Seeking Alpha

Explosive action in BofA Article 77 hearing

  • Bank of America's (BAC +0.3%) Article 77 hearing resumed this week at which a NY State Supreme Court judge will or won't approve the bank's $8.5B MBS settlement with investors like Goldman, BlackRock, and Pimco. To review: The objectors - led by AIG - contend the amount is far too small and the trustee assigned to guard bondholder interests - BNY Mellon (BK) - was horribly conflicted due to business ties with BofA.
  • In what CLSA Mike Mayo describes as the most explosive action thus far, AIG's attorneys tried to establish Brian Lin of little-known RRMS Advisors (he was hired by BK to write a report on the reasonableness of the $8.5B deal) was no more than a rubber-stamp for the cheap settlement. The judge eventually had to step in and cut off questioning.
  • Mayo maintains his sell rating on BAC, believing Street consensus of a 1-in-20 chance of the settlement being throw out is too small. Should the judge actually vacate the settlement, the bank faces another $16B-$22B in legal damages, he says.
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Comments (29)
  • BlueOkie
    , contributor
    Comments (7013) | Send Message
     
    Who's getting all this fine money? The gov't and we still have a huge debt.
    13 Sep 2013, 11:45 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2732) | Send Message
     
    Actually its the investors getting the money, not the govt. And $8.5 billion on a debt load of $14 trillion is a rounding error.
    13 Sep 2013, 11:49 AM Reply Like
  • AchaninUSA
    , contributor
    Comments (45) | Send Message
     
    I'd like to see the contingency accounts though. If the guv is looking for a deterrent, that's not it.
    13 Sep 2013, 11:52 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2732) | Send Message
     
    This isnt a criminal complaint, nor is it a civil case brought by the government. Its one group of investors suing to block a settlement between BofA and the holders of certain bonds. It has nothing to do with the government getting money, or deterring certain actions.
    13 Sep 2013, 02:00 PM Reply Like
  • Ruffdog
    , contributor
    Comments (1967) | Send Message
     
    And how much are the ambulance chasing attorneys getting?
    14 Sep 2013, 09:13 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (9719) | Send Message
     
    A sell rating because BAC MIGHT have to pay UP TO $22 billion?

     

    BAC 2012 revenue?

     

    $85 billion

     

    Assets?

     

    $2.12 TRILLION

     

    I think BAC can easily handle the settlement. <---understatement
    13 Sep 2013, 12:20 PM Reply Like
  • Regarded Solutions
    , contributor
    Comments (17931) | Send Message
     
    you have zero clue as to what you are talking about. There is a reason this dog sells at a 28% discount to book. Fools will rush in though if there is a sniff of a settlement and then the bagholders will cry foul as usual. Don't say I did not warn you.
    13 Sep 2013, 09:36 PM Reply Like
  • mphill47
    , contributor
    Comments (575) | Send Message
     
    Dog.??? your obvious bias has shown through.
    15 Sep 2013, 02:39 PM Reply Like
  • Ryan Sequeira
    , contributor
    Comments (48) | Send Message
     
    Regarded, didn't you buy in to BAC when discount to book was even larger? Why did you buy BAC to begin with if it's such a dog?
    18 Sep 2013, 11:35 AM Reply Like
  • DoowopDave
    , contributor
    Comments (252) | Send Message
     
    Mike Mayo may be too low. There could be follow-on suits that total over $40 bn when all is said and done. Not to mention the additional legal costs. Ugh.
    13 Sep 2013, 12:21 PM Reply Like
  • SA_Member_12759281
    , contributor
    Comments (29) | Send Message
     
    Let's assume Mayo is correct and the chances of the settlement being overturned are, say, 1 in 10 as opposed to 1 in 20.

     

    So, Mayo has a sell rating on BAC based on a 10% chance of a negative outcome?

     

    Doesn't seem logical, does it?

     

    Of course, I'm sure the sell rating has nothing to do with the fact that CLSA is a subsidiary of CITIC, one of BAC's leading competitors for global investment banking services.

     

    Funny how that never gets mentioned.
    13 Sep 2013, 12:37 PM Reply Like
  • mphill47
    , contributor
    Comments (575) | Send Message
     
    I agree....it doesn't make sense as written...Needs clarification.
    13 Sep 2013, 01:41 PM Reply Like
  • mphill47
    , contributor
    Comments (575) | Send Message
     
    SheepSlayer et al...this will help
    http://bit.ly/13Xq69R
    13 Sep 2013, 01:47 PM Reply Like
  • Shelby Cardozo
    , contributor
    Comments (885) | Send Message
     
    Anything to drag this stock back down would be welcome by me. I need another opportunity to continue to trade this stock.
    13 Sep 2013, 01:19 PM Reply Like
  • healthpicker
    , contributor
    Comments (1048) | Send Message
     
    I think you will get your wish - there is over $100B of MBS involved here. Mayo thinks there is more exposure ($16B - $22B) at stake here.
    I think there could be more than that.
    As for 1 in 20 or 1 in 10 chances - given the elapsed time spent on this case and the continuing Judicial review and questioning taking place I think the odds of an approval over rejection of the agreement are more like even money at the moment.
    13 Sep 2013, 03:08 PM Reply Like
  • sidiji
    , contributor
    Comments (227) | Send Message
     
    With the housing market recovered, probably all of these MBS back in the money again...it might be better for bofA to take back the loans and sellon 2ndary market. The longer we are away from the extremes of the 2007 crisis the less relevant this issue becomes.
    13 Sep 2013, 02:27 PM Reply Like
  • Regarded Solutions
    , contributor
    Comments (17931) | Send Message
     
    There is NOTHING to like about BAC right now, NOTHING.
    13 Sep 2013, 09:38 PM Reply Like
  • Sirvasq
    , contributor
    Comments (335) | Send Message
     
    Real analysts like MS have and continue to predict AIG loses, and provide daily coverage. I am long because the fact that 1 of 20 parties to a settlement of litigation objects AFTER is highly disfavored in the real world of the courts. What's missed here is the judge consistently is described as appearing irked at AIG's lawyers for beating a dead horse. We will see next month.
    15 Sep 2013, 10:03 AM Reply Like
  • mphill47
    , contributor
    Comments (575) | Send Message
     
    I agree . The burden of proof is on AIG to prove that the settlement negotiation was not done in good faith by the third party,Mellon, not that the settlement was too little..This will be a tough one to prove.
    16 Sep 2013, 01:50 AM Reply Like
  • healthpicker
    , contributor
    Comments (1048) | Send Message
     
    The judge recommended they enter arbitration weeks ago - AIG offered and of course BAC refused - don't sound anything like a done deal to me.
    16 Sep 2013, 04:12 PM Reply Like
  • healthpicker
    , contributor
    Comments (1048) | Send Message
     
    I think it has to be seen as fair and reasonable by the Judge - BNY seems to have some valid criticism. Even money bet.
    16 Sep 2013, 04:16 PM Reply Like
  • slimbob54
    , contributor
    Comments (2) | Send Message
     
    When is this hearing suppose to conclude?
    15 Sep 2013, 12:28 PM Reply Like
  • mphill47
    , contributor
    Comments (575) | Send Message
     
    Judge says this month.
    15 Sep 2013, 01:50 PM Reply Like
  • DoowopDave
    , contributor
    Comments (252) | Send Message
     
    9.25.13
    17 Sep 2013, 03:22 PM Reply Like
  • healthpicker
    , contributor
    Comments (1048) | Send Message
     
    I wonder how long the Judge will take after that? My guess is at least a month.
    19 Sep 2013, 03:23 PM Reply Like
  • mphill47
    , contributor
    Comments (575) | Send Message
     
    The irony here is that AIG, one of the biggest mismanaged companies and culprits in the economic catastrophe is the one that is screaming foul (give me a break). As for all of the BAC bashers.....I don't get their motive...short sellers? ...investors that lost money? ....(not that rich or sophisticated) ....foreclosed homeowners?....maybe.
    15 Sep 2013, 01:28 PM Reply Like
  • healthpicker
    , contributor
    Comments (1048) | Send Message
     
    Maybe some of us are just being realistic - you don't have to be emotional to have a valid opinion. Looks to me that there is a good chance that this will go against BAC and cost them a lot more than $8.5B - then will they repeat their negotiation bluff and put CWF in to BK - I very much doubt it.
    The current shareholders will pay the price again - not management.
    16 Sep 2013, 04:21 PM Reply Like
  • BIGgeorgeT
    , contributor
    Comments (14) | Send Message
     
    bac is a strong buy. the end
    16 Sep 2013, 09:43 PM Reply Like
  • mphill47
    , contributor
    Comments (575) | Send Message
     
    I think a lot of followers lost a heap on BAC stock and are still grinding their teeth on these articles.
    19 Sep 2013, 11:43 AM Reply Like
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