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?
While pricing right on the When Issued screws, or 0.540%, tied for the lowest high yield since October 2014, today's $26 billion auction of 2 Year paper was nothing to write home about. From a low Bid to Cover, which at 3.30 was down from March's 3.457%, and the lowest of 2015, to a slide in the Indirect bid to only 38.1%, also the lowest for 2015, to the highest Dealer take down of 2015, with commercial banks left with 47.8% of the short-end issue, there was not much demand for the paper which pays a 0.50% cash coupon and which matures on April 30, 2017.
Still, the lack of a tail is what the algos were looking at, and they got it. As a result the bid following the auction across the curve which...
Last week, stocks cycled bullish yet again. In fact, the S&P 500, NYSE Composite, and NASDAQ each closed at record highs as investors positioned for the heart of earnings season in the wake of strong reports from some of the Tech giants. Notably, Utilities stocks got some renewed traction as yield-starved investors returned to the sector. Although our trend-following sector rotation model remains bullish, strong overhead technical resistance and neutral rankings in our SectorCast quant model indicate that caution is in order, and this might not be the moment for a major upside breakout, particularly given the expected softness in earnings reports.
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 funda...
Apple Inc.’s IPhone sales in China may have exceeded the U.S. for the first time in the latest quarter, thanks to brisk demand during the country’s New Year celebrations.
Apple will probably show on Monday that earnings jumped by more than 20 percent when it reports results for the second fiscal quarter, which ended in March. While Apple doesn’t break out shipments by country, the company may have sold 18 million to 20 million iPhones in greater China during the period, while U.S. deliveries were about 14 million to 15 million, according to Creative Strategies LLC.
Apple closed last week at an all-time weekly closing high at (1) in the chart above. Apple recently broke above its 4-year rising channel, came back to test old resistance and pushed higher, setting this new record high.
In November of last year, when Apple was trading below $110 per share, the Power of the Pattern shared that Apple’s upside target stood at $150.(See post here)
The big economic number this week will be the Q1 Advance Estimate for GDP on Wednesday at 8:30 AM ET.
What do economists see in their collective crystal ball for Q1 of 2015? Let's take a look at the GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.
Here's a snapshot of the full array of WSJ opinions about Q1 GDP with highlighted values for the median (middle), mean (average) and mode (most frequent). In the latest forecast, the median and mean were quite close. The mode (ten of 62 forecasts) was a tad lower at 1.2%, and the second most frequent value, held by eight respondents, was bit higher 1.5%. In essence, 35% of the economists' forecasts fell within a narrow 0.3% range.
As the visualization above illustrates, despite the cluster in the midd...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
Here's an interesting argument by Felix Salmon, although I think he is taking two correct observations and mistakenly attributing a cause-and-effect relationship to them: Bitcoin is going nowhere because women are not involved.
More likely, in my opinion, women are not involved in bitcoin because bitcoin is going nowhere (and they know it). Or maybe, simply, bitcoin is going nowhere and women are not involved.
Nathaniel Popper’s new book, Digital Gold, is as close as you can get to being the definitive account of the history of Bitcoin. As its subtitle proclaims, the book tells the story of the “misfits” (the first generation of hacker-l...
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...
In my last post (Part 1 of this article), I looked at alternative ETFs that could be used as hedges against the corrections that we have seen during that long 2 year bull run. Looking at the results, it seems that for short (less than a month) corrections, a VIX ETF like VXX could actually be a viable candidate to hedge or speculate on the way down. Another alternative ETF was TMF, a long Treasuries ETF which banks on the fact that when markets go down, money tends to pack into treasuries viewed as safe instruments. In some cases, TMF even outperformed the usual hedging instruments like leveraged ETFs. There could of course be other factors at play since some of 2014 corrections were related to geopolitical events which are certain...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
PSW Members - well, what a year for biotechs! The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down! The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months. What could go wrong?
Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.
Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies. A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...
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.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: email@example.com.