PlanMaestro Posted April 12, 2012 Share Posted April 12, 2012 MBIA settles with Aurelius http://www.reuters.com/article/2012/04/12/mbia-aurelius-idUSL2E8FC0K920120412 Link to comment Share on other sites More sharing options...
valuecfa Posted April 12, 2012 Author Share Posted April 12, 2012 MBIA settles with Aurelius http://www.reuters.com/article/2012/04/12/mbia-aurelius-idUSL2E8FC0K920120412 Don't forget Ubs Link to comment Share on other sites More sharing options...
goldfinger Posted April 12, 2012 Share Posted April 12, 2012 Quote from: PlanMaestro on Today at 06:51:39 PM MBIA settles with Aurelius http://www.reuters.com/article/2012/04/12/mbia-aurelius-idUSL2E8FC0K920120412 Don't forget Ubs From Isaac Gradman and Alison Frankel twitter sites: - MBIA settled with Aurelius - They got the agreement to depose Moynihan and green light to pursue successor claims against BoA. Good week! Link to comment Share on other sites More sharing options...
goldfinger Posted April 12, 2012 Share Posted April 12, 2012 http://online.wsj.com/article/SB10001424052702304356604577340070991629922.html?mod=WSJ_hp_LEFTTopStories Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 12, 2012 Share Posted April 12, 2012 Allison Frankel's Twitter feed is worth hundreds of hours reading legal fillings: http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=44742&terms=@ReutersTopicCodes+CONTAINS+'ANV' I'm no poker player, but I don't understand how Bank of America can tolerate the risk of continuing to litigate against MBIA, particularly because of looming capital reserve pressures if it wins the restructuring case. The bank's leverage against the insurer decreases every time another member of the coalition challenging MBIA's restructuring departs -- and just about every time Bransten issues a major ruling in MBIA's Countrywide case. I get that BofA, Natixis, and Societe Generale believe they have a strong case that MBIA's transformation was an improperly approved fraudulent conveyance. Just Monday, the bank group's counsel at Sullivan & Cromwellfiled the final brief in the regulatory case, submitting what the banks consider to be powerful evidence that MBIA deceived regulators about the health of its structured finance business in order to win approval of its restructuring and save the municipal bond insurance business. I also understand their frustration with MBIA's accounting. The bank group has long asserted that MBIA's structured finance spin-off is insolvent, and that its settlements with more than a dozen former coalition members have only worsened MBIA's dire straits. The insurer's $1.1 billion loan from its muni-bond business, taken at the time MBIA announced its settlement with Morgan Stanley last fall, was perceived by its critics as proof of the insurer's illiquidity. (The insurer and its lawyers at Kasowitz Benson Torres & Friedman always respond that MBIA has never failed to pay a policyholder what it owes, despite the banks' assertions of insolvency.) No one's disclosing terms of the Aurelius settlement, but it's a good assumption that the tough-as-nails hedge fund insisted on a hefty payout. MBIA has not reported to the Securities and Exchange Commission where it's getting the money for the Aurelius deal, nor, for that matter, for any commutation of UBS policies it agreed to when UBS dropped out of the bank group earlier this month. But weigh the potential upside for BofA in the MBIA restructuring litigation against the potential downside for the bank in MBIA's MBS case. Rulings by the judge in the case, Bransten, have generally favored MBIA and not the bank. She's also been widely upheld by the intermediate state appeals court. I've said it before: If I were Bank of America, I would not want Bransten to set precedent on successor liability. Even though the bank will surely appeal an adverse ruling, Bransten's thinking in the meantime will affect every state-court judge overseeing an MBS case against Countrywide, and there are sure a lot of them. One of the ways BofA held the proposed global put-back settlement with Countrywide MBS investors to $8.5 billion was by citing uncertainty about successor liability. If Bransten removes some of that uncertainty, BofA's $18 billion in MBS reserves could look puny. The bank knows MBIA wants the cash it believes Countrywide owes the insurer for MBS deficiences. MBIA has said publicly that it has already paid out about $3 billion to policyholders with Countrywide MBS claims, all of which it believes Countrywide should be liable for. MBIA has also already booked $3.1 billion in put-back receivables from all MBS issuers. BofA's leverage lies in MBIA's need to fortify its balance sheet. That leverage will be considerably lessened if MBIA wins a major ruling from Bransten. Bank of America, meanwhile has marked about $1.3 billion in MBIA "trades," based on complex who-owes-who financial instruments. That number will go up if the banks win their challenge to MBIA's transformation. But according to a very smart hedge fund friend of mine, the catch for BofA is that when the banking reforms enacted after the financial crisis take effect in 2014, BofA will have to hold more than what MBIA owes in capital reserves. Pressure on capital reserves was one of the reasons Morgan Stanley cited for settling with MBIA last fall. Link to comment Share on other sites More sharing options...
goldfinger Posted April 17, 2012 Share Posted April 17, 2012 nice write up on MBIA: http://www.valuewalk.com/2012/04/fernbank-partners-up-22-45-in-2011-detail-bullish-case-for-mbia-inc-mbi/ Link to comment Share on other sites More sharing options...
valuecfa Posted April 18, 2012 Author Share Posted April 18, 2012 Fernbank Partners has a decent fluff piece out on MBIA that once again lays out the general thesis well. Sorry gold finger... I missed ur post... On a smartphone Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 18, 2012 Share Posted April 18, 2012 Does bank of America not hold the ultimate card of putting countrywide into bankruptcy? Dazel. Link to comment Share on other sites More sharing options...
twacowfca Posted April 18, 2012 Share Posted April 18, 2012 Does bank of America not hold the ultimate card of putting countrywide into bankruptcy? Dazel. Under FIRREA they could not put Countrywide into bankruptcy if Countrywide is considered to be a bank held by BAC as the holding company or one of its subsidiaries unless their regulator approves. If Countrywide is considered to be a bank held by a bank holding company, as I assume it is, the Holdco is required to support it until it becomes solvent. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 18, 2012 Share Posted April 18, 2012 Is bac not in court trying to prove that it does not have to support countrywide. In theory these are all just legal bargaining chips....because bac does not want the negative publicity of the bk after the tax payer bailout....but it would destroy mbia's position. Dazel. Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 18, 2012 Share Posted April 18, 2012 Is bac not in court trying to prove that it does not have to support countrywide. In theory these are all just legal bargaining chips....because bac does not want the negative publicity of the bk after the tax payer bailout....but it would destroy mbia's position. Yes they are, and it looks like BAC has the upper hand on this. At the same time, BAC does not want to test the legality of CW's Ch11 considering that if they loose it could be disastrous for other litigation going on affecting CW. Most analysis that I've seen indicate that BAC has the incentive to settle. The question that I have not seen answer in any of the MBIA wirte-ups is, what prevent MBIA going the AMBAC route, and run out of liquidity before the payoff? Even AMBAC was finally able to desegregate the muni bonds division. http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=45182&terms=@ReutersTopicCodes+CONTAINS+'ANV' Link to comment Share on other sites More sharing options...
twacowfca Posted April 18, 2012 Share Posted April 18, 2012 Is bac not in court trying to prove that it does not have to support countrywide. In theory these are all just legal bargaining chips....because bac does not want the negative publicity of the bk after the tax payer bailout....but it would destroy mbia's position. Yes they are, and it looks like BAC has the upper hand on this. At the same time, BAC does not want to test the legality of CW's Ch11 considering that if they loose it could be disastrous for other litigation going on affecting CW. Most analysis that I've seen indicate that BAC has the incentive to settle. The question that I have not seen answer in any of the MBIA wirte-ups is, what prevent MBIA going the AMBAC route, and run out of liquidity before the payoff? Even AMBAC was finally able to desegregate the muni bonds division. http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=45182&terms=@ReutersTopicCodes+CONTAINS+'ANV' If Countrywide is a bank held by a bank holding co or one of the holdco's banking subsidiaries, there is no way this will happen under FIRREA. Is there a way they structured the Countrywide acquisition to keep it completely out of the bank Holdco structure? Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 18, 2012 Share Posted April 18, 2012 If Countrywide is a bank held by a bank holding co or one of the holdco's banking subsidiaries, there is no way this will happen under FIRREA. Is there a way they structured the Countrywide acquisition to keep it completely out of the bank Holdco structure? http://www.cwrmbssettlement.com/docs/Opinion%20Regarding%20Corporate%20Separateness.pdf Link to comment Share on other sites More sharing options...
Grenville Posted April 18, 2012 Share Posted April 18, 2012 http://www.cwrmbssettlement.com/docs/Opinion%20Regarding%20Corporate%20Separateness.pdf Thank you for sharing this document! Link to comment Share on other sites More sharing options...
goldfinger Posted April 18, 2012 Share Posted April 18, 2012 Quote from: Dazel on Today at 08:04:18 AM Is bac not in court trying to prove that it does not have to support countrywide. In theory these are all just legal bargaining chips....because bac does not want the negative publicity of the bk after the tax payer bailout....but it would destroy mbia's position. Yes they are, and it looks like BAC has the upper hand on this. At the same time, BAC does not want to test the legality of CW's Ch11 considering that if they loose it could be disastrous for other litigation going on affecting CW. Most analysis that I've seen indicate that BAC has the incentive to settle. The question that I have not seen answer in any of the MBIA wirte-ups is, what prevent MBIA going the AMBAC route, and run out of liquidity before the payoff? Even AMBAC was finally able to desegregate the muni bonds division. http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=45182&terms=@ReutersTopicCodes+CONTAINS+'ANV' From the last quarterly report meeting: "National has liquidity capacity. Its balance sheet contained over $4 billion of invested assets as of December 31, 2011 as well as its $1.13 billion secured loan to MBIA Corp. and very little is expected in terms of near-term claim payments on its policies. Over time, we expect that both of our insurance companies will have adequate liquidity and earnings to provide dividend to the holding company. However, in the near term we've agreed with our regulator that neither will pay dividends to MBIA Inc. without the Department of Financial Services' prior written approval. In National's case that agreement expires in July 2013." Link to comment Share on other sites More sharing options...
twacowfca Posted April 18, 2012 Share Posted April 18, 2012 http://www.cwrmbssettlement.com/docs/Opinion%20Regarding%20Corporate%20Separateness.pdf Thank you for sharing this document! Yes, thank you. Technically, BAC shouldn't be responsible for the debts of its subsidiary, Countrywide, but the Holdco structure doesn't relieve BAC of their mandate under FIRREA to do everything possible to keep Countrywide solvent. BAC has already put $3B into that subsidiary to strengthen its balance sheet. They must continue to do what is necessary to keep them solvent. That's what FIRREA was all about -- not letting a bank put an insolvent banking subsidiary into bankruptcy and leaving the FDIC holding the bag to make the subsidiary whole. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted April 18, 2012 Share Posted April 18, 2012 That's what FIRREA was all about -- not letting a bank put an insolvent banking subsidiary into bankruptcy and leaving the FDIC holding the bag to make the subsidiary whole. I reached the same conclusion after reading this document: http://www.newyorkfed.org/research/staff_reports/sr189.pdf The general public should be very happy with BofA. The taxpayer made a HUGE profit on the BofA bailout and left the BAC shareholders with the CFC tab! Otherwise, it would already be in the FDIC hands and wouldn't have that $3b injection by the generous shareholders of BAC. Link to comment Share on other sites More sharing options...
Grenville Posted April 18, 2012 Share Posted April 18, 2012 I reached the same conclusion after reading this document: http://www.newyorkfed.org/research/staff_reports/sr189.pdf Thanks for posting that paper as well! Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 18, 2012 Share Posted April 18, 2012 Technically, BAC shouldn't be responsible for the debts of its subsidiary, Countrywide, but the Holdco structure doesn't relieve BAC of their mandate under FIRREA to do everything possible to keep Countrywide solvent. BAC has already put $3B into that subsidiary to strengthen its balance sheet. They must continue to do what is necessary to keep them solvent. That's what FIRREA was all about -- not letting a bank put an insolvent banking subsidiary into bankruptcy and leaving the FDIC holding the bag to make the subsidiary whole. Thanks for the comments and report! Isn't this about protecting depositors and the FDIC ... not other claimants? Am I wrong? Definitely not a legal expert. According to Federal Reserve Board policy, bank holding companies are expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each such subsidiary. This support may be required at times when a bank holding company may not be able to provide such support. Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance Act, in the event of a loss suffered or anticipated by the FDIC – either as a result of default of a banking subsidiary or related to FDIC assistance provided to a subsidiary in danger of default – the other banking subsidiaries may be assessed for the FDIC’s loss, subject to certain exceptions. Link to comment Share on other sites More sharing options...
jegenolf Posted April 18, 2012 Share Posted April 18, 2012 http://www.cwrmbssettlement.com/docs/Opinion%20Regarding%20Corporate%20Separateness.pdf Thank you for sharing this document! Yes, thank you. Technically, BAC shouldn't be responsible for the debts of its subsidiary, Countrywide, but the Holdco structure doesn't relieve BAC of their mandate under FIRREA to do everything possible to keep Countrywide solvent. BAC has already put $3B into that subsidiary to strengthen its balance sheet. They must continue to do what is necessary to keep them solvent. That's what FIRREA was all about -- not letting a bank put an insolvent banking subsidiary into bankruptcy and leaving the FDIC holding the bag to make the subsidiary whole. This makes me feel like I'm wrong, but last I dug into this, it seemed like the successor liability case was pretty strong. FIRREA might be another mechanism to prevent BAC from putting Countrywide into bankruptcy, but the successor liability case doesn't depend on that at all. And my impression was that MBIA was certainly the favorite if we're handicapping that case. The discussion here makes me think successor liability is dependent on FIRREA. And I've been taking the decision a week or two back to force Moynihan to testify in the successor liability case as a pretty good catalyst for a settlement. The game of chicken only lasts so long, and I doubt Moynihan wants to testify unless he plans on turning into a baseball player (McGwire/Sosa/Bonds/Clemens). I feel like BAC knows they are going to lose the reps and warranties and the successor liability (and probably the MBIA split too) and the last thing they want (outside of their CEO airing dirty laundry under oath) is an official ruling on either. Then again I thought the settlement would have already happened, so what do I know. Link to comment Share on other sites More sharing options...
txlaw Posted April 19, 2012 Share Posted April 19, 2012 The question that I have not seen answer in any of the MBIA wirte-ups is, what prevent MBIA going the AMBAC route, and run out of liquidity before the payoff? I think dilution is likely the worst case scenario if liquidity issues arise at the holdco. I think there are many savvy investors who would jump at the chance of being issued common or high yield debt to help the holdco out with liquidity issues. Link to comment Share on other sites More sharing options...
txlaw Posted April 19, 2012 Share Posted April 19, 2012 Just to add to the conversation, both BAC and MBI have aspects of WEB's American Express investment back in the day. That is, with both of these companies, it might just make good business sense not to "walk away" and permanently impair the reputation of the franchises. Certainly, a financial guarantor -- who guaranteed the modern equivalent of empty salad oil barrels -- cannot simply fail to pay out on its liabilities without damaging its reputation. MBIA Corp continues to pay out on its guarantees, even where the underlying collateral was not quite what it was made out to be. Of course, MBI wants remuneration from the bad actors, and many of us are rooting for them to get it. But do those of us who praise Brian Moynihan really think he would risk the reputation of BofA-Merrill Lynch by throwing Countrywide into BK, as opposed to selectively picking and choosing how and when some creditors (but not necessarily all) will be remunerated (but not necessarily made whole)? Link to comment Share on other sites More sharing options...
goldfinger Posted April 19, 2012 Share Posted April 19, 2012 http://newsandinsight.thomsonreuters.com/Legal/News/2011/10_-_October/Why_Countrywide_bankruptcy_likely_won_t_solve_BofA_MBS_problems/ successor liability and why Countrywide bankruptcy would not really help BAC in this case. Since then Bransten has ordered that Moynihan comes to court for deposition: http://www.reuters.com/article/2012/04/13/us-bofa-moynihan-testify-idUSBRE83C03F20120413 Link to comment Share on other sites More sharing options...
valuecfa Posted April 19, 2012 Author Share Posted April 19, 2012 Via Frankel's blog: http://newsandinsight.thomsonreuters.com/Legal/News/2012/04_-_April/Should_bank_challenge_to_MBIA_restructuring_go_to_trial_/ The trial letters: http://newsandinsight.thomsonreuters.com/uploadedFiles/Reuters_Content/2012/04_-_April/banksvmbia--mbiatrialletter.pdf http://newsandinsight.thomsonreuters.com/uploadedFiles/Reuters_Content/2012/04_-_April/banksvmbia--dfstrialletter.pdf http://newsandinsight.thomsonreuters.com/uploadedFiles/Reuters_Content/2012/04_-_April/banksvmbia--banktrialletter.pdf Link to comment Share on other sites More sharing options...
valuecfa Posted April 20, 2012 Author Share Posted April 20, 2012 Looks like we have a trial on our hands Link to comment Share on other sites More sharing options...
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