Tag Archives: aig

Pushing Back the Banks in the Wake of Occupy

tumblr_lt7r2hsiK51qav5oho1_500 Orleans Given all of the niggling around the impact of the Occupy Wall Street movement and its impact, it is worth raising some footnotes a little higher on the tally sheet where the results are important, but perhaps unnoticed.  Take these recent developments into account.
Small example, but telling is that JP Morgan Chase, perhaps the most arrogant of banks led by Jamie Dimon, announced that they were NOT planning to add the surcharge onto customers’ accounts for use of debit cards.  Bank of America, which had led the jump into the deep water with their announcement of the $5 per month charge, has also indicated that it is perhaps backing up from its Netflix moment in the wake of customer response.

As we have discussed earlier, lawyers who have successfully litigated with these outfits have called this nothing but grant larceny.  I had the discussion with my banker at Capital One who could only rationalize that it was being considered because “they had to raise money somewhere.” We all know that the defense that “you needed the money” is both the truest and least effective response any criminal can make.

The Times did a sad service with a front page article on the shrewd calculations that Bank of America and its colleagues have made by pushing direct and automatic payments for customers to their regular vendors from utilities to credit card companies to home mortgages and back again.  The story was an easy reminder for readers both how easy it is to sign up for such payments and how hard it is to unravel them to the degree you become welded to your bank regardless of the outrageous charges and abuse.   We are near the point where we are going to need to demand an easier “exit” policy from our banks, just as we had to achieve with our cell phone companies around keeping our phone numbers in recent years.  The little things can kill you!

Even though Occupy has not been successful in seeing any traction on the urgent “Geithner Must Go!” campaign to hold him responsible for some much of the Wall Street pandering and pampering he led first as the critically important head of the New York Federal Reserve Bank, the storm may finally be coming on the horizon.  Amazingly a story in today’s Times documents the giveaway with AIG where banks were paid in full from the federal coffers and were not asked to take any haircut, but in face were even required to shave.  Even banks that offered to take less that they were owed were informed by Geithner’s Fed, since he was head at the time, that they would be paid in full.

At least Geithner, now at Treasuery, with Ben Bernacke at the Federal Reserve are having to line up to finally provide some regulation for non-bank banks in recent hearings in the wake of Occupy.  Of course it is not enough, but even bringing 30 financial institutions like Mass Mutual, Zurich, some hedge funds and outfits like Blackrock and others under regulation because they control over $50 Billion in assets is something.  The Financial Stability Oversight Council still has to wait for comments so the lobbyists will be feeding at the trough, but at least now they need to realize that they might have to reckon with real, immediate, and potentially powerful political outrage if the boys give yet another break to the bankers.

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Bank of America’s Countrywide Ghoul Strikes Again

Nebank of americaw Orleans Reports from Bloomberg News and the Los Angeles Times are raising the specter of Bank of America filing for bankruptcy for its Countrywide mortgage unit detonating the “nuclear” option to save the parent company and run from the toxic mortgage load bought in 2008.  I wonder if this doesn’t finally give another explanation to Bank of America’s continued resistance to rational modification of mortgages to allow mortgage holders to stay in their homes.

According to these reports, Bank of America, its lawyers and strategists have spent time and money making sure that they contained the Countrywide operation as a separate entity.  The Bloomberg report notes:

“Countrywide has $11 billion in assets that could be depleted through demands to repurchase defective mortgages,” Jonathan Glionna of Barclays Plc said in an Aug. 31 note. After that, Bank of America may not have any obligation to pay claims from Countrywide’s creditors, he said.

Typically, a corporation that acquires another firm’s assets isn’t liable for the seller’s debts, unless the transaction is considered a de facto merger or there was fraud in the takeover, Robert M. Daines, a Stanford Law School professor, wrote in a legal opinion prepared for BNY Mellon, trustee for the Countrywide mortgage bonds. Daines analyzed whether Bank of America would have to pay bond investors if Countrywide couldn’t.

American International Group Inc. (AIG), the insurer that sued Bank of America last month to recoup more than $10 billion in losses on Countrywide mortgage bonds, argued that the bank is a legal successor to the unit. New York-based AIG cited a series of transactions by Bank of America in 2008 that “were structured in such a way as to leave Countrywide unable to satisfy its massive contingent liabilities.””

Obviously one reason all of the big whoops suing Bank of America from Freddie to Fannie are making sure in any litigation or settlement that BofA is on the hook for Countrywide is their fear that the company will finally jettison this toxic nightmare.  But for poor, working homeowners the problem in getting modifications and preventing foreclosure is that Bank of America clearly has to continue to play pretend and pump up the fake value of Countrywide mortgages that are still on the books at the loan terms rather than the underwater value.

In Phoenix where values have been halved and Arizona Advocates and Actions has been mired in the modification process with Bank of America few if any modification offers make financial sense for homeowners because the bank continues to pretend that houses now worth little more than $100,000 are still holding the $250,000 loan value of the original mortgage.  Restating the mortgage to the actual value would save millions of homeowners.  Unfortunately, injecting reality might bring the whole house of cards down, not just the Countrywide unit, but all of the nation’s largest financial institution, Bank of America.

What a mess!

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