Buffet and the Bank of America Conundrum.

    Buffet is swimming in more Bank of America cross currents than an ocean salmon fighting his way up the Rogue River to spawn.

    Buffet's announcement today of a $5B investment in preferred shares of BOA is a monumental event in a raucous day on the stock market. Despite the gyrations today, partly on European news and party positioning for Bernanke's speech tomorrow, Buffet's actions should have near term favorable implications for BOA, bank stocks in general, the stock market in general, and as all boats are lifted and affluent consumers step up to the Christmas season, the re-election of Obama--and the pressures on Ben Bernanke.

    Bernanke has just had a FATWA issued against him by PIMCO. "No more Quantitative Easing, Ben, on fear of the death of your reputation and perhaps worse if you travel to Texas." As the stock market, as opposed to the bond market, has been trying to intimidate Bernanke all week ahead of his speech tomorrow in Jackson Hole, Wyoming, the little personal relief rally offered Ben by Buffet is probably welcome news. In other words, Ben won't have to do QE3 in order to protect the stock market.

    Buffet's investment comes at a time when BOA's future is uncertain by virtue of the attempts to settle grievances from the mortgage loan crisis in the global deal being proffered by 50 state Attorneys General, the Obama administration and Ms. Kyle, the board member of the Fed who supposedly represents the public, along with the New York Fed.

    Enter Eric Schneiderman, Attorney General, N.Y. Schneiderman, who was just kicked off the Settlement Committee, has just filed to block a settlement regarding Countrywide of 8.5B, which is separate from the overall settlement, engineered by BNY Mellon. Additionally, Scheiderman has countersued BNY Mellon in what is a far reaching event in and of itself not to mention it possibly undermines the global settlement of which BOA is a part. 

    In an interview today on Bloomberg radio, Chris Whalen, a name on the Street, argued that Judge Kapnick has a very heavy responsibility. Schneiderman has directly accused an MBS trustee, MBY Mellon, of fraud. What is at stake, according to Whalen, are the securities laws of New York state, which underpin the entire financial industry in N.Y. What's more, Whalen broached the subject of whether the eventual outcome of real litigation against BOA, instead of a sweet heart deal, could bring down the bank as we know it. In other words, bankruptcy and reorganization. I assume all of this has been figured into Buffet's calculations, after all he once bet on the possibility of earth quakes in California.

    I still believe in fantasy, particularly one where I swim upstream to breed and leave the planet knowing that wrongs have been righted:

    The judge blocks the 8.5 Countrywide settlement.

    Schneiderman wins the suit against BNY Mellon

    The BOA files bankruptcy.

    BOA's morgage operations are sold to Wilbur Ross who receives a loan from the Fed to straighten the mess out and clear the mortgages.

    Obama gets re-elected because he continued to receive contributions from people like me instead of the Wall St. types he is romancing with the global settlement on mortgages.

    As for Buffet, he breaks even and eats an ice cream cone from DQ.


    Here are a couple of articles, sorry can't give the specific addresses.

    Reuters, Aug 5, article by Alison Frankel, "NY AG's BOA filing...."

    Rolling Stone, Matt Taibbi, August 24, "Obama goes all out for dirty banker deal"

    Yeah I caught Taibbi's and intent to read it a couple more times.

    Just one thing has struck me about all this:

    How do you tie criminal prosecution with civil proceedings?

    Thousands of people have blood on their hands and still have a lot of blood in their hearts! And I am sorry, but I want those thousands prosecuted!

     those thousands prosecuted!

    I want those billions awarded (by juries...)


    Here;  here

    Better claw back those bonuses;.....crooks .....poison fruit 

    Sadly, while our clawback program languishes, the sonsabitches are blowing all our money on lamborghini's and high priced pussy.  (not that there's anything wrong, etc, etc...)

    Frack.  So Buffett bought BOA so Obama would not be forced to.  I knew I should not have let yesterday's tweets about the possibility of nationalizing BOA get me all atwitter. It would have been a good thing to do but imagine how GOPers would have spun it next year. It would have made Buffet's fundraiser for Obama next month almost completely pointless.


    It will probably bring in some big bucks.  Wall $treet owes Obama big time for this one.


    Thanks. And here is a question. With the leverage Schneiderman and New York state have, could pressure now come to bear on BofA to break into parts? If so at least a big part of the current mortgage portfolio could be isolated. (I'm really going off the deep end here). Having the portfolio isolated, would it facilitate a direct intervention by gummint in a way which would temporarily nationalize the company, then have it sold to investors who would straighten the mess out, clear out mortgages, etc. The Fed could perhaps be involved. Just dreamin'. It's not all the mortgages but it's a large percentage of them.

    Sorry so late getting back to you.  I am not at all sure I understand your questions.  What leverage does Schneiderman and NY state have?  Not only is BOA national but also probably easily employs fifty lawyers  for every state attorney general.  Settlements will be negotiated with maybe a few people thrown to the lions for show.

    Now a question for you.  Why do you propose that if the company is nationalized and cleaned up that it subsequently be sold back out to private investors.  Why not use it as the foundation of a banking sovereign wealth fund, one that can act as a countervailing power to the Fed and its primary dealers.  Remember that although the Federal Reserve Bank currently acts as our central bank, it is essentially the bankers' bank, not ours.  The arrangement was supposed to be mutually beneficial and has been for the most part.  But times change.  Like other industries, the financial sector is globalizing and looking at greater opportunities outside the US.  A reevaluation of the arrangement seems like a prudent thing to do, no?


    Strange things are afoot at the BofA. Interesting move.

    Any way it goes ... the venerable institution, DQ, is likely to see an uptick with all the positive free press it's they've been getting of late! :-)

    The market has been fascinating today, one of the most complex I can remember. First it was up on the news of BOA. Then down on rumors of Germany being downgraded. Then I think the ramifications of the N.Y. legal actions by Schneiderman are potentially disastrous to banks. Wouldn't it be interesting if the breakup and down sizing of banks is the long term result of all of this?

    Oxy, that whole Buffett, BOA deal was a head-scratcher.  Thanks so much for your insight here.  I'll probably never understand the ins and outs of it all, but it's been fun trying. (If "fun" is the right word.) 

    Glad there are people like you aboard who give it the attention it so richly deserves.  From my simple-minded POV I get it that the more complicated it gets, the happier the scoundrels are.  They want those waters muddied.  You and a few smarties know how to clear it up.  Thanks.

    Thanks. You are too kind. While I would never try to pass myself off as someone who's learned either in law or economics, it is a challenge to try and put the many factors surrounding the BofA investment into a matrix of some kind.

    What I find really interesting is the situation Obama and Geithner are in . It is as if they are staring down the same gun barrel of a financial industry in potential disarray as they were three years ago. And they will probably do exactly the same thing they did before, give the financial industry a pass, for the same reasons.

    Ms. Kyle's apparent collusion here with Geithner is along the lines of quicker resolution of foreclosures which are now hurting people everywhere. But it seems as if the powers have always taken the position of saving the people by saving the system but in the process have weakened our entire sense of justice in this country by capitulating to the banks.


    Not Anonymous. Sorry, Ramona, got bumped off the site.

    Everything on our side of the pond seems to hinge on whatever's going on inside BOA right now ... and keeping a lid on it, apparently. I mentioned yesterday the feeling this is some warped parody of the Tabloid hacking scandal with BoA serving the role of Rebecca Brooks - protected at all costs because they keep the scandal one step farther removed from granddaddy Murdoch. Miller (Iowa) dismissing Schneiderman (New York) from the settlement negotiations is pretty stunning. Turns out Miller received 88 times more contributions from the financial sector between last October and the election than he had for the entire previous decade.

    I wonder what the Schneiderman/Miller moves do for the resolve of other most-interested states like DE, CA, NV, etc. who have also been balking. What it seems they are trying to do with the proposed settlement - and the underlying reasons they appear to be doing it - are all pretty messed up. I sure wouldn't want to be the AG in a place seriously suffering from the foreclosure crisis trying to get reelected (while voters face the obvious wave of seizures this deal is going to immediately create) after signing on to blanket immunity. Man I hope they've finally tried to cross a bridge too far.

    Have I mentioned, I really hate Geithner?

    Mene mene tekel upharsin

    The lies and deception are catching up. 

    Not enough fingers to plug the dike?

    One of the significant things in all of this is that the action is in New York state, away from the Congress, away from the Obama administration. Of course there is always the Supreme Court. But there is so much residual anger against the banksters that a resersal by SCOTUS might just be the start of the revolution. I guess I'm getting ahead of myself.

    No your not getting ahead of yourself,

    The bankers knew they had to get theirs first, they know the revolution is coming.

    Were playing catch-up.

    The Sea of mankind is agitated.

    This rising tide isn't lifting the ships; its about to swamp them.

    Obama protect us? Whose US

    You hate Geithner? You mean because he is an insouciant, insufferable, stove-up financial engineer who was put into a position requiring integrity, entrepreneurship, a fighting spirit for the man on the street and a fire in his belly to rigtht the wrongs of the fraudulent banking industry? That Geither? No, I don't think you mentioned it.

    Yes, that's the one. Well, I do.

    To quote Pat Garrett (that no good, low down, back shootin', friend betrayin' skunk) "It's the baby faced ones ya gotta watch out for..."

    Yeah, what is that downward side glance with the uplifted eyes? My dog does that when she's just peed on the guest room bed.

    the uplifted eyes? 

    And the blinking...lotsa blinking.

    Banker flirting.

    I rather incline towards the judgement that it represents a "tell", viz, banker lying.

    Pretty sure that *is* banker flirting.

    You'd better watch your back, you know they are?

    Not Gerber  ............it's  Giethner.

    It really spelled out Obama's *loyalties when he gave Geithner a pass on the tax fail, but made Van Jones **walk the plank on a humbug.



    *Bevis: Hey, Butthead, you said Obama and loyalty in the same sentence, heh-heh.


      **Piratese for "throw under the bus  .".

    They just don't get it

    I was over at TPM  earlier, the Obama-apologist were coming on strong.

    They just don't see what you, and I see  

    They just don't get it. and for that reason were about to get it again.

    You raised the issue that the global settlement would create a wave of seizures the deal would create. If you happen to see this, I'd be interested in your further take on it. Does it relate to the chain of custody arguments which are now providing consumers with a method of fighting foreclosures.

    contributions from people like me instead of the Wall St. types he is romancing with the global settlement on mortgages.

    You weren't kidding when you said "fantasy", were you.

    Did I ever tell you about my plans for Angelina Jolie and me....?


    Where d'ya plan on stashing all them kids?

    Thanks to a quirk in the social security program, I can adopt them and Prez will pay Angie half a million dollars,(maybe more) to help her get over Brad...(uinfortunately, Angie does not need half a million...perhaps this plan needs a third world venue...)

    I thought you liked those Northern clime stand-offish blondes like January Jones.

    Yeah, but Angelina has the cheekbones and the crazy pussy (stomp-down psycho pussy...)

    That woman done made you loco.

    Not for the first time, not for the last...

    Okay, this is how I see it.

    All the big guys were sitting in the Oval Office with THE big guy and somebody spoke up:

    We need a buffer between us and the banks.

    So Biden piped up:

    Okay, I will get him on the phone right now!

    And that was that!

    You see Joe had not recently replenished his hearing aid.

    Well, actually, Obamer met with Buffer up in Marther's Vineyerd this week. I don't suppose they discussed Buffer's impending deal and whether Obamer would knee cap Eric Schneiderman.


    Well which side exactly is your Buffet buttered on?

    The side where Buffet forks over the dough.

    The bankers were clamoring for another course at the table, someone suggested Obama should set it up as a buffet, that way the bankers could take whatever they wanted.

    They didn't much care for claw-backs.

    Let the people eat them along with the cake.

    I am no conspiracy theorist! This came to me directly in a dream.

    In the meeting with Obamer, Buffer wanted to clear up some things about a wind down by FSOCK in the slim chance that the legislation in New York would force BOA's hand. After all, nothing has ever been wound down by FSOCK, how does it work. Sec. Treas holds the cards.

    Depending on the dissolution philosophy, would the bad debt all be loaded into one entity, or two, where a government/private cum Federal Reserve mish mash could deal with it?

    Or would the Sec. Treas. say, hell, just put it into bankruptcy.

    So, that covers Obamer, Bueffer, and the blinking swallower of words, Geithner. Just don't know what happens to Marther Vineyerd in this scenario.

    I suspect that the biggest factor at work here was that Buffett could get himself high income preferred stock and a cheap option on 7% of the entire company -- a no lose proposition even if the market is correct and BofA's assets aren't worth as much as management says.  Moynihan and his team saw this as a way to save their jobs and somehow, at least yesterday, BofA's other shareholders didn't quite realize the extent to which Moynihan and co. let the Oracle dilute them.

    Right. As usual he cut himself a very good deal. Not to mention that if this action is able to lift bank stocks in general over time, he is also making money on any remaining warrants he might have in other banks.

    For the record I'd like to define some of the Court actions.

    In 2010 a group of investors in 3 MBS's stemming from Countrywide sent the Trustee, BNYM a letter demanding they sue Countrywide (BOA) to take back mortgages. Stonewalled by BNYM, the group, under the title, Walnut Place, LLC, filed an action in Feb '11 with the Supreme Court, NYS.This action was assigned to Judge Kapnick.

    In the meantime BNYM reached a settlement with 22 investors in 530 MBS's, in secret and without informing Walnut Place, and filed it with the Court. NYBM specifically asked that Judge Kapnick to be assigned, for the reason that "...if approved, the Settlement (with BOA/Countrywide) will resolve the claims raised by the plaintiffs in Walnut Place, LLC"

    As a separate action, on Aug 5 Schneiderman filed his motion to intervene. That motion included counterclaims against BNYM :

    1. Breach of Fiduciary duty in negotiating the $8.5 B settlement.

    2. Violation of Executive Law

    3. Violation of General Business Law(under the Martin Act)

    Schneiderman's motion also says the AG has potential claims against Countrywide and BNYM.

    And in what looks like a separate action, around Aug 5, Walnut Place, LLC filed a motion to intervene in the BNYM Settlement.

    Separately, Schneiderman was kicked off the global settlement(not the same as the BOA/BNYM $8.5B deal) being engineered by the 50 Attorney's general, etc. As long as New York is a hold out on the global settlement of 50 other states, Trustees signing on to that agreement would still have to face actions by New York State, and thus are less inclined to act now.

    Breaking news on BofA $8.5B settlement:

    The entity known as Walnut Place, LLC has just filed to move the venue of the $8.5 B settlement from New York State to the U.S. District Court in Manhatten.

    The filing claims that the size of the case qualifies as a "mass" action, giving federal courts jurisdiction.

    BofA wisely chose Article 77 in order to provide a mechanism to make the Settlement binding upon all 530 trusts. Class action in Federal Court would allow parties to opt out of the settlement.

    BofA counsel calls it a delaying tactic.

    Apparently there is not Article 77 precedent for cases of the magnitude of the BofA Settlement.

    In the very least, the filing today may throw a monkey wrench into Judge Kapnick's schedule of an August 30 deadline for additional bond holders to intervene in the Settlement. In other words, opposing bond holders may have more time to get organized to file motions. Apparently the Settlement was done without contact with other than the 22 largest parties, and those opposed have been slow to act because their expectations for put backs were low.

    Curiouser and curiouser.

    Ordinarily, the response would be "Gee, wonder what they're hiding." But in this case it seems there is already a pretty good idea of what they are hiding and the real question is if anyone will be able to stop them from flushing it all down the regulatory memory hole in a massive whoosh of graft and misdirection.

    Could it be; the Obama administration is not a defender, of truth and righteousness.

    "everything hidden, will be exposed"

    Everyday that passes, I am less inclined to give this government, my full faith and confidence.

    What right do they have to say, they rule by the consent of the governed  

    When they lie, they breach that consent.

    What right do they have to say, they rule by the consent of the governed  

    When they lie, they breach that consent.

    Oh, that one's easy. The same folks who own them own all the TV stations. Turns out, a while back they sued in court, and yes ... anyone put on air or in print has the total right to lie (and be fired for refusing to lie). Sunrise in America or some shit.

    Wait a second. I read that wrong. (Got "Walnut Place" confused with "Timberwolf" or somesuch GS derivatives deal in my head). I suppose the comment stands in the more general sense ... ;-)

    Not sure what to think about this move (and the last couple days in general) ... could be hawks looking for a kill, could be vultures looking to pick over bones ... some combination? ... folks chasing their tails? With all the action, it certainly seems flocks are increasingly starting to gather expecting some sort of feast.

    Some folks are indicating Buffett has started treating the TBTF banks essentially as Treasuries; betting on another bailout. Which would indicate the powers that be have pretty much accepted as given this is going to trainwreck. Doesn't bode well for the hope of breaking up the banks, really.

    It's a  mind twister.

    By the way, Walnut Place is mentioned up a couple of posts. It's a smaller entity which filed an action against BNYM before the bank went behind their backs with the larger Settlement.

    But this investment still seems un-characteristc of Buffet. This is not 2008, there will not be that kind of bailout. FSOCK exists to prevent the bailouts. I subscribe to the view that Buffet is betting against Schneiderman. Probably someone has the NY Judge in their pocket and that's why Buffet forged ahead. The woman Kyle, Fed member, has a big stake in the overall settlement with the 50 states.

    The bailout might be in the form of BOA just spinning off Countrywide (and do what? I don't know) 

    In the final analysis, Buffet is senior to the common stock holders as well as the bond holders of BOA. So in a break up of the units I assume he would be the last person standing on this pile of companies. Now that would really make him salivate.   

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