Seeking Alpha

Day 2 of Bank of America's (BAC) Article 77 hearing led off with a new revelation: Chief Risk...

Day 2 of Bank of America's (BAC) Article 77 hearing led off with a new revelation: Chief Risk Officer Terry Laughlin in Nov. 2011 told the 22 institutional investors in favor of the settlement the bank had been given permission to put Countrywide into bankruptcy if the mortgage lender's liabilities threatened the BofA's viability - the message clearly being the $8.5B settlement was a pretty good outcome for those suffering losses. Naturally, the "objectors" say there were other options rather than signing off on a "sweetheart deal."
Comments (7)
  • Mike Maher
    , contributor
    Comments (2540) | Send Message
    The real question is if they have permission to put Countrywide into bankruptcy and save $40 billion for BAC shareholders, why didn't they?
    5 Jun 2013, 09:53 AM Reply Like
  • MexCom
    , contributor
    Comments (3051) | Send Message
    Mike, it would have brought down the whole economy. The AIG people are not going to get more than the settlement originally agreed to.
    5 Jun 2013, 10:09 AM Reply Like
    , contributor
    Comments (1148) | Send Message
    FDIC basically told BAC they had to (they were the ONLY ONES) even marginally able to take them over. Otherwise the FDIC it's self could/would have been considered insolvent due to the massive losses/frauds CW had made. From memory there was some sort of backstop promised to (BAC) for their agreeing to take them on.


    these "Settlements" are all going against the intrinsic value of the old CW company. If the "Lawsuits/Settlements" risk breaching this intrinsic value then BAC will more than likely put them into bankruptcy. I believe it was a loophole and main reason they kept CW it's own entity. Somewhere along the line much of this may come out and all the FDIC/BAC info will look to be interesting. The only issue may be how the past settlements are agreed upon if CW does eventually go thru bk then then "were there/are there clauses" for claw-backs in the settlements-agreements already made.


    I did a lot of (now long ago) looking into these issues when BAC was single digit price & it is now my largest holding by share count & by price.
    5 Jun 2013, 10:24 AM Reply Like
  • Marvelousmmm
    , contributor
    Comments (4) | Send Message
    The stigma of bankruptcy would have hurt the credibility of management and may have hurt the overall view of the stability of the Bank. However, if pushed to the wall they would have done that to "save" the Bank. They have done the moral thing in trying to settle all the claims against Countrywide.
    5 Jun 2013, 10:41 AM Reply Like
  • OverSouled
    , contributor
    Comments (121) | Send Message
    Whenever you have an environment of steadily rising prices - oil, gold, real estate, .com's, whatever - you have financial companies that are ready to take enormous risks to profit from the trend. That's what AIG was doing in the MBS market - they are not victims but rather one component of the unrestrained greed that brought down the world financial system. Keep in mind that no analyst in the world knew the real value or real risk of their Credit Default Swaps - they were selling $$billions in fairy dust, and taking home piles of cash for doing it. The rating agencies and the SEC were whistling Dixie while this was going on and the investment banks were happily raking in boatloads of money from their clients for MBS's that were essentially black boxes. The idea that one of these crooks has the right to sue another is a joke. AIG would have been out of business 5 years ago if the feds hadn't stepped in and pressured BOA to save their sorry rumps. Not that BOA is free of guilt here, but in this case I hope they collect lawyer's fees from that rag of an insurance company.
    5 Jun 2013, 12:11 PM Reply Like
  • sandykoz
    , contributor
    Comments (12) | Send Message
    Who, and with what power and/or authority granted the permission for BofA to put CW into bankruptcy. I think it had to be our "government (who in the government would be nice to know)" and it had to be to keep CW from going bankrupt before the merger, so Fanny and Freddie and others would not go under. I think BofA was tasked to rescue CW, and would sure love to know the terms of the deal. Maybe if BofA puts their CW subsidiary into bankruptcy, all that will come out in court as BofA proves their right to file a separate bankruptcy for CW.
    5 Jun 2013, 08:31 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
    Who do they need permission from? That seems ridiculous on the surface.


    They should have put it into BR as it has been a black hole for money, bad PR and left wing politicos beating them up for a crappy operation they should never have taken on.
    6 Jun 2013, 03:32 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio: