Everyone knew that the foreclosure fraud crisis was going to spawn a festival of lawsuits, and now it looks like it is already beginning. The New York Federal Reserve Bank is part of a consortium of eight large institutional investment firms that has launched an effort to force Bank of America to repurchase $47 billion worth of mortgages packaged into bonds by its Countrywide Financial unit. It turns out that most mortgage bond contracts explicitly require the repurchase of loans when the quality of the loans falls short of promises made by the sellers. As most of us know by now, many of these mortgages that were packaged together into "AAA rated" securities were actually a bunch of junk. But this is just the beginning. There are going to be hordes of lawsuits stemming from this crisis and it is going to take years and years for this thing to work through the legal system.
All of the big players in the U.S. mortgage industry are going to be paralyzed for an extended period of time by this crisis, and that means that buying a home and achieving the American Dream is going to become a lot harder for millions of Americans. Not only that, if mortgage lending institutions end up being forced to take back gigantic mountains of bad mortgages it could end up sinking a whole lot of them. The implications for the U.S. financial system would be staggering.
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.
Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.
Patrick represents investors who own at least 25 percent of so-called voting rights in the deals and stand to recover “many billions of dollars,” Patrick said.
Countrywide hasn’t met its contractual obligations as a servicer also because it hasn’t asked for loan repurchases and is taking too long with foreclosures, Patrick said. The delays stem from missing documents, process mistakes and insufficient staffing to evaluate borrowers for loan modifications, she said.
If Countrywide doesn’t correct the servicing problems within a few months, her clients could have the right to pursue legal action against Bank of America, Bank of New York or both, she said. “None of the bondholders are opposed to modifications for deserving borrowers, but you’ve got to get it done” in a timely fashion, she added.
Mortgage-bond contracts are explicit in requiring repurchases of loans when their
So let me make sure I have this right because Lord knows I’ve been drinking more than usual lately. Feinberg spent months putting together this report only to discover 17 firms had paid out $1.8 billion in questionable bonuses but then comes out and says he’s not going to do anything about it.
U.S. "pay czar" Kenneth Feinberg on Friday declined to request 17 financial firms that doled out $1.6 billion in "ill advised" executive compensation to return the excessive payouts, saying to do so would be unfair to the companies and could trigger private lawsuits and additional Congressional investigation.
Mr. Feinberg released a report that found 17 firms—including Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Citigroup Inc.—made the bonus-like payouts to top executives in late 2008 and early 2009 even as the companies were receiving taxpayer assistance.
Mr. Feinberg, the Obama administration’s special master for compensation, said he deemed these payments as "ill advised" both for the sheer amount—some individual payouts exceed $10 million, he said—and the lack of reasonable rationale for their payment.
Other firms Mr. Feinberg criticized for poor judgment included: American Express Co., American International Group Inc., Bank of America Corp., Boston Private Financial Holdings Inc., Capital One Financial Corp., CIT Group Inc., M&T Bank Corp., Regions Financial Corp., Sun Trust Banks Inc., Bank of New York Mellon Corp., Morgan Stanley, PNC Financial Services Group Inc., U.S. Bancorp and Wells Fargo & Co.
"Lack of reasonable rationale" hahahahaha. Maybe we should charge Obama with that for giving this guy a fake job patrolling payouts in the first place.
The Federal Deposit Insurance Corp.’s plan to rebuild its reserves may cost Bank of America Corp. and three of the largest U.S. banks more than $10 billion.
Bank of America, the biggest U.S. lender by deposits, may owe $3.5 billion under an FDIC proposal that banks prepay three years of premiums, based on the lowest assessment rate multiplied by the bank’s $900 billion in June 30 U.S. deposits.
“This seems like a very hefty amount,” said Tim Yeager, a finance professor at the University of Arkansas and former economist at the Federal Reserve Bank of St. Louis. “The FDIC’s projections of future losses are pretty severe, and they are trying everything they can to avoid tapping the Treasury.”
U.S. bank premiums range from 12 cents per $100 in deposits for the safest lenders to 45 cents for banks the U.S. considers risky, said Chris Cole, senior regulatory counsel for the Independent Community Bankers of America. The FDIC yesterday proposed asking banks to pay premiums for the fourth quarter and next three years on Dec. 30. The fees will raise $45 billion.
Based on the current assessment and each bank’s deposits, Wells Fargo & Co.’s fee may be $3.2 billion based on its $814 billion in deposits, JPMorgan Chase & Co. may pay $2.4 billion and Citigroup Inc. $1.2 billion. The estimates exclude the FDIC’s plan to boost the assessment rate by 3 cents per $100 in deposits in 2011 or the agency’s assumption that bank deposits will increase by 5 percent annually.
In a post called "Break Up the Big Banks", Rolfe Winkler provides a nice graphic showing that the too big to fails have gotten bigger:
The big have gotten even bigger since the start of the financial crisis. At the end of 2007, the Big Four banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo — held 32 percent of all deposits in FDIC-insured institutions. As of June 30th, it was 39 percent.
In total, they had $3.8 trillion worth of deposits as of June 30th. Compare that figure to the FDIC’s Deposit Insurance Fund, which showed a balance of just $10.4. billion on the same date.
A federal judge on Monday rejected a $33 million settlement between the Securities and Exchange Commission and Bank of America Corp., saying the SEC’s accusations of inadequate disclosure by the bank over bonuses paid at Merrill Lynch must now go to trial.
The SEC announced last month that it had settled its civil charges against BofA, which agreed to buy the New York investment bank last year, without the bank admitting or denying guilt in the case. BofA has said it didn’t violate disclosure rules.
U.S. District Judge Jed Rakoff held up his approval of the settlement, however, and ordered the SEC last month to explain why it didn’t pursue charges against specific executives at Bank of America over the accusations.
After receiving additional statements from the SEC and BofA last week, Rakoff ruled Monday that the proposed $33 million settlement "cannot remotely be called fair," and ordered that the case go to trial beginning Feb. 1.
Rakoff, in his ruling, found that the proposed settlement "suggests a rather cynical relationship between the parties: the SEC gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger, the bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth."
The New York Attorney General’s office is preparing charges against several high-ranking Bank of America executives over the bank’s alleged failure to disclose details about its acquisition of Merrill Lynch, according to a person familiar with the investigation.
Attorney General Andrew Cuomo’s office is likely to file civil charges against the executives over their role in failing to alert shareholders to mounting losses as well as accelerated bonus payments at Merrill, said the person, who requested anonymity because no charges have been filed yet.
One of the most evident characteristics of the recent 50% stock rally has been short squeezes. Skepticism regarding the quality of the rally kept the shorts confident that stocks would retrench. And day after day we got short squeezes in the banks that generated market rallies. As summer rolled around the trend appeared to die and the financials went through a 3 month lull. That has all changed in the last 4 weeks, however, as 5 (mostly meaningless) stocks dominate NYSE trading. BofA, Citi, Fannie, Freddie and AIG have accounted for more than 30% of NYSE volume in the last month and are again generating overall stock market optimism today as all 5 stocks rally on no news or news that is totally irrelevant to the rest of the market. Will the shorts ever learn their lesson?
There are many things going on in the Greece vs Institutions+Germany negotiations, and many more on the fringe of the talks, with opinions being vented left and right, not least of all in the media, often driven more by a particular agenda than by facts or know-how.
What most fail to acknowledge is to what extent the position of the creditor institutions is powered by economic religion, and that is a shame, because it makes it very difficult for the average reader and viewer to understand what happens, and why.
While Ben Bernanke will never agree that global economic growth has ground to a halt as a result of his monetary policies, a phenomenon which in the past year has been dubbed "secular stagnation" by the very serious weathermen (and will certainly never admit the reason for such stagnation), with every passing month one thing becomes clear: there can be no growth and certainly no prosperity for the broader population with a $200 trillion (and rising at over ...
The tug of war between the bulls and bears has created an unusual situation this year, a historically tight trading range! The chart below reflects that the Dow Jones has traded within a 6.68% high to low trading range this year. That is the 4th tightest trading range through May, in the past 115 years.
CLICK ON CHART TO ENLARGE
The inset table to the right looks at future performance of the Dow following narrow trading ranges through May. As you can see, most of the time the market has ended the year to the upside. Will it be different this time?
Wednesday’s action was almost a 180 degree turn from Tuesday’s with the S&P 500 up 0.92% and the NASDAQ 1.47%. Sone vague belief in (yet another) resolution in Greece seemed to be the catalyst. Greek Prime Minister Alexis Tsipras said on Wednesday the negotiations are on the “final stretch” towards a positive deal, Reuters reported. Later in the day, German Finance Minister Wolfgang Schaeuble said there was not much progress in the Greek debt talks and he was surprised by the upbeat tone from some Greek government officials. Athens must make a 300 million euro payment to the International Monetary Fund on June 5, ahead of several other payments due to the IMF later in the month, for a total of 1.6 billion euros.
We’ll see if yesterday’s move was the head fake or today’s was shortly.
Early last week, stocks broke out, with the S&P 500 setting a new high with blue skies overhead. But then the market basically flat-lined for the rest of the week as bulls just couldn’t gather the fuel and conviction to take prices higher. In fact, the technical picture now has turned a bit defensive, at least for the short term, thus joining what has been a neutral-to-defensive tilt to our fundamentals-based Outlook rankings.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the t...
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Understanding the new normal of a business model is key to the success of any company. The managment of companies need to adapt to the changing demand, but first they must recognize what changes are taking place. Big Pharma's business model is changing rapidly, and much like the airline industry, there will be but a handful of pharma companies left at the end of this path.
Most Big Pharma companies have traditionally done everything from research and development (R&D) through to commercialisation themselves. Research was proprietary, and diseases were cherry picked on the back of academic research that was done using NIH grants. This was in the heyday of research, where multiple companies had drugs for the same target (Mevocor, Zocor, Crestor, Lipitor), and could reap the rewards on multiple scales. However, in the c...
Bitcoin, the virtual digital currency, has been called the future of banking, a dangerous fad, and almost everything in between, but we're finally about to get some solid data to help settle the debate.
On Monday, the Nasdaq (NDAQ) stock exchange said it would ...
Chris Kimble likes the idea of shorting the US dollar if it bounces higher. Phil's likes the dollar better long here. These views are not inconsistent, actually, the dollar could bounce and drop again. We'll be watching.
Phil writes: If the Fed begins to tighten OR if Greece defaults OR if China begins to fall apart OR if Japan begins to unwind, then the Dollar could move 10% higher. Without any of those things happening – you still have the Fed pursuing a relatively stronger currency policy than the rest of the G8. So, if anything, I think the pressure should be up, not down.
UNLESS that 95 line does ultimately fail (as opposed to this being bullish consolidation at the prior breakout point), then I'd prefer to sell the UUP Jan $25 puts for $0.85 and buy the Sept $24 call...
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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