Monday, January 3, 2011
Bofa Takes a $2 Billion Q4 Charge For GSE Repo
Tim Mayopoulos' Revenge #1: BofA Takes $2 Billion Q4 Charge For GSE Repurchase Obligations
Two years ago, Ken Lewis decided to scapegoat then General Counsel (and incidentally the guy who just happens to know more about BofA's dirty laundry than almost anyone else in the world, most certainly including Julian Assange - and that two year non-disparagement clause is pretty much over...) Tim Mayopoulos for no reason whatsoever, resulting in the termination of the latter without cause. Subsequently, we learned that this action was taken purely to prevent then head of Investment Banking at the world's laughing stock of a C-grade investment bank, and current CEO, Brian Moynahan, from going somewhere (rumor has it the 4th Bangalore Bank of Junk Bond underwriting had expressed a preliminary interest, and even provided a $0.69 retention bonus). Subsequently, Mayopoulos ended up as GC at perpetually insolvent GSE Fannie Mae. And since then, the bad blood has been flowing, most recently involving the dust up between the GSEs which have been demanding legal action against the zombie mortgage lender (BofA for the cheap seats) accusing it of Reps and Warranties breaches (and as the recent filing by Allstate showed, there sure are many of those). And this is just the beginning. As of a few minutes ago, we have learned that Fannie and its scorned GC just scored another victory against that other just-as-insolvent organization.
Per Bloomberg, Bank of America Corp. said it will take a $2 billion impairment charge on home loans and insurance and a $3 billion provision for repurchase obligations to government sponsored entities Freddie Mac and Fannie Mae. Oddly enough this is precisely in tune with what Zero Hedge predicted three months earlier, namely that BofA's massive underreserving will mean a surge in charges and write offs as the bank scrambles to reconcile its insolvent books with reality.
In the meantime. expect to see the animosity between Fannie and BofA get real over the next year as the fraudclosure scandal, and lawsuits like the most recent one by Allstate, keep dropping new hints of massive fraud and as Mayopoulos continues acting (righ
Per Bloomberg, Bank of America Corp. said it will take a $2 billion impairment charge on home loans and insurance and a $3 billion provision for repurchase obligations to government sponsored entities Freddie Mac and Fannie Mae. Oddly enough this is precisely in tune with what Zero Hedge predicted three months earlier, namely that BofA's massive underreserving will mean a surge in charges and write offs as the bank scrambles to reconcile its insolvent books with reality.
In the meantime. expect to see the animosity between Fannie and BofA get real over the next year as the fraudclosure scandal, and lawsuits like the most recent one by Allstate, keep dropping new hints of massive fraud and as Mayopoulos continues acting (righ
One Minute Macro Update
US: Futures higher in the early morning as the market rings in the New Year. With today's data featuring the ISM readings for December, expectations are high for the start of 2011. The week ahead will likely be bolstered by a slew of economic data that should serve to feed the positive tone, however we caution that the risks to the global economy remain high.
Europe: London closed and eyes return to the periphery with issuance scheduled this week from France, Belgium, the Netherlands, Malta, Germany and Portugal. We believe the European debt story will continue to accelerate in 2011 and that a true fiscal union combined with haircuts will be the ultimate solution. We also note that with US QE2 priced in (and before the inevitable QE3), the divergence between the EUR and European sovereign credit is unsustainable.
Asia: China December manufacturing PMI fell to 53.9 from a November 55.2 reading. The slowdown here will continue as tighter policy takes hold and extremely high levels of new loan growth are dampened.
Via Brian Yelvington of Knight Capital
Europe: London closed and eyes return to the periphery with issuance scheduled this week from France, Belgium, the Netherlands, Malta, Germany and Portugal. We believe the European debt story will continue to accelerate in 2011 and that a true fiscal union combined with haircuts will be the ultimate solution. We also note that with US QE2 priced in (and before the inevitable QE3), the divergence between the EUR and European sovereign credit is unsustainable.
Asia: China December manufacturing PMI fell to 53.9 from a November 55.2 reading. The slowdown here will continue as tighter policy takes hold and extremely high levels of new loan growth are dampened.
Via Brian Yelvington of Knight Capital
Subscribe to:
Posts (Atom)