to Comment MoneyWise
MoneyWise's picture

Now it's a real move, Gold weeds getting first bite in the a$$.. Tyler probably large BAC shareholder and shorting GOLD actively. *LOL*

Tue, 08/23/2011 - 16:20 | Link to Comment Clearly_Irrational
Clearly_Irrational's picture

CNBC just quoted Zerohedge:

 

http://www.cnbc.com/id/44241469

 

Now that's a sign of the end times if I've ever seen one, heh.

Tue, 08/23/2011 - 16:24 | Link to Comment Problem Is
Problem Is's picture

World's OVER... Doomsday in 5,4,3...

Tue, 08/23/2011 - 16:21 | Link to Comment truont
truont'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".
That's right, give 'em hell, Tyler!

Tue, 08/23/2011 - 16:22 | Link to Comment Problem Is
Problem Is's picture

Some Follow Up Questions (And Recommendations) For Brian Moynihan
Recommendation: Go stuff a giant foot long corn dog down your pie hole like Bachmann and Perry, you value destroying douche Mo(ron)-ihan...

Tue, 08/23/2011 - 17:41 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

Wow! ZH gets mentioned on Fast Monkey, er, Money on CNBS. One guys said ZH was a place to plant stories, so I thought my thoughts of BofA should be planted here along with Blodget's and everyone else's.

BofA Near Death Experience?

Tue, 08/23/2011 - 19:53 | Link to Comment Dragonsgrace
Dragonsgrace's picture

This was an interesting comment to me..

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

I have been out on the "front line" with homeowners who are suing the banks over faulty mortgage foreclosures.  I have first hand experience that BofA is using the same "hand to hand" combat with homeowners as well as the monolines and investors.  Gee....I am so shocked you would think they would treat their former customers better....right?  

Some of the others have actually started to look at the case and say...."gee we may have messed this one up" and trying to make sense out of it.  Not BofA.  No matter how much and how clearly they fuck something up...they do not want to admit or see a problem.  I guess that might be part of the reason they spent $3.0 billion on litigation costs in Q4 2010.  

They are out of their minds from what I can see.  If this "strategy" is coming from their general counsel the guy should be roasted by the shareholder, the board and ceo.  If this is the CEO the board should perhaps provide some "guidance" to him or fire his ass.  Just sayin. 

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