Chris Whalen: 'Gift From Government To Bank Of America' In $2.8 Billion Settlement With Fannie & Freddie
The deal with Fannie Mae is not airtight; it leaves open the possibility that Fannie could pursue additional claims against Bank of America. In contrast, the settlement with Freddie Mac closes the book on pending and potential claims.
- "This is a gift from the government to the bank," said Christopher Whalen of Institutional Risk Analytics. "We're all paying for this because it will show up in the losses from Fannie and Freddie."
Inside I've also included an update on Ally's (GMAC) settlement last week with Fannie, and the status of MBIA's lawsuit against Bank of America.
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Bank of America settles with Fannie, Freddie
Fannie Mae and Freddie Mac, the financial giants whose failed mortgage investments made them wards of the government, have accepted $2.8 billion from Bank of America to largely put to rest claims that the bank sold them faulty loans.
The cost to Bank of America was less than the potential blow some investors had expected, and the bank's stock rose 6.4 percent on the news Monday.
For Bank of America, the settlements eliminate "a doomsday scenario," said analyst Paul Miller of FBR Capital Markets.
- "This is a gift" from the government to the bank, said Christopher Whalen of Institutional Risk Analytics. "We're all paying for this because it will show up in the losses from Fannie and Freddie."
The deal with Fannie Mae is not airtight; it leaves open the possibility that Fannie could pursue additional claims against Bank of America. In contrast, the settlement with Freddie Mac essentially closes the book on pending and potential claims.
The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, approved the settlements. In a statement, the agency said the deals were "consistent with market practice and FHFA's conservatorship responsibilities."
Fannie spokeswoman Janis Smith called it a "fair and responsible resolution."
At issue is one of the biggest threats facing Bank of America and other major lenders that weathered the financial crisis with help from the government.
During the housing bubble, the banks typically sold mortgages to investors around the world, including Fannie Mae and Freddie Mac. But those investors were generally entitled to repayment by the lenders if the loans were sold on the basis of false assurances.
Stocks of major banks swooned last year when the market was gripped by fears that banks could be on the hook for huge sums.
Bank of America's acquisition of one of the biggest issuers of troubled loans, Countrywide Financial, has left it especially vulnerable.
In October, a group of investors including the Federal Reserve Bank of New York, Pacific Investment Management and BlackRock, wrote to Bank of America signaling that they might try force repayment on pools of Countrywide mortgages totaling more than $47 billion. That dispute remains unresolved.
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Bank of America hit with setback in MBIA mortgage liability lawsuit
Bank of America's hangover from the housing bubble could be harder to shake in the new year as a result of a recent court decision.
The bank lost a major procedural ruling in a lawsuit over its liability for allegedly toxic mortgages. The ruling will make it harder for the bank to defend itself in that case, and it could set a standard for similar disputes.
http://www.washingtonpost.com/wp-dyn/content/article/2010/12/31/AR2010123101728.html
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Ally Financial in $462 million settlement with Fannie
(Reuters) - Ally Financial Inc, the lender formerly known as GMAC, on Monday said it agreed to pay $462 million to Fannie Mae to avoid having to repurchase poorly underwritten mortgages sold to the housing finance giant.
Ally, which is majority-owned by U.S. taxpayers, said the agreement releases its Residential Capital LLC mortgage unit from any liability related to bad underwriting on $292 billion worth of loans sold to Fannie Mae, itself about 80 percent owned by the government.
http://www.reuters.com/article/idUSTRE6BQ3OA20101227
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Jan 4, 2011 at 1:10 AM
Reader Comments (23)
http://www.reuters.com/article/idUSTRE7021JX20110103
http://www.reuters.com/article/idUSTRE6BQ3OA20101227
http://www.bloomberg.com/news/2011-01-03/banks-stocks-rise-after-bank-of-america-settles-mortgage-putback-claims.html
This bloomberg version has the most detail of any of the stories...
http://www.bloomberg.com/news/2011-01-03/u-s-manufacturing-expands-as-ism-index-climbs-to-57-matching-forecasts.html
http://femalefaust.blogspot.com/2011/01/police-getting-what-they-deserve-for.html
http://www.reuters.com/article/idUSTRE7024JI20110104
Now why do I have this sinking feeling all of a sudden?
Gene B. Sperling (born December 24, 1958) is an American economist and political expert, currently serving as a Counselor to Treasury Secretary Tim Geithner. He is also on the staff of the Council on Foreign Relations, where he serves as Senior Fellow for Economic Policy and Director of the Center on Universal Education, and is economic advisor for Hillary Clinton.[1] He has held several high-level economic policy positions and was chief economic advisor to Hillary Clinton's presidential campaign.[2]
He was an architect of the Clinton economic plans while serving on the Clinton-Gore 1992 presidential campaign. He was known for his long hours, passionate commitment to his work, and detailed knowledge of economic policy. Following Clinton's election, from 1992-1996, Sperling served as deputy director of the [[United States National Economic Council|National Economic Council while the Council was directed by Robert Rubin, who was promoted to Treasury Secretary. Sperling became National Economic Adviser to President Clinton and director of the National Economic Council from 1996 to 2000.
From Wikipedia.
Settlement?
BANGALORE (Reuters) – The five largest mortgage loan servicers, including Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N), may be the first to settle with 50 state attorneys general who are investigating foreclosure practices, Bloomberg reported, citing Iowa Attorney General Tom Miller.
The attorney-general group expects to reach five separate agreements with the five largest servicers, the news agency said, quoting Miller, who heads the multi-state probe.
Miller could not be immediately reached for comment by Reuters outside regular U.S. business hours.
The other three large servicers are Citigroup Inc (C.N), Wells Fargo & Co (WFC.N) and Ally Financial Inc.
The group has had at least one face-to-face meeting with representatives from all five of the largest banks and will reach individual settlements rather than a global agreement with the servicers, Bloomberg reported.
Mortgage servicers have come under fire in recent months for abuses of the foreclosure process.
All 50 state AGs formed a joint probe in October to investigate the use of "robo-signers" in foreclosure proceedings.
Ally Financial, Bank of America, Citigroup, JPMorgan and Wells Fargo could not be immediately reached for comment by Reuters outside regular U.S. business hours.
john--
As for the settlement between 50 AG's and 5 mortgage servicers, any idea where I could find the settlement agreement itself?
Financial Economists, Financial Interests and dark corners of the meltdown, It's time to set Ethical Standards for the Economics Profession.
http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_201-250/WP239_revised.pdf
Thanks, I suspected as much from the Administration of Transparency.
We've really reached an impasse here. Yves Smith had some court documents posted yesterday that seem to show that the Florida AG cannot even subpoena documents from the foreclosure mills the banks hired to prepare the perjured affidavits and forged documents necessary for their foreclosure cases. Seems the courts themselves and or the bar association have jurisdiction over this kind of thing. Then a Supreme Court ruling declared accountanting firms cannot be sued by a third party but only by the accounting firms client.
So, as the Iowa AG states even as a civil matter, there is no way to get to the bottom of this story. Cannot subpoena, can't depose, can't do much of anything except watch as forged documents and perjured affidavits are submitted and, incredibly, are posted on line for the public to peruse at their leisure.
http://www.bloomberg.com/news/2011-01-03/state-foreclosure-settlements-to-start-with-biggest-banks-iowa-ag-says.html
http://www.hindustantimes.com/FIR-filed-against-Citibank-CEO-others--in-fraud-case/H1-Article1-646366.aspx
http://en.wikipedia.org/wiki/First_Information_Report
http://www.boston.com/news/local/breaking_news/2011/01/summers_to_head.html
We know this is your homework, Larry.
@Cheyenne, there is a hell of a lot more..... Stay tuned.
http://www.ourfuture.org/blog-entry/2010041726/larry-summers-lying-about-big-banks
Who believes that women are inferior.
http://www.boston.com/news/local/articles/2005/01/17/summers_remarks_on_women_draw_fire/
So Harvard decided to give him another job. (I wonder if Elena Kagan was part of the deal.)
http://uk.ibtimes.com/articles/97687/20110105/harvard-summers-obama-economic-policy-advisor.htm
Remember how he did a really good job helping mexico out?
http://www.counterpunch.org/cervantes11142008.html
Let's now take a peek at his green efforts.
http://www.asmainegoes.com/content/first-wind-payback-received-115-million-stimulus-money
and this just scratches the surface.
Here is a valid comment that I know to be true.
Don't count on the Obama administration investigating this global warming hoax. Al Gore is not the only one making a fortune from this scam. The white house council of economic advisors is headed by Larry Summers includes D.E. Shaw GE CEO Jeffrey R. Immelt. GE bought Enron's industrial wind business manufactures wind turbines. Summers was a managing director of hedge fund DE Shaw group. DE Shaw owns 42% of UPC Wind (now First Wind, Deepwater Wind, Evergreen Wind, and others) First Wind just received a DOE grant of $115 million of our tax dollars. Read more here: http://www.futureofcapitalism.com/2009/09/clean-energy UPC operated as IVPC in Italy, and was or may still be part owner of the Cape Wind boondoggle. IVPC has recently been charged with collecting subsidies on wind plants that didn't produce or produced very little, and with connections to the Italian mafia. arrests have been made. Read more here: http://www.bostonherald.com/business/general/view.bg?articleid=1212055