BOA Headed for Bankruptcy? Tricky But Effective

EDITOR’S NOTE: First, my analysis is that the loss posted by Bank of America is as fictitious as everything else they have been putting out as Press Releases and filings, but there is a grain of truth in it if they acquired the losses to be expected from payouts to investors and damage judgments to borrowers.
Second, it is noteworthy that other mega banks are reporting incredible profits while the rest of the economy stinks. One wonders how they could be making money while commerce around the world is doing so badly, employment sickening in this country and new business start-ups are faring so well.
Third, this seems like the launch of a strategy to create credibility to filing for bankruptcy for Countrywide and maybe Merrill Lynch, which not only gives them relief from creditors, but leaves the Bank intact. Of course that would be immoral if the average consumer or homeowners tried that sort of thing, probably illegal as well.
Fourth the PR on this spinning news, is that they get to distance themselves from the bad guys who are making huge profits and make it seem like they got stuck too. The next step would be reminders about pressures from the Federal Government to acquire Merrill Lynch and Countrywide.
NY Times——————————————————————————-
January 21, 2011, 7:21 am Investment Banking

Bank of America Posts 4th-Quarter Loss of $1.2 Billion

Brian Moynihan, chief executive of Bank of America.Brendan Hoffman/Bloomberg NewsBrian Moynihan, chief executive of Bank of America.

Underscoring the still-lingering effects of the mortgage mess, Bank of America reported a fourth-quarter loss of $1.2 billion, or 16 cents a share, as write-downs and charges tied to the weak housing market and soured home loans offset stronger results in the company’s core banking business.

For the full year, Bank of America lost $2.23 billion, or 37 cents a share.

The earnings report was complicated by a series of one-time gains and losses, most notably a $4.1 billion charge for mortgage repurchase claims, including the impact of an agreement late last month with Fannie Mae and Freddie Mac, the government-sponsored mortgage giants, to buy back troubled loans. In addition, Bank of America took a noncash charge of $2 billion to reflect a write-down of goodwill on its acquisition of Countrywide, the subprime mortgage giant, in 2008.

Excluding the goodwill charge, Bank of America earned $756 million, or 4 cents a share in the fourth quarter, on revenue of $22.6 billion. The consensus among Wall Street analysts called for a profit of 14 cents.

As the nation’s largest bank, Bank of America, based in Charlotte, N.C., is closely watched as a proxy for the broader financial services industry, especially since it provides everything from consumer and business loans to retail banking to sophisticated Wall Street trading through its Bank of America Merrill Lynch unit.

Trading results were disappointing, with results in fixed-income trading hurt in the fourth quarter as the bond market rally reversed course and bond prices unexpectedly fell. It’s the same issues that dogged the reports of Goldman Sachs and Morgan Stanley this week.

Like other big banks, Bank of America reduced the reserves it had set aside to protect against potential losses across its banking businesses. That release of reserves bolstered overall profit by more than $1 billion. Also helping were gains from the sale of the majority of its stake in BlackRock, the giant asset manager.

The agreement with Fannie and Freddie, painful as it was in the quarter, helped ease investor worries about one major liability from mortgage loans made by Countrywide, the subprime specialist Bank of America acquired in 2008. But the fate of tens of billions of other troubled Countrywide loans, owned by private investors, remains a worry.

“Last year was a necessary repair and rebuilding year,” said Brian T. Moynihan, Bank of America’s chief executive. “Our results reflect the progress we are making at putting legacy – primarily mortgage-related – issues behind us. We earned $10.2 billion before goodwill impairment charges, rebuilt our capital positions, reduced the risk on our balance sheet, and shed more than $19 billion in assets that didn’t directly serve customers and clients.”

19 Responses

  1. Brian T. Moynihan’s statement regarding “making progress and putting their legacy issues (mortgage/securities) behind them sounds like the CEO from BP wanting his life back.
    For the last 1 1/2 years I’ve had three different short sale offers on the table and not one went through. Again, Private Mortgage Insurance Fraud. Anyone?
    Now they are taking the Deed in Lieu of Foreclosure and monetarily they get squat. Until they sell the property. Their loss would have been minimal with the short sale. Times me by how many equals bankruptcy.

  2. E. Tolle,

    Yes — but I am referring to disposal of non-performing loans by Wall Street. The market for distressed assets is huge. Greenspan was a big fan of this market. While homeowners certainly lost on bogus mortgages and homes, and Wall Street nearly shut down during crisis, others profit by the losses. These profiteers are being hidden in court.

    With the likes of Greenspan and former regulators joining the market of the distressed debt industry — concealment is difficult to break.

    Sewell Chan (my below post) quotes Joshua Rosner of Graham Fisher — “The ‘too big to fail’ concept is not just about assets. It’s also about relationships.”

  3. Steve,

    That’s a better response than the one I got from my QWR! Mine said they were not aware of the existence of my authority to request the original note. Hah.

  4. Why do people in the financial sector make so much more money than the rest of us? Mainstream economists claim that your income reflects the economic value you produce — at least in free and open markets. But are proprietary traders, for example, really 100 times more valuable than neurosurgeons? In the UK, some economists say no: The British New Economics Foundation calculates that “While collecting salaries of between £500,000 and £10 million, leading City bankers destroy £7 of social value for every pound in value they generate.”

    Let’s try a back-of-the envelope calculation of Wall Street’s net social value. Compare their bonuses and profits for roughly the last five years (about $500 billion) with the economic losses produced in the financial crisis the bankers caused (about $4 trillion in value destroyed, not counting the ongoing travails of the 22 million people who haven’t yet been able to find a full-time job). For every dollar “earned” on Wall Street, about 8 dollars were destroyed.

  5. Kickboxer,

    So what happens to mortgages once they file bankruptcy

    You’ll be stuck like the rest of us sending Qualified Written Request to the new loan servicer, who will just reply,” We are only the loan servicer. We don’t have to answer anything under RESPA. To request originating loan documents you must contact the loan originator which is now bankrupt. Good Luck.

  6. Anon, you wrote:

    “But – always someone is profiting — always SOMEONE is profiting.”

    I believe in our new reality with Wall Street and it’s revolving door to Capitol Hill, this is more akin to a casino bet. While someone, as in banksters, are always profiting, it’s at common taxpayers expense. Always.

    As you know, for every win on Wall Street there’s a loss, someone taking the other side of the trade. However, increasingly, the casino, a.k.a. the banksters, also take in their rake, or percentage per game or transaction. Add to this flash trading when our regulators look the other way and the average citizen and their pension is doomed, in more ways than one.

    The problem here is debt, levied upon us by the central banks. All of our woes would be gone rather quickly if we could explode the myth that we owe our existance to the banks. Instead of states defaulting, they’d be growing healthy communities.

    Instead of deficits entangling our grandchildren, we’d be teaching them how to nourish the elders in our lives. Asset instead of debt.


    They serve no purpose save to heave debt upon our townships, cities, counties, states, and countries. All the while they count the monies and shower their excesses on their severely corrupt and underperforming leaders in the form of massive bonuses and extreme paystubs.

    We can easily do without them. The experiment is over, done. It proved itself to be a very bad experiment, with the patient, the world’s economy, nearing death. We MUST pry open the clawed fingers of these banksters and retrieve our money supply, and the governance of same.

    Otherwise, we will continue to live lives shackeled in the under-bellies of slave ships, doing what we’re told by elitists who control the entire monopoly board. We’ll pick more cotton on their behalf, getting a few biscuits here and there.

    And soon, after they’ve added all or most of our properties to their vast holdings, we will be forever at their beck and call. They will be able to do as they please with us.

    Their time is up. We must peacefully resign from their system. Fight them in court and in relationships. Education is key. We can’t move forward while shackeled. Enough is enough. Teach others. Let’s resign together. En masse.

  7. E. Tolle,

    Love those cartoons!!!! Always leave out eating — big pastime.

    Incredible — but exactly what is happening. Ironic that a cartoon can say it best.

    Homeowners were solicited — it was the only source of profit banks thought they could make a big bundle on. All America had left — was the American home — now up in smoke.

    But – always someone is profiting — always SOMEONE is profiting.


  8. Anon, that piece boils my blood. It is so past time to dropkick these rat bastards out of any power roles whatsoever!


  9. Anyone have $500,000.00 to invest???

    See Below

    In Marketing of a New Mortgage Fund, Pimco Lists Former Bush Officials
    Published: December 16, 2010

    New York Times
    Business Day

    WASHINGTON — When Pimco, the huge bond manager, approached investors recently to raise money for a new fund that would buy soured mortgage securities from ailing banks, it promoted its expertise by listing several former top Bush administration officials and Alan Greenspan, the former Federal Reserve chairman.

    Jay Mallin/Bloomberg News

    Neel T. Kashkari, who ran the Wall Street bailout program for the Treasury, now works for Pimco as a managing director.
    Add to Portfolio

    * Goldman Sachs Group Inc

    Go to your Portfolio »

    In a confidential presentation to investors, Pimco listed as either consultants or employees an all-star constellation of former federal officials, including Mr. Greenspan; Joshua B. Bolten, who was White House chief of staff under George W. Bush; and Neel T. Kashkari, who ran the Wall Street bailout program for the Treasury department.

    Those former officials, as well as others hired by Pimco, helped set national economic policy during the run-up to the financial crisis of 2008, which was prompted by the collapse of the housing market.

    Now investment firms like Pimco are looking to profit by buying distressed mortgage debt from banks, which are under pressure to raise cash and hold more capital.

    While Pimco did not create shoddy mortgages or contribute to the crisis, its presentation to investors, which was prepared in October, suggests that former senior officials are now poised to help investors benefit from the disastrous financial developments that occurred while they held power in Washington.

    The presentation, a copy of which was obtained by The New York Times, also reflects Washington’s revolving door where officials leave government to pursue lucrative opportunities working with industries they once dealt with while in public office.

    “This highlights the all-too-close relationships between our largest financial institutions and the people who acted as their regulators,” said Joshua Rosner, managing director of Graham Fisher & Company, which advises institutional investors, after the presentation was described to him. “The ‘too big to fail’ concept is not just about assets. It’s also about relationships.”

    Mr. Greenspan, who led the Fed for 18 years until his retirement in January 2006, has been criticized for not using the central bank’s regulatory powers to crack down on subprime mortgage lending. He has been a paid adviser to Pimco since May 2007.

    Reached at his consulting firm, Mr. Greenspan expressed surprise on learning that he was listed as a “special consultant to Pimco” in a marketing presentation.

    “Pimco has never asked me to assist in the marketing of any of their products, and I never have,” he said. “I am a consultant to them on global economic and financial issues.”

    Another special consultant was Mr. Bolten, a former Goldman Sachs executive who worked in the White House for the eight years of the Bush administration.

    As the chief of staff from 2006 to 2009, Mr. Bolten was intimately involved in economic policy. He helped lure Henry M. Paulson Jr., a fellow alumnus of Goldman Sachs, to serve as Treasury secretary, and was Mr. Paulson’s main liaison to the White House in 2008, when the Treasury worked frantically with the Fed to avert a collapse of the capital markets.

    Mr. Bolten, who is now a visiting professor in the Woodrow Wilson School of Public and International Affairs at Princeton University, did not respond to phone calls and e-mails requesting comment.

    The presentation also names two other Bush administration officials who are now executives at Pimco.

    One is Mr. Kashkari, who was the assistant Treasury secretary charged with managing the Troubled Asset Relief Program, which Congress set up to rescue the financial services industry. The other is Richard H. Clarida, who was the top economist at the Treasury in 2002 and 2003. He is now an executive vice president at Pimco’s New York office, as well as a professor of economics at Columbia University. Neither responded to requests for comment.

    Officials at Pimco, which is based in Newport Beach, Calif., and is a subsidiary of the German insurer Allianz, declined to comment, saying their lawyers believed that rules set by the Securities and Exchange Commission prohibited them from discussing the investment offering.

    Harold P. Reichwald, a banking and finance lawyer at Manatt, Phelps & Phillips in Los Angeles, who does not have a relationship with Pimco, said the use of policy experts was not surprising for the kind of investment Pimco was offering.

    “It’s not surprising that an issuer would surround itself with people with expertise in the field,” he said. “I think good practice would dictate that if you’re going to name individuals in a prospectus, which is essentially a selling document, that you would clear it with them in advance.”

    While some large Wall Street banks have been thriving in recent months after getting a lifeline from the government, other financial institutions, including smaller banks, have been teetering.

    The Federal Deposit Insurance Corporation has seized and closed nearly 300 banks in the last two years. And some big banks are trying to get out of the business of servicing residential mortgages, an expensive and time-consuming task to which banks that focus on originating loans are not well-suited.

    The presentation estimates that banks in the United States and Europe need to raise more than $550 billion in capital, partly because of pressure from regulators to strengthen their balance sheets, and partly in anticipation of new international bank capital standards known as Basel III.

    In essence, the Pimco fund — known as Bravo, short for Bank Recapitalization and Value Opportunities — intends to buy a wide variety of distressed assets, including pools of nonperforming loans bundled into securities, at a discount, among other strategies. Pimco is believed to be trying to raise hundreds of millions of dollars for the fund.

    Over the five-year life of the fund, it hopes to overhaul the servicing of the loans so that they generate a healthy cash flow. Then Pimco hopes to sell the assets, or the underlying real estate, for a profit.

    The once high-flying market for mortgage-backed securities has been moribund since 2007, but the presentation states: “Within the five-year term fund, Pimco believes is it reasonable to expect a securitized market will be functioning again, albeit smaller.”

    The minimum investment is $500,000. The fund is a private placement, meaning it is aimed at sophisticated investors, like pension funds and other institutions, rather than ordinary investors.


    Pension funds?? — who rated this AAA??? And, Mohmed EL-Erian — I used to like you — you look so nice on TV.

    Also see below from different site– scooping up — sounds like a real deal.

    “Some of the most active buyers of distressed single-family residential whole loans include Arch Bay, Kondaur Capital, Roosevelt Management, Raneiri Partners, PennyMac(PMT) and Morgan Stanley(MS). Private equity firms and hedge funds such as Fortress(FIG) and BlackRock(BLK) have also been scooping up distressed mortgage assets.
    Banks are reportedly pricing residential mortgages at around 63 cents to 66 cents of their current value. “

  10. Join the suit and stop this nonsense once and for all. From the website:

    …..I have a powerful workable plan. Mechanically, it is simple to execute. In fact its power lies in its simplicity. But we must get off of our heels. We need to become the aggressor and move onto the offense. They are trying to divert us from the real problem, the one single problem that lies at the root of the worst of our ills. The problem is not Obama, or Congress, or jobs, or health care… The problem is debt; or more precisely where it came from and who it’s owed to and most importantly why we have debt at all. There is another way.

    Will you join me? Will you do what is required? Can you do it peaceably, with resolve and fortitude and stand unwaveringly to reclaim your liberty.

    We have the truth behind us and our children’s generation before us. It’s time to take a stand… It’s time to dig in. It’s time to realize that if you don’t – the lamp of freedom will die, and all of us along with it.

    Patriots, are you ready to reclaim your birthright?

    Today we begin…

  11. Just looks like more spin on the truth. BofA has a great deal to hide, and it is doubtful we will ever know what is really going on inside that corporation. Fake money equals fake money. We better hope the rest of the planet does not figure out the emperor has no clothes.

  12. BOA just transferred my loan to ING. I’m two months down on pmts, so possibly ING pd cents on dollar for the servicing rights? why would ING want this?

  13. California is the “bank friendliest” state in the entire union.

  14. It’s called the GSE Business Model with its various “players”. The whole show is funded by the taxpayers one way or the other, now or then. It is not so difficult to figure out if you just “follow the money”.

  15. Well that certainly seems to nullify the last 3 years of arguments. I wonder how this will work out. The banks claim bankruptcy. They get their buddy the trustee to form another corportation that goes out to collect the debt/houses from the homeowner and the homeowner has no recourse sort of like when you do a loan mod. Its a new transaction and nobody is liable for fraud. Is that about the jist of it??? Does anybody feel like a sheep getting sheered again??

  16. Countrywide gets bought out pennies on the dollar.
    BoA is about to go bankrupt
    We are stuck with 100% of the debt plus fees.

    The judges in California going to extra legth to side with the Banksters.

    Am I missing something?

  17. One can only hope!

  18. So — they did dispose of Blackrock interest. Remember that BofA was questioned on their relationship with Blackrock at congressional hearings. Blackrock is a distressed debt buyer.

    Blackrock is investment manager for Maiden Lane.

  19. So what happens to mortgages once they file bankruptcy? Will it be sold to debt collectors who will then try and collect?

    If the homeowner is in bankruptcy and so is the bank, do the bankruptcy trustees for both parties negotiate the debt?

    No matter what happens to the banks, they’ve already lost something that they may never recover, our trust.

Contribute to the discussion!

%d bloggers like this: