– The Bank Of America Non-Settlement “Settlement” (ZeroHedge, June 29, 2011):
Some curious language in the BAC settlement: “…In addition, because the settlement is with the Trustee on behalf of the Covered Trusts and releases rights under the governing agreements for the Covered Trusts, the settlement does not release investors’ securities law or fraud claims based upon disclosures made in connection with their decision to purchase, sell, or hold securities issued by the trusts. To date, various investors, including certain members of the Investor Group, are pursuing securities law or fraud claims related to one or more of the Covered Trusts. The Corporation is not able to determine whether any additional securities law or fraud claims will be made by investors in the Covered Trusts and, if made, to reasonably estimate the amount of losses, if any, with respect to such asserted or potential claims…” Uh, just how is that a settlement.
Also, did Bank of America just admit its securitization trusts violated IRS laws:
“the settlement is conditioned on receipt of private letter rulings from the IRS as well as receipt of legal opinions under California and New York state tax laws and regulations.”
We can’t wait to hear for the cash strapped IRS’ response on this matter.
Bank of America may be about to part with more money than it has earned since 2008 in what will soon be the biggest financial settlement in the industry to date According to the WSJ, the Charlotte, NC-based bank is preparing to pay $8.5 billion to settle mortgage (mis)representation claims (aka the Mortgage putback issue) brought on by such high profile figures as BlackRock, Pimco, MetLife and, of course, the Federal Reserve, previously discussed on Zero Hedge. “A deal would end a nine-month fight with a group of 22 investors that hold more than $56 billion in mortgage-backed securities at the center of the dispute, including giant money manager BlackRock Inc., insurer MetLife Inc. and the Federal Reserve Bank of New York.” Keep in mind that this is actually not good news for the bank, contrary to what the company’s stock is doing after hours, as this still keeps the company exposed to a multitude of other rep and warranty litigation (which will now be largely underreserved), not to mention fraudclosure issues, which are totally unrelated, and which will plague the bank for years and years. Lastly, BAC is largley underreserved (see below) for a settlement of this size which means its Tier 1 capital ratio will likely be impacted due to a major outflow of cash.
From the WSJ:
The deal could embolden mutual-fund managers, insurance companies and investment partnerships to go after similar settlements with other major U.S. banks, arguing that billions in loans scooped up before the U.S. housing collapse didn’t meet sellers’ promises or were improperly managed. Most vulnerable would be Wells Fargo & Co and J.P. Morgan Chase & Co., which along with Bank of America collect loan payments on about half of all outstanding U.S. mortgages.