Seeking Alpha

MBIA (MBI +16.2%) continues to add to gains following this morning's earnings call in which CEO...

MBIA (MBI +16.2%) continues to add to gains following this morning's earnings call in which CEO Joe Brown vowed to fight BofA (BAC) "all the way." Damages to MBIA from unpaid mortgage putbacks are nearly $5B, Brown contends.
Comments (5)
  • DeepValueLover
    , contributor
    Comments (8335) | Send Message
     
    Now THIS is what I'm talking about!

     

    Go MBIA!!
    9 Aug 2012, 03:02 PM Reply Like
  • MexCom
    , contributor
    Comments (3051) | Send Message
     
    What about the mortgages that are current that were sold to them? Are they faulty too? Then sell back all the mortgages and give back all the interest earned. More mortgages are current in their payments than those that have defaulted. BAC can use the capital gain.
    9 Aug 2012, 03:23 PM Reply Like
  • PeterScriabin
    , contributor
    Comments (197) | Send Message
     
    Hi MexCom - while I am "on your side" (long BAC), I do not like this argument. If I buy a bag of oranges and 2 of them turn out rotten, the store ought not to ask me to return the whole bag, they should just refund for the 2 rotters, because no part of my payment was counterfeit.

     

    Now, it would be different if the orange stand at Safeway had a disclaimer, something like: "Automated packing processes sometimes cannot discriminate between good and bad items. We have set the price to discount (ie. expect) 10% rotters, so don't come bitching about the odd bad one or two. If you've got 50% rotters, come see us, before consuming any, but even better would be to look at the damn things before buying."

     

    I've no idea whether CMO or MBS auto-packaging has that kind of contract-clause built in, but I would think it did, and that massive organizations like AIG, MBIA, FNMA, etc., etc., would understand this only too well. Some of the lives of some of the people are going to go bad, and their mortgages with them, even when the entire economy does NOT tank on a scale not seen since the 1930s.

     

    The argument I would like to see BofA making (and prevailing in) is that the much-inflated rate of rotters in their "bags" was systemically caused, and was not a function of the automated packaging process.

     

    If the government suddenly forced the supermarkets to buy truckloads of crap oranges (from "disadvantaged" producers), or forced them to store all oranges in damp, mildew-filled government storage units (for "QC" purposes), or completely gaffed the packaging processes, so that rotters could no longer be filtered at all, then it would make little sense for the consumers of fruit (MBIA) to sue the Safeways (BofA).

     

    And it is exactly this latter kind of world that we lived in during 2004-2008, when Greenspan deliberately stopped interest rates rising as they normally would have in an upswing, and the legislators and governments insisted everyone with a pulse must have a mortgage and a house of their own.

     

    Why is it all BAC’s fault, all of a sudden? THIS should be the argument, and boldly stated – not yours.
    9 Aug 2012, 04:12 PM Reply Like
  • jypd
    , contributor
    Comments (5) | Send Message
     
    Why doesn't Brown sue S&P, Moody's, Fitch, Chris Dodd, Barney Fife..errrr..you know who I mean, the Federal Government and his own people who analyzed Mozillo's mortgages. And maybe himself?
    9 Aug 2012, 04:10 PM Reply Like
  • moneyTalksBSWalks
    , contributor
    Comments (193) | Send Message
     
    Brown is grandstanding. MI companies are not idiots, he is simply trying to hitch a free ride on the "bash Bac" express train in the hopes that Bac will relent and not drag this out. Same is true for the gse's that are demanding put backs on performing mortgages.
    9 Aug 2012, 04:19 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:

|