Tom Lindmark

The BofA SEC Flap: Small Potatoes

I agree with a lot of your points, particularly the one about rules changing when you contract with the government.


On Aug 03 11:57 PM truthteller wrote:

> I am no fan of Ken Lewis, however I feel the man has gotten a terrible
> wrap. I suspect history will show the man was greedy, gullible and
> very wreckless with the trust so many placed in him. Also, history
> will probably show he fell victim to a government scam and a misplaced
> sense of patriotism. We won't know the entire story until Ken Lewis
> leaves Bank of America and frankly we may never receive a full accounting
> because lawyers are very good at crafting confidential agreements.
> However, I would like to engage in pure speculation. What if the
> Treasury began shopping Merrill, knowing full well the company was
> iinsolvent? How could you get someone to take on this enormous amount
> of risk willingly?
>
> First, I guess you would have to pick a relatively strong financial
> institution, with some political baggage like the acquisition of
> Countrywide mortgage. Otherwise, a strong company could put up a
> heck of a fight and blow the whole deal. Second, you need to convince
> the CEO that a bidding war was going to erupt over Merrill, but they
> could pre-empt this by acting quickly. Third, you need to put them
> in a position to commit without a good look at the company's books.
> The only way you can accomplish this is by appealing to the person's
> greed, stroking their ego, sense of patriotism and making verbal
> assurances not bound by a written contract. The final ingredient
> needed is: Once they find out the deal was bad, losses are mounting
> and any reasonable CEO would invoke a MACC (Material Adverse Condition
> Clause); then threaten to remove the CEO and Board of Directors.
> Lewis thought he could make a bundle of money and be a good patriot
> at the same time. However, he soon found out, just how quickly the
> rulles change, when you make deals with politicians and climb into
> bed with Uncle Sam.

Banking Sector: A More Balanced View Is Needed

Missed that one. I always end up swimming against the current.


On May 24 05:07 PM Alan Young wrote:

> Tom, thanks for bringing balance to this discussion. It is quite
> rare. I guess you didn't get the memo about hysteria being the best
> way to win a following?

Paulson Throws Bernanke Under the Bus, Backs Ken Lewis

MAC means material adverse change. Many contracts contain MAC's which allows one party or the other to back out if an event happens that alters the basis for entering into the contract. They're very hard to enforce.


On Apr 23 03:56 PM Jim Benham wrote:

> Mr. Lindmark:
>
> What does MAC stand for?

What Else Are the Banks Hiding?

Matt,

I don't disagree with your points. In fact if you look at some of my other posts you will see that I subscribe to the position that the banks are generating exceptional amounts of net interest income (hard not to given the yield curve).

My concern is that the embedded losses in their balance sheets will overwhelm them before they can earn their way out. I think Wells is probably better than most of their peers but still questions linger. If more information was available -- reliable information not the banks' interpretation -- I could make a reasonable judgement.

As it is I remain hopeful and skeptical. Too many recent surprises that I just can't shake.


On Mar 26 10:44 PM MattZN wrote:

> The media tends to focus only on the negative aspects of the banks.
> They don't seem to be able to spend even 10 minutes reading a 10-K,
> so most people never hear about the positive aspects.
>
> Take Wells Fargo for example. Due to new government rules Wells was
> able to combine Wachovia's tax asset (tax carryover) with its own
> tax liability (taxes owed), turning something like a 4-5 billion
> tax bill into an 11 billion+ tax carry over that will zero out Wells
> Fargo's taxes for one to two years. It's right there in their 10-K.
>
>
> Another example is the net interest margin. Big money center banks
> like Wells are increasing their deposit base by leaps and bounds.
> Those deposits cost the bank 1-2% in interest paid to depositors.
> At the same time the bank is turning around and originating mortgages
> at 4-6% with that money. Wells has one of the highest net interest
> margins in the business right now.
>
> A third example would be mortgage refinances and originations. Refi
> activity is the highest ever recorded right now. Each refi brings
> in significant income in fees to the bank, removes the original loan
> from whatever securitzed vehicle it had been sitting in previously,
> and puts serious money in the pockets of large numbers of middle-class
> families which I guarantee you they will be spending at least some
> of. And we aren't talking about one-time here, we are talking about
> improved cash flow for millions of Americans.
>
> The question has never been whether there would be mortgage losses
> or not. Everyone knows there will. The question has always been whether
> the banks can cover those losses with earnings. In fact, I think
> Wells has a pretty good handle on that, making it rather silly to
> price its stock as if it were going out of business.
>
> Just looking at the negatives will not give you the whole picture.
> The media has been focused almost entirely on the negatives for the
> last 6+ months.
>
> -Matt

Banks: Nationalize, Cleanse and Get It Over With

mikeg3,

No book to talk. Not short or long any banks.

I had great experiences as a banker just didn't play the political game well. I spent most of my banking carreer with BofA and BNP-Paribas.

Loan Modifications: BofA Gets Taken to Court

In the case of WAMU, the FDIC became the receiver of the bank after is was judged to be insolvent. The FDIC's job in this case is to find the least costly way to unwind the bank. Senior debt holders along with holders of other securities and uninsured depositors are entitled to 50% of whatever money is left after the institution is wound down.

Thus senior debt holders of WAMU may be in line for some recovery of principal.