NY Fed, BlackRock and PIMCO Pressure Bank of America to Buy Back $47 Billion in Bad Mortgages

The news had a significant impact on the market because of the parties involved in 'pressuring' Bank of America. The loans were originated by CountryWide, which had been acquired by BofA. It is ironic that Countrywide CEO Angelo Mozilo just settled with the SEC admitting no wrongdoing and merely paid a fine which was a small percentage of his financial gains.

It is nothing new for bondholders and the common people to sue some of the big Wall Street Banks for fraud.

But when the plaintiffs include some of the most important financial institutions in the country the market has to sit up and take notice.

It's nice to see some outrage being expressed, even if it is among the privileged few. Watching Bloomberg television was particularly difficult today as the apologetics and cheerleading for the financial sector among its guests and newspeople is almost shameless.

And the band played on...

Bloomberg
Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages
By Jody Shenn
Oct 19, 2010 2:53 PM ET

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.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview. Recoveries for her clients, who own at least 25 percent of so-called voting rights in the deals, may reach “many billions of dollars,” she said....

Cuomo: Bank of America Officials May Be Charged

The charges center around the acquisition of Merrill Lynch, and the lack of disclosure regarding losses, and the accelerated bonuses paid to Merrill.

Cuomo also cites their indiscriminate use of attorney - client privilege to mask wrongdoing.

Cuomo's action is a slap at the SEC which has crafted a settlement with the Bank, which has been challenged repeatedly by the Judge as a wristslap, defying commen sense and basic justice.

This comes as the SEC faces further charges of a whitewash of their involvement with the Madoff Ponzi scheme scandal, and the lack of discovery of the fate of the billions which Madoff took from investors.

Reminds one of the Spitzer actions as the New York Attorney General in which he brought Wall Street to judgement and a settlement on its scandals regarding analysts improper rating of stocks from the tech bubble. There had been repeated attempts by the federal regulators to short circuit Spitzer.

Reuters
UPDATE 1-NY's Cuomo may charge BofA execs over Merrill
Tue Sep 8, 2009 3:05pm EDT

NEW YORK, Sept 8 (Reuters) - New York's attorney general threatened on Tuesday to file charges against top executives of Bank of America Corp over the disclosure of details regarding bonuses it authorized to Merrill Lynch & Co employees before the company's merger.

Andrew Cuomo, the attorney general, made the threat as U.S. District Judge Jed Rakoff considers whether to approve the bank's $33 million civil settlement with the U.S. Securities and Exchange Commission about the disclosures.

The judge has rejected the settlement twice, and Bank of America and the SEC are expected to made new submissions in the matter by Wednesday.

Cuomo accused Bank of America of using a defense of attorney-client privilege to explain why it should not release more information about who authorized the payment of billions of dollars of bonuses.

"We cannot simply accept Bank of America's officers' naked assertions that they sought and relief on advice of counsel in good faith, and that, therefore, they should not be charged," Cuomo wrote in a letter to the bank's lawyer.

He gave the bank until Sept 14 to provide more information.

Bank of America did not immediately return a call seeking comment. (Reporting by Jonathan Stempel; Additional reporting by Elinor Comlay and Grant McCool; Editing by Ted Kerr)

BAC Credit Rating Cut by S&P Overall and Subsidiaries to "Junk"

S&P has downgraded Bank of America's overall credit rating from A+ to A.

It has also cut the ratings of its subsidiaries to junk.

S&P reaffirms the AAA rating of their debt that is guaranteed by the FDIC.

S&P downgrades Bank of America ratings
Tuesday March 3, 4:44 pm ET

S&P cuts Bank of America ratings, outlook remains to negative, citing earnings pressures

NEW YORK (AP) -- Standard & Poor's on Tuesday downgraded Bank of America Corp. on concerns that earnings pressures for the bank may be greater than originally anticipated.

S&P cut the Charlotte, N.C.-based bank's long-term counterparty credit rating to "A" from "A+," and affirmed the "A-1" short-term rating. The outlook remains "negative," which suggests the possibility of more cuts to come.

"We downgraded BofA one notch because we believe that the economic weakness will persist and that in turn, earnings pressures will be more intense than we anticipated as recently as Dec. 19, 2008, the date of our last downgrade of BofA," Standard & Poor's credit analyst John Bartko said in a statement.

The ratings agency also lowered its ratings on the bank's subsidiaries to "A+/A-1" from "AA-/A-1+," the bank's hybrid rating to "BB-" from "BBB," and the hybrid ratings on the bank subsidiaries to "BB" from "BBB+."

"We lowered the hybrid capital rating by four notches because of our view that the risk that BofA could defer dividend payments has increased," the rating agency said, noting the move reflects heightened concern that the bank's management could decide to exercise its option not to pay dividends.

Bank of America posted a $2.39 billion loss for the three months ended in December, hours after it convinced the federal government it needed a $20 billion lifeline to survive the absorption of Merrill Lynch's hefty losses.

Merrill Lynch posted a loss of $15.31 billion for the period -- underscoring Bank of America's assertion that it needed extra U.S. aid in order to absorb the investment bank's bad mortgage bets.

Bank of America is one of the companies at the center of a storm engulfing the U.S. financial system, and has received $45 billion in emergency funding from the government.

On Monday, Bank of America chief executive Ken Lewis told the Financial Times newspaper that the second part of that aid, a $20 billion chunk to support the bank's hastily arranged purchase of Merrill Lynch & Co. last fall, was a "tactical mistake."

Merrill Lynch Execs Paid Themselves $15 Billion on $21.5 Billion in Losses in 2008

No wonder John Thain was sacked. On the surface it appears that he and his management were 'hiding' or at best unaware of enormous losses that were only revealed after they were purchased by the Bank of America, and the recipient of enormous amounts of government funds.

And to make matters worse, they continued to pay themselves huge salaries and bonuses for the year despite those losses.

It will be interesting to see if there is any meaningful investigation of this. We doubt it very much. The Democratic leadership have shown themselves to be a lot of noise and little meaningful action so far, and almost all the Republicans are outrageous hypocrites. Such is the state of the deep capture of the government.

The problem with Wall Street is that there is reward without commensurate risk, pervasive fraud and the misstatement of numbers without the appropriate discovery and deterrence, and a lack of responsible accountability and disclosure to the American people.

Any 'solutions' from the government that fail to address these fundamental problems are not only doomed to failure, but probably represent a looting of public funds by powerful special interests.

If you are holding US dollars and financial assets you are paying for this with an indirect tax on your wealth.


The Wall Street Journal
Merrill paid employee bonuses before sale to Bank of America
LiveMint.com
Thu, Jan 22 2009. 5:30 PM IST

Despite Merrill reporting a massive loss of $21.5 billion in the fourth quarter of 2008, the report noted that the company had “set aside $15 billion for 2008 compensation

London: Collapsed banking entity Merrill Lynch accelerated the payment of bonuses to employees just days before closing its acquisition by the Bank of America, says a media report.

“Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America,” the Financial Times has reported.

The daily pointed out that the timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s Chief Executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.

Last week, the US Federal government had pumped in another $20 billion into Bank of America mainly to absorb losses incurred from the buyout of Merrill.

This is in addition to $25 billion which it ploughed each into Bank of America and Merrill last year, respectively.

Despite Merrill reporting a massive loss of $21.5 billion in the fourth quarter of 2008, the report noted that the company had “set aside $15 billion for 2008 compensation, a sum that was only 6% lower than the total in 2007, when the investment bank’s losses were smaller”.

“The bulk of 15 billion dollars compensation was paid out as salary and benefits throughout the course of the year,” the report said. Further, attributing to a person familiar with the matter, the report said that an estimated $3 to $4 billion dollars was paid out in bonuses in December.

Merrill and the Bank of America shareholders had approved the takeover on 5 December. “Three days later, Merrill’s compensation committee approved the bonuses, which were paid on 29 December,” it added.

Bank of America to Receive Additional $138 Billion in Government Assistance

The situation must have been rather dire indeed. They did not even wait for the weekend.

Its a nice amount of government aid for a single company. Too bad GM is not a bank.

Some animals are more equal than others.


Bloomberg
U.S. Gives Bank of America $138 Billion Lifeline
By Scott Lanman and Craig Torres

Jan. 16 (Bloomberg) -- The U.S. government agreed to invest $20 billion more in Bank of America Corp. and backstop $118 billion of its assets to help the lender absorb Merrill Lynch & Co. and prevent the financial crisis from deepening.

The government agreed to the rescue “as part of its commitment to support financial market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said today in a e-mailed joint statement.

Hours earlier, the U.S. Senate voted to allow the release of $350 billion in financial rescue funds, the second half of the $700 billion Troubled Asset Relief Program enacted Oct. 3 by President George W. Bush.

The U.S. already had injected $15 billion into Bank of America, the country’s biggest lender, and another $10 billion to Merrill to bolster the combined company against the global credit crunch.

Bank of America will absorb the first $10 billion of losses in the pool, of which the “large majority” of assets were assumed by the company in the Merrill purchase, the government said. The Treasury and FDIC will share the next $10 billion of losses.

The Fed will backstop assets with a loan after the government’s first $10 billion in losses, the agencies said.

Future Losses

The asset pool includes cash assets with a current book value of as much as $37 billion and derivatives with maximum potential future losses of as much as $81 billion, according to the term sheet provided by the government.

Separately, the FDIC said it plans to propose changing its bond-guarantee program for banks to cover debt as long as 10 years, from the current three-year maturity. The FDIC will soon propose rule changes to the Temporary Liquidity Guarantee Program, today’s statement said.

“The U.S. government will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” the joint statement said.

Shares of Bank of America plunged 18 percent yesterday, sliding to $1.88 to $8.32 in New York Stock Exchange composite trading after hitting $7.35, its lowest level since February 1991.

The bank moved up its fourth-quarter report to today at 7 a.m. New York time.

Bank of America Requires Significantly More Government Aid, Gives New Life to Nationalisation Rumours

Apparently some of the rumours and early reports may be true, at least with regard to the troubles at the Bank of America.

Just off the Bloomberg wire at 3:30 EST, Bank of America is formally requesting financial assistance and guarantees from the government to complete its acquisition of Merrill Lynch, according to 'people familiar with the matter.'

A later report on CNBC cites the amount of $200 billion to be requested in a new bailout tranche.

Los Angeles Times
Nationalization rumors slam Citigroup, Bank of America
By Tom Petruno
11:09 AM PST, January 15, 2009

The hottest rumor on Wall Street today was that the government was planning to effectively nationalize Citigroup Inc. and Bank of America Corp., perhaps as early as this weekend.

That talk has devastated many financial stocks, and hammered the broader market for a second straight session -- although buyers have been returning in the last half-hour.

The nationalization rumors were put to Federal Deposit Insurance Corp. Chairwoman Sheila Bair at an appearance in New York today, and her non-denial answer wasn’t likely to make investors feel better.

"I’d be very surprised if that happened," she said, according to Bloomberg News.

Some investors weren't sticking around to find out if the rumor was true: Citigroup fell as low as $3.36 early in the session and about 11 a.m. PST was off 43 cents to $4.10.

Bank of America fell as low as $7.35 and was off $1.56 to $8.64 about 11 a.m PST.

The Dow Jones industrial average was off as much as 205 points but has pared that to a loss of 43 points at 8,156.

The Dow’s closing low in the fall market collapse was 7,552, reached on Nov. 20.

The latest dive in the financials began early this week on fears that some of the biggest players have become bottomless pits for government capital, as bad loans continue to mount.

Those fears soared late Wednesday on news reports that Bank of America, which got $25 billion under the financial-system bailout Congress approved in October, was negotiating another capital infusion from the Treasury.

Ryan Larson, head trader at Voyageur Asset Management in Chicago, said the rumor today was that the government would take control of Citigroup and Bank of America via a "nationalization in AIG style" -- referring to insurance giant American International Group. The government took a 79.9% stake in AIG last fall in return for loans and capital injections to keep the company afloat.

AIG shares now trade for about $1.40.

The nationalization rumors may just be so much hysteria, but they show how faith in the financial system has again frayed badly. The average big-bank stock has plunged 24% just since Dec. 31.