BOA Bank Bailout Looks Awfully Similar to Dodd-Drafted Housing Bill (Internal BankofAm discussion)

All of my congresscritters will be hearing from me come Monday. This takes the cake. Our elected leadership doesn’t care about the people, they care about “their people” a.k.a the people who bribe them - and they care about getting re-elected and riding the U.S. Taxpayer Gravytrain. THIS IS BS!!

They care about voting for raises for themselves and giving themselves the best of the best healthcare insurance (paid in full by the taxpayers) for LIFE!

This isn’t only democrats or Republicans - this is about greedy corrupt politicians in leadership positions of both parties.

If term limits are acceptable for the POTUS, then I DEMAND right now that we the people put in motion term limits for ALL elected U.S. Senators and U.S. Representatives!!!!!!

I can’t think of a time in our history when we have to rise up (just like we did during the McCain/Kennedy Amnesty Shovedown) more than now.

/rant

I wouldn't have thought so. But round 2005/2006 when Chicago was refusing business to Wachovia; some of us went digging around and found data and articles which asserted explicitly that which I posted.

But you are probably right in re what may not be happening now...

Quite acceptable; and I admit my own hunches went beyond the material at hand along the lines of who bent whose hands first in this mess. Since the 90s I've heard nonstop from dems as to how the poor and minorities are never able to buy homes. Voila! No great checks on validities, everyone gets a loan. For the very limited few will I grant that zero% interest loans are constructive/productive. BofA, huge in the west, and growing huger in the south. I understood the whys of BofA and Countrywide; and for BofA it was a prudent move (given they have the assets and leverage to do this move).

Now there's talk about extending unemployment, etc.

I'm having a dejavu moment. I think I've seen all this before.

In other words, if all they wanted was to get their hands on CFC loan portfolio then they already had first dibs on it. All they had to do was to wait a day or two and, after CFC declared bankruptcy, BoA could buy them for pennies a share - they did not have to rush out and buy them next morning after being assured that there would be no problems from regulators and antitrust and the Hill.

Let me ask you a question, if you know: Say, Countrywide declared bankruptcy. Could anyone /institution in the world have bought them out?

Obviously, BofA didn't wait for the bottom, in order to make their move. Which means that most the loans are in US held institutions. And yes, BofA will probably leave the worst ones for Fed bailout. If not Fed Bailout, I wonder if those loans would have been put on the open (world) market as a package deal.

Dodd and Conrad should be in DEEP ASS TROUBLE.....however they are DEMOCRATS and Denocrats NEVER get punished...at least here on earth. CORRUPTION ABOUNDS in the SENATE.

Capitol Hill is a cesspool.

Obviously, BofA didn't wait for the bottom, in order to make their move.

CFC market value was a long way from "the bottom", they were about to publicly declare a bankruptcy and nobody was making a move, because nobody had an interest in paying a "market value" premium to assume a huge debt with uncertain and deteriorating portfolio and loan business, which since has proved to be worse than originally anticipated, when they could buy it from bankruptcy (i.e., there was no expectation of "bidding war" for CFC "assets" which was the price for the service business).

Say, Countrywide declared bankruptcy. Could anyone /institution in the world have bought them out?

Theoretically, yes. Practically, not a chance, for several reasons:

1. Countrywide was going to declare bankruptcy because of its negative value and no liquidity and ability to service debt. Countrywide was, they were about to announce it, and everybody knew it. If they wanted it at that price it was available, and without any possible antitrust issues which BoA had.

2. There were very few institutions (banks or PE funds) who would be interested in assuming CFC debt and liabilities, let alone who could afford to "buy" them.

3. BoA had already made a $2B commitment in convertible debt to CFC earlier (at a price of $15 per CF share when CFC's market price was $18 per share) to shore up their liquidity (which proved to be insufficient anyway) so, for all practical purposes, BoA "owned" assets of CFC in bankruptcy. If you look at the price of CFC stock now, it's little more than $2B, but was dependent on stock of BAC (currency of exchange in this transaction), which lost a lot of value since, in large part because of taking on CFC's problems. This transaction has not been painless for BoA, and they didn't go into it blindly or because they did not know or understand what they were doing.

To recap, were it strictly a business decision, the only way anybody (including BoA, of course) would be interested in getting Countrywide's business would be without their "market premium" and problems, some of which could only disappear in bankruptcy proceedings. It would be messy for the markets and take time, but that time was worth quite a few billion dollars and much less headache for acquirer, and BoA had a lock on the assets.

But rumors of CFC (Number 1 mortgage lender, by far) declaring bankruptcy were already creating panic and havoc in the markets. Late night Thursday, January 10, BoA received urgent [official] assurances from Washington that the deal is welcome and will not have any regulatory or antitrust problems. On Friday, January 11, BoA announced the deal. Since then they were chastised and excoriated by many in financial community for making the deal and many times urged to withdraw from the deal, i.e. it was not a business opportunity or fear of losing a deal (they could outbid anybody at far lower price than it cost them then, even if there were other bidders) that made them bail out CFC from getting in and being run by the bankruptcy court.

Also, the purpose of this bill is no more a "bailout" of Countrywide or BoA with taxpayers' funds than JPM's buyout of BSC and Fed assuming BSC's portfolio at the then-prevailing market value (taxpayers may or may not benefit from it in time), it's simply providing a liquidity to BoA and similar banks to allow mortgage market to recover, and stabilize the market possibly by buying out weaker players into stronger hands.

It would be great if "VIP's" like Dodd were not present (by having the decency to recuse themselves on the issue or just going on campaign trail with Obama), but otherwise this bill is not a "bailout" of fina at taxpayers expense and it's better for BoA to write what they need in portion of the bill than leave it to lawyers on Dodd's staff who may just screw this part up - for banks and taxpayers.

Full Disclosure : I am not now and have not been invested in the stock of any public financial institution for at least 3 years and have no conflicts of interest with this or similar bills.

Since the 90s I've heard nonstop from dems as to how the poor and minorities are never able to buy homes. Voila! No great checks on validities, everyone gets a loan.

Now there's talk about extending unemployment, etc. I'm having a dejavu moment. I think I've seen all this before.

Yeah, that's the part that's really insane. We haven't come out of the down market yet, and the Dems are using the need to recapitalize and reliquify the banks hostage to putting their failed "enabler" policies into the bill - this really at the expense of taxpayers and simply recycling what caused most of the problem to begin with. To recap the banks only to make them write bad loans again to people with no ability to pay them off?

They truly are the heirs of FDR's failed policies which only prolonged the misery of Great Depression.

Obama Turns FDR Upside Down

:) I trust your disclosure; but more importantly your logic and knowledge of banking comes across loud and clear.

Your answers are cogent and sound, and I thank you for them.

Also, the purpose of this bill is no more a "bailout" of Countrywide or BoA with taxpayers' funds than JPM's buyout of BSC and Fed assuming BSC's portfolio at the then-prevailing market value (taxpayers may or may not benefit from it in time), it's simply providing a liquidity to BoA and similar banks to allow mortgage market to recover, and stabilize the market possibly by buying out weaker players into stronger hands.

I agree. And trust me, I'm suffering through it: I bought some BAC stock before all this began. Ha.

It would be great if "VIP's" like Dodd were not present (by having the decency to recuse themselves on the issue or just going on campaign trail with Obama), but otherwise this bill is not a "bailout" of fina at taxpayers expense and it's better for BoA to write what they need in portion of the bill than leave it to lawyers on Dodd's staff who may just screw this part up - for banks and taxpayers.

Very true. It's just made a bigger mess. These are two separate messes, now, tangled into one huge inkblot to be interpreted in any number of ways.

Wow! Yours cogently and succintly parsed exactly the sum of what's going on:

We haven't come out of the down market yet, and the Dems are using the need to recapitalize and reliquify the banks hostage to putting their failed "enabler" policies into the bill - this really at the expense of taxpayers and simply recycling what caused most of the problem to begin with. To recap the banks only to make them write bad loans again to people with no ability to pay them off?

There's a term for this: brickbatting. Stuffing a bag over another's head and beating the bagged head with bricks, bats, and whatever else is handy.

But this is consistent with the character of the Democrat Party: Doom and gloom every danged thing while out the other side of their mouths speak great words like: hope, dreams.

Snake oil salesmen with brothers who sell different brands of snake oil to cure the ailments the purchaser got from buying that very first bottle.

Both borrowers and lenders are to blame for this mess. Why should the taxpayers bail out either side?

How’s this for an idea: Stabilize housing market by allowing lenders to foreclose, but requiring that homeowner be allowed to continue to reside by paying “fair market” rent until such time as lender desires to re-sell the home. Would allow lender to foreclose and take collateral (as they bargained for), and hold until prudent to sell; would allow foreclosed family to continue to live there until lender decides to sell; would protect neighborhood from distress; would require change to regs. restricting lenders on how long they can hold property; would require “fair market” rent determination. Would not require taxpayer-funded bailout of either side.

My first post. Interested in intelligent discussion.