Notice is hereby given by the Law Office of Alfred G. Yates Jr., PC that it has filed a class action in the Southern District of New York on behalf of all those who purchased or otherwise acquired the securities of Merrill Lynch & Co., Inc. (Merrill or the Company)....
The complaint charges Merrill and certain of its officers and directors with violations of the Securities Exchange Act of 1934. More specifically, the Complaint alleges that Merrill had gone aggressively into Collateralized Debt Obligations (CDOs), securities backed by pools of assets including mortgages, which generated higher yields in the short term but which would be devastating to the Company as the real estate market continued to soften and the risky loans led to losses. According to the Complaint, the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company had failed to fully disclose the extent of its exposure to collateralized debt obligations ("CDOs"); (2) that the Company had failed to timely write-down the value of its CDOs as conditions in the housing and credit markets deteriorated; (3) as such, the Company's investment portfolio was impaired; (4) that, as a result of the above, the Company would be forced to take substantial charges in its third quarter 2007 to remedy such failures, causing the Company to suffer a net loss in the quarter; (5) that the Company lacked adequate internal and financial controls; and (6) that, as a result of the foregoing, the Company's financial statements were materially false and misleading at all relevant times......
I suspect some major investment banks will lose lawsuits in the tens of billions of dollars. They will have a very difficult claiming that they did accurately represent the risks involved since there is clear evidence that their own investment divisions did not understand them.
Would this be an auspicious time to nominate Warren Zevon Lawyers, Guns and Money for rock blogging?
energyecon | 12.16.07 - 10:24 pm | #
Gravatar energyecon - I hate to see you waste that one now, because the sh#t has most definitely not hit the fan yet.
MLM | Homepage | 12.16.07 - 10:26
LGM by Warren Zevon has already been used once before on this blog this past year, but hey why not again.
You would not believe the amount of fraud, both real and alleged. Well, actually you probably would.
It is absolutely astonishing stuff. I'm not just talking about the borrowers, which is now at the "no duh" stage - I'm talking amongst institutions and supposedly "sophisticated" folks.
On the plus side, my decision to invest ~$100K to earn a law degree from a top 15 law school is finally allowing me to outearn mortgage folks I know (many of whom did not go to college).
What Jeff Moped said goes for me too. My chapter 7 Trustee partner is asking for documentation on all mortgages: assignments, notes and payment histories. Let's see if anyone did any of this stuff right.
The suit against Merrill is especially difficult for the CDO industry-can Merrill claim they had no idea of the risks of these devices (and as a result suffered losses from them) and at the same time worked to sell them as appropriate investments to far less sophisticated buyers?
This looks to be the can-opener to get at the can'o'worms.
These are the secondary effects a lot of people don't consider when they talk about big bank "bailouts". Those Wall Street institutions that manage to escape their derivative deathtraps will be running right into a feeding frenzy of legal sharks.
Consider the type of people that had their money in these things -- wealthy individuals, endowments, pension funds. No question they'll all sue, regardless of whether they were truly misled.
The public pension funds in particular will evoke lots of sympathetic coverage, given that they represent the (taxpayer funded) retirement savings of firefighters, police, teachers, etc. I can already see the State AG's all fighting for the microphone...
OT: Couldn't decide where to toss this bone, so your in luck here. This is an abstract take on The Broken Model which we are all playing with, living with, watching break, i.e, the macro-economic model connected to the micro-economic reality of foreclosure and bank REOs connected to junk collateral and strings of bad decisions passed from liar-to-liar in a game of blind mans bluff.
Hence here is the meat of the matter in the form of a new model to help bogus rating agencies, banks, mortgage lenders that had the wrong model:
STATISTICS IN MEDICINE
Statist. Med. 2007; 26:29192936
Re: SUMMARY
When a likelihood ratio is used to measure the strength of evidence for one hypothesis over another, its reliability (i.e. how often it produces misleading evidence) depends on the specification of the working model. When the working model happens to be the true or correct model, the probability of observing strong misleading evidence is low and controllable. But this is not necessarily the case when the working model is misspecified.
Royall and Tsou (J. R. Stat. Soc., Ser. B 2003; 65:391404) show how to adjust working models to make them robust to misspecification. Likelihood ratios derived from their robust
adjusted likelihood are just as reliable (asymptotically) as if the working model were correctly specified in the first place. In this paper, we apply and extend these ideas to the generalized linear model (GLM) regression setting.
Re: The exponential adjustment factorA/B is simply the ratio of the model-based variance estimate for to the robust variance estimate (sandwich estimator) using the corrected data.
To accommodate this type of model failure, we need to only slightly modify how the adjustment factor B is calculated. We do this in the same way that the meat of the sandwich estimator is adjusted for clustering.
See Also: abductive inference, smirks, volatility asymmetry, Chi Square tests, canonical correlation and our favorite helping hand, Gaussian distribution!
Please adjust your models!!!
Also See: One important consideration is the
prompt corrective action (PCA) provision of the FDICIA, which requires regulatory intervention
in advance of insolvency. (Designing Counter cyclical and Risk Based
Aggregate Deposit Insurance)
In my opinion, the vast majority of CDOs failed to transfer risk and thus they werea lot like micro insurance agencies that were acting like micro hedge funds which were engineered to be reinsurance companies and thus these suckers should all go belly up and or have the crap sued out of them, if the IRS or some Fed org doesnt bust them for fraud!
Can someone tell me why the Nikkei index seems to have just gone vertical.
In Japan, the stock market takes a lunch break for about an hour. If anything bad happens while they are on lunch, they have to run back to their offices and sell as soon as the market opens back up.
They've lost so much money in the market that they're kinda nervous about losing more, especially during lunch.
DAVID WALLIS: We started as a very small number.\tThis is a fund that candidly saw a good risk reward and obviously, they were wrong as we were in this particular case -- in a particular tranche of this exposure -- a subordinate tranche to us. So one of the things that we are spending some time on here is looking for new and innovative ways to transfer risk, to enable us to play at the sort of risk reward points that we wish to play. And in this particular case this opportunity became available and we took it.
Check out this type of conduit garbage where these greasy pig-like snakes crawl around, as they look for bogus liquidity as they zip in out of shadows, in and out of FSAB loopholes engineered to allow any snake a fast exit to Cayman Island fun time!!
Variable Funding Capital Company LLC, a Delaware limited liability company, as assignee of Blue Ridge Asset Funding Corporation (VFCC or a Conduit), and Wachovia a Bank, National Association, in its capacity as liquidity provider to VFCC (together with its successor, Wachovia and together with VFCC, the VFCC Group or a Conduit Group),
(d) Three Pillars Funding LLC, a Delaware limited liability company (TPF or a Conduit), and SunTrust Bank, in its capacity as liquidity provider to TPF (together with its successor, SunTrust and together with TPF, the TPF Group or a Conduit Group),
(e) Wachovia Bank, National Association, in its capacity as agent for the VFCC Group (together with its successors and assigns in such capacity, the VFCC Agent or a Co-Agent), and SunTrust Capital Markets, Inc., in its capacity as agent for the TPF Group (together with its successors and assigns in such capacity, the TPF Agent or a Co-Agent), and
(f) Wachovia Bank, National Association, in it capacity as administrative agent for the Lenders hereunder or any successor administrative agent hereunder (together with its successors and assigns hereunder, the Administrative Agent and together with the Co-Agents, the Agents),
Why do we have a banking crisis when every banker and lender is pushing every legal loophole and every tax evasion scam to levels never before seen, where no document loans were given to any drug dealer, any person of questionable risk, regardless of collateral reality; no one was denied the opportunity to ensure that banks would make as much money as possible during this housing bubble era, which was all but mandated by The Fed with the collusive conceptual link to the Homeownership Society......and now we have The Great Homeownership Society Banking Bailout Circa 2007, 2008, 2009, 2010...
In a simple equilibrium model designed to make market external risk tradable, agents exposed to the risk measure their preferences according to exponential utility functions. The equilibrium price of external risk can be described by backward stochastic differential equations (BSDE) with non-Lipschitz generators. In joint work with A. Popier (Ecole Polytechnique, Palaiseau) we investigate a new concept of solutions for BSDE of this type, which we call measure solutions and which corresponds to theconcept of risk-neutral measures in arbitrage theory. We show that strong solutions of BSDE induce measure solutions, and present an algorithm by which measure solutions can be constructed without reference to strong ones.
When the Long Term Capital Investment fund, having the Scholes and Merton in its advisory board, collapsed in 1998, the failure of risk management was traced back to the use of Gaussian distributions in the Black Scholes model. Levy distributions can produce heavier tails needed to model the risks in financial markets more correctly. Since there is no general formula for the densities of Levy distributions, many statistical methods, e.g. maximum likelihood, cannot be easily applied. Using the Wilson-Polchinski renormalization group and generalized Feynman graphs, B. Smii, H. Thaler and I have been able to provide a Borel summable asymptotic expansion for general Levy distributions with a diffusive component and a jump distribution that has all moments. First numerical checks are promising.
I vote something from AC/DC for that Aus flavor (or flavour if you prefer). How about something off Dirty Deeds Done Dirt Cheap.
To think these muni's got a trip to Vegas, got wined and dined, and probably some other things so that they could put their muni money into some leveraged crap. Too bad what happens in Vegas stays in Vegas. The lawyers/barristers will likely get 5 cents on the dollar back - if they're good.
As someone that worked in high-tech in the 80s-90s and lived through the boiler-plate lawsuits of Bill Lerach and the San Diego lawyers I can tell attest they don't do it for the "common" man. Most of these were settled due to the nuisance factor and the lawyers kept the bulk of the settlement funds. A shareholder was lucky to get a few bucks!
Don't get me wrong. There should be discovery and suits to get to the bottom of the fraud. But I don't know if anyone noticed that just like how both the Repubs and Dems want to pass legislation that absolves the telecom companies in their significant role in spying on all Americans with no probable cause - all these "bailout" legislation will require that those that receive bailouts like rate freezes will give up any right to sue Wall Street. The guys downtown have both parties and every major presidential candidate in their pocket.
"And directly to the point, Maine, unlike some other states and even the largest investment banks, has had only minimal exposure to the market troubles brought on by the worldwide subprime crunch."
Senate Republican leaders last month called for an investigation into the state treasurer's $20 million investment of cash pool funds in Mainsail II commercial paper whose rating slipped from high to low this summer.
Mainsail II assets were frozen, putting the state's investment in question.
Lemoine has said nearly $20 million, representing about 3 percent of the cash pool, were invested in Mainsail II in August and that a financial adviser from Merrill Lynch advised the treasury that the investment met the state's criteria.
In his statement Wednesday, Lemoine specified that "while it was indicated by the broker that the instrument was asset-backed commercial paper meeting the state's rating requirements, it was not indicated that Mainsail was a structured investment vehicle which arbitrages between short-term and long-term debt."
More than a dozen state-run cash pools that manage money for local governments have some exposure to mortgage-related and other high-risk holdings that roiled credit markets this past summer, according to rating agency Standard & Poor's.
Mainsail II, which attracted Maine and others like Connecticut, Florida, Montana and King County in Washington, was an SIV that was operated by British hedge fund Solent Capital Partners.
Mainsail's commercial paper offerings were downgraded to junk by rating agencies because of concerns about whether the SIVs could repay the money it owed.
As someone that worked in high-tech in the 80s-90s and lived through the boiler-plate lawsuits of Bill Lerach and the San Diego lawyers I can tell attest they don't do it for the "common" man. Most of these were settled due to the nuisance factor and the lawyers kept the bulk of the settlement funds. A shareholder was lucky to get a few bucks!
What!?!? You don't say
Seriously, the major benefit for me personally (besides the joy of watching someone else's legal circus), is the IB banker jokes that our resident lawyers are bound (in a very real and legal sense) to tell us. For example: Q: How many IB bankers does it take to screw in a light bulb? A: I don't know, but it only takes one to screw New South Wales.
Charlotte, North Carolina-based Wachovia set up SAI in April 2004.
LaCrosse Financial Products LLC, a unit of bond insurer MBIA Inc., removed Wachovia Corp.'s Structured Asset Investors LLC as manager of a $1 billion collateralized debt obligation.
MBIA, based in Armonk, New York, set up LaCrosse in 1999 to arrange derivatives used to guarantee CDOs, according to the bond insurer's Web site. The announcement didn't provide details on LaCrosse's role in Sagittarius.
Lacrosse canceled SAI's position as collateral manager under its so-called ``for cause'' conditions, according to the statement. Reasons for termination under the conditions include certain events of default, declines in the value of the assets backing the CDO beyond a certain point or a sale of the asset manager, according to the CDO's prospectus.
I'm interested in how the market will react to the combination of Moody's affirmation of MBIA's AAA rating with negative outlook. Plus this little tidbit.
My guess is that the market already priced in the affirmation when the Warburg investment was announced, since they wouldn't have done it if it wouldn't defer a downgrade.
Jeffs Moped said, "You would not believe the amount of fraud, both real and alleged. Well, actually you probably would.
It is absolutely astonishing stuff. I'm not just talking about the borrowers, which is now at the "no duh" stage - I'm talking amongst institutions and supposedly "sophisticated" folks."
actually JM, we here at CR understood a long time ago that too often, it is the "sophisticated folks" that are usally capable and willing to engage in the greatest fraud.
AND, by the way your comment about this being "some random blog" is way off the mark. You would probably learn much about economics and the mortgage industry if you review the archives.
obviously you are new here...demonstrate some savoir faire
Jeffs Moped,
great post
damn i am tempted to strap on the yellow legal pad again after retiring ... ah nah , more fun just betting against these pos, you will be busy for as long as you can stand it
rok
There has been some credential brandishing here lately, but so what?
Shaw said that All professions are conspiracies against the laity. But clearly the magnanimous posts from CR, Tanta and the cohort, many highly educated professionals, provide evidence to the contrary.
And the best part, hard knock schlubs like me gradually become a more informed laity, and can occasionally chime in.
Without encouraging lawyers too much (and not that I expect that theyll be as generous with insights on this forum!), Get me a specialist is something well all have to say sometime in our lives.
If the Australians want to sue because they were misled that's great. But what is up with some of the councils having 70% of their assets invested in CDOs? Haven't they heard about having the correct ration of eggs to baskets?
DaveNYC, could it possibly be that something sweet was promised to our lowish-paid bureaucrats in exchange for polluting government funds with risky debt?
I expect that side of things will surface in the lawsuit mire. Ugly, ugly.
OT...is anyone following CIBC? This is in several of the UK papers, but no mention of it in any of the Canadian papers. Surely the canucks would be interested to know?
"CIBC has already written down almost C$1bn of investments linked to the US mortgage market more than any other Canadian bank. Analysts expect it will face more and could even have to realise losses next year."
Sorting out how to value the assets, who gets paid and whether to pull the plug on struggling CDOs is complicated business. Often little is known about who holds what. "If there's one safe prediction for 2008, it is that legal teams will be busy," wrote J.P. Morgan Chase in a recent report led by analyst Chris Flanagan.
Comment: After the lawyers get paid there won't be to many bonars left. That's my prediction for 2008.
A promise of Candy (the one in the fishnets) is possible. I could see that explaining why a government would choose to do business with Grange (or anyone), but not why they'd be OK with so much of their funds in one type of security.
To make matters worse, while I can't claim to be an expert I believe local governments in Australia have less responsibilities than their US equivalents.
For example, education and law enforcement are not handled at local levels here.
All you have to do is have one person on the take convince other mathematically challenged, politically preoccupied colleagues that this is a fabulous investment.
That would explain a lot. Because that is the biggest question here - why would the goverment invest in these funds if they are opaque, complicated and promising returns to good to be true.
It's the flip-side of the moral hazard coin -- there has to be strong incentive for public officials to be very cautious when playing with taxpayers/pensioners money -- otherwise they are vulnerable to strangers with candy - (of the fishnet -- or more likely -- kickback kind).
Investing in the securities I can understand. Investing such a large percentage in the securities I can't. It's like the people who had 90%+ of their 401(k) in Enron stock. Eggs and baskets.
This week's issue of National Underwriter (insurance industry trade magazine) just landed on my desk. Cover story is how the the subprime mortgage crisis is resulting in potential insured losses: initial estimates are $3B for D&O claims and $16B for E&O claims. Industry forecasters are saying this could be just the tip of the iceberg. The article was able to find 29 securities class action lawsuits related to the subprime mortgage crisis so far.
The sight of lawyers disgorging funds from Wall Street just makes my Christmas.
For the first time in my life (wife excepted): go, lawyers, go!
for a lay folks like me, could someone tell us how much MORE were they expected to yield compared to "safe[er]" "bets"???
Anonymous - you don't really want to know because it would just piss you off.
Would this be an auspicious time to nominate Warren Zevon Lawyers, Guns and Money
for rock blogging?
energyecon - I hate to see you waste that one now, because the sh#t has most definitely not hit the fan yet.
We're finding out where Waldo is, and he's hiring lawyers.
Greenspan sees stagflation:
Greenspan sees stagflation signs
He and BB must be best mates!
Notice is hereby given by the Law Office of Alfred G. Yates Jr., PC that it has filed a class action in the Southern District of New York on behalf of all those who purchased or otherwise acquired the securities of Merrill Lynch & Co., Inc. (Merrill or the Company)....
The complaint charges Merrill and certain of its officers and directors with violations of the Securities Exchange Act of 1934. More specifically, the Complaint alleges that Merrill had gone aggressively into Collateralized Debt Obligations (CDOs), securities backed by pools of assets including mortgages, which generated higher yields in the short term but which would be devastating to the Company as the real estate market continued to soften and the risky loans led to losses. According to the Complaint, the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company had failed to fully disclose the extent of its exposure to collateralized debt obligations ("CDOs"); (2) that the Company had failed to timely write-down the value of its CDOs as conditions in the housing and credit markets deteriorated; (3) as such, the Company's investment portfolio was impaired; (4) that, as a result of the above, the Company would be forced to take substantial charges in its third quarter 2007 to remedy such failures, causing the Company to suffer a net loss in the quarter; (5) that the Company lacked adequate internal and financial controls; and (6) that, as a result of the foregoing, the Company's financial statements were materially false and misleading at all relevant times......
first CRE blowup?
Centro Slumps 76% on Struggles to Refinance Debt (Update5) - Bloomberg.com
I suspect some major investment banks will lose lawsuits in the tens of billions of dollars. They will have a very difficult claiming that they did accurately represent the risks involved since there is clear evidence that their own investment divisions did not understand them.
International Herald Tribune
Morgenson: When the SEC turns a blind eye to market mischief
Morgenson: When the SEC turns a blind eye to market mischief - The New York Times
the bloomberg link not working for me...heres another source
Global debt crunch hits mall operator (Centro)
Debt fears trigger stockmarket carnage | The Australian
I called this one long ago.
C'mon, Esquire Yates: sic Goldman, selling and shorting simultaneously.
It may have been legal. But, it ain't gonna sit well with the jury.
Would this be an auspicious time to nominate Warren Zevon Lawyers, Guns and Money for rock blogging?
energyecon | 12.16.07 - 10:24 pm | #
Gravatar energyecon - I hate to see you waste that one now, because the sh#t has most definitely not hit the fan yet.
MLM | Homepage | 12.16.07 - 10:26
LGM by Warren Zevon has already been used once before on this blog this past year, but hey why not again.
Heh. I am one of those lawyers.
We've been busy for well over a year now.
You would not believe the amount of fraud, both real and alleged. Well, actually you probably would.
It is absolutely astonishing stuff. I'm not just talking about the borrowers, which is now at the "no duh" stage - I'm talking amongst institutions and supposedly "sophisticated" folks.
On the plus side, my decision to invest ~$100K to earn a law degree from a top 15 law school is finally allowing me to outearn mortgage folks I know (many of whom did not go to college).
Sanity. Making a comeback since 2007.
Jeffs Moped,
Thank God lawyers are once again earning more money than people who don't go to college. For awhile there, America was really getting weird.
What Jeff Moped said goes for me too. My chapter 7 Trustee partner is asking for documentation on all mortgages: assignments, notes and payment histories. Let's see if anyone did any of this stuff right.
The suit against Merrill is especially difficult for the CDO industry-can Merrill claim they had no idea of the risks of these devices (and as a result suffered losses from them) and at the same time worked to sell them as appropriate investments to far less sophisticated buyers?
This looks to be the can-opener to get at the can'o'worms.
These are the secondary effects a lot of people don't consider when they talk about big bank "bailouts". Those Wall Street institutions that manage to escape their derivative deathtraps will be running right into a feeding frenzy of legal sharks.
Consider the type of people that had their money in these things -- wealthy individuals, endowments, pension funds. No question they'll all sue, regardless of whether they were truly misled.
The public pension funds in particular will evoke lots of sympathetic coverage, given that they represent the (taxpayer funded) retirement savings of firefighters, police, teachers, etc. I can already see the State AG's all fighting for the microphone...
If anyone wants to sue JP Morgan, I'm in.
So sick of them camping on the last of my mom's estate for four damn years now.....
There are alot of unhappy pig owners after seeing the contents of the poke they bought.
Rock Blogging: How about something from Men at Work for those Aussies?
OT: Couldn't decide where to toss this bone, so your in luck here. This is an abstract take on The Broken Model which we are all playing with, living with, watching break, i.e, the macro-economic model connected to the micro-economic reality of foreclosure and bank REOs connected to junk collateral and strings of bad decisions passed from liar-to-liar in a game of blind mans bluff.
Hence here is the meat of the matter in the form of a new model to help bogus rating agencies, banks, mortgage lenders that had the wrong model:
STATISTICS IN MEDICINE
Statist. Med. 2007; 26:29192936
Re: SUMMARY
When a likelihood ratio is used to measure the strength of evidence for one hypothesis over another, its reliability (i.e. how often it produces misleading evidence) depends on the specification of the working model. When the working model happens to be the true or correct model, the probability of observing strong misleading evidence is low and controllable. But this is not necessarily the case when the working model is misspecified.
Royall and Tsou (J. R. Stat. Soc., Ser. B 2003; 65:391404) show how to adjust working models to make them robust to misspecification. Likelihood ratios derived from their robust
adjusted likelihood are just as reliable (asymptotically) as if the working model were correctly specified in the first place. In this paper, we apply and extend these ideas to the generalized linear model (GLM) regression setting.
Re: The exponential adjustment factorA/B is simply the ratio of the model-based variance estimate for to the robust variance estimate (sandwich estimator) using the corrected data.
To accommodate this type of model failure, we need to only slightly modify how the adjustment factor B is calculated. We do this in the same way that the meat of the sandwich estimator is adjusted for clustering.
See Also: abductive inference, smirks, volatility asymmetry, Chi Square tests, canonical correlation and our favorite helping hand, Gaussian distribution!
Please adjust your models!!!
Also See: One important consideration is the
prompt corrective action (PCA) provision of the FDICIA, which requires regulatory intervention
in advance of insolvency. (Designing Counter cyclical and Risk Based
Aggregate Deposit Insurance)
Can someone tell me why the Nikkei index seems to have just gone vertical.
Is it me, or is anyone else getting nauseous from all the self-congratulatory academic achievers around here lately?
Give it a rest people.
You're not as 'outstanding' as you would like to think.
ScoPro
Waaaa, S-C-. When someone (Nemo) calls me a bozo, I bite, every time.
In my opinion, the vast majority of CDOs failed to transfer risk and thus they werea lot like micro insurance agencies that were acting like micro hedge funds which were engineered to be reinsurance companies and thus these suckers should all go belly up and or have the crap sued out of them, if the IRS or some Fed org doesnt bust them for fraud!
In Japan, the stock market takes a lunch break for about an hour. If anything bad happens while they are on lunch, they have to run back to their offices and sell as soon as the market opens back up.
They've lost so much money in the market that they're kinda nervous about losing more, especially during lunch.
Re: Ambac the other day:
DAVID WALLIS: We started as a very small number.\tThis is a fund that candidly saw a good risk reward and obviously, they were wrong as we were in this particular case -- in a particular tranche of this exposure -- a subordinate tranche to us. So one of the things that we are spending some time on here is looking for new and innovative ways to transfer risk, to enable us to play at the sort of risk reward points that we wish to play. And in this particular case this opportunity became available and we took it.
Boo!!! Transfer of Risk is bogus..Boo FASB!!
Check out this type of conduit garbage where these greasy pig-like snakes crawl around, as they look for bogus liquidity as they zip in out of shadows, in and out of FSAB loopholes engineered to allow any snake a fast exit to Cayman Island fun time!!
Variable Funding Capital Company LLC, a Delaware limited liability company, as assignee of Blue Ridge Asset Funding Corporation (VFCC or a Conduit), and Wachovia a Bank, National Association, in its capacity as liquidity provider to VFCC (together with its successor, Wachovia and together with VFCC, the VFCC Group or a Conduit Group),
(d) Three Pillars Funding LLC, a Delaware limited liability company (TPF or a Conduit), and SunTrust Bank, in its capacity as liquidity provider to TPF (together with its successor, SunTrust and together with TPF, the TPF Group or a Conduit Group),
(e) Wachovia Bank, National Association, in its capacity as agent for the VFCC Group (together with its successors and assigns in such capacity, the VFCC Agent or a Co-Agent), and SunTrust Capital Markets, Inc., in its capacity as agent for the TPF Group (together with its successors and assigns in such capacity, the TPF Agent or a Co-Agent), and
(f) Wachovia Bank, National Association, in it capacity as administrative agent for the Lenders hereunder or any successor administrative agent hereunder (together with its successors and assigns hereunder, the Administrative Agent and together with the Co-Agents, the Agents),
When my model broke I use to just sniff the glue.
Why do we have a banking crisis when every banker and lender is pushing every legal loophole and every tax evasion scam to levels never before seen, where no document loans were given to any drug dealer, any person of questionable risk, regardless of collateral reality; no one was denied the opportunity to ensure that banks would make as much money as possible during this housing bubble era, which was all but mandated by The Fed with the collusive conceptual link to the Homeownership Society......and now we have The Great Homeownership Society Banking Bailout Circa 2007, 2008, 2009, 2010...
Liberty For All!
sdts,
There yah go, your mixing together old data with new data and yah still have a broken model dont yah!
WOW! NIKKEI diving further, now -247.
Monday's shaping up to be another interesting day in the markets.
Doc,gotta say your moniker is appropriate given your shotgun approach to posting.have you considered screw in choke tubes?
One more model for the road:
On BSDE arising in problems of hedging market external risk Peter ImkellerHU Berline-mail: imkeller@mathematik.hu-berlin.de
ABSTRACT
In a simple equilibrium model designed to make market external risk tradable, agents exposed to the risk measure their preferences according to exponential utility functions. The equilibrium price of external risk can be described by backward stochastic differential equations (BSDE) with non-Lipschitz generators. In joint work with A. Popier (Ecole Polytechnique, Palaiseau) we investigate a new concept of solutions for BSDE of this type, which we call measure solutions and which corresponds to theconcept of risk-neutral measures in arbitrage theory. We show that strong solutions of BSDE induce measure solutions, and present an algorithm by which measure solutions can be constructed without reference to strong ones.
Tom, Thanks, but no time for that today
FREE TIP:
When the Long Term Capital Investment fund, having the Scholes and Merton in its advisory board, collapsed in 1998, the failure of risk management was traced back to the use of Gaussian distributions in the Black Scholes model. Levy distributions can produce heavier tails needed to model the risks in financial markets more correctly. Since there is no general formula for the densities of Levy distributions, many statistical methods, e.g. maximum likelihood, cannot be easily applied. Using the Wilson-Polchinski renormalization group and generalized Feynman graphs, B. Smii, H. Thaler and I have been able to provide a Borel summable asymptotic expansion for general Levy distributions with a diffusive component and a jump distribution that has all moments. First numerical checks are promising.
I vote something from AC/DC for that Aus flavor (or flavour if you prefer). How about something off Dirty Deeds Done Dirt Cheap.
To think these muni's got a trip to Vegas, got wined and dined, and probably some other things so that they could put their muni money into some leveraged crap. Too bad what happens in Vegas stays in Vegas. The lawyers/barristers will likely get 5 cents on the dollar back - if they're good.
If we are going AC/DC probably Highway to Hell.
As someone that worked in high-tech in the 80s-90s and lived through the boiler-plate lawsuits of Bill Lerach and the San Diego lawyers I can tell attest they don't do it for the "common" man. Most of these were settled due to the nuisance factor and the lawyers kept the bulk of the settlement funds. A shareholder was lucky to get a few bucks!
Don't get me wrong. There should be discovery and suits to get to the bottom of the fraud. But I don't know if anyone noticed that just like how both the Repubs and Dems want to pass legislation that absolves the telecom companies in their significant role in spying on all Americans with no probable cause - all these "bailout" legislation will require that those that receive bailouts like rate freezes will give up any right to sue Wall Street. The guys downtown have both parties and every major presidential candidate in their pocket.
This is a sweet ending:
"And directly to the point, Maine, unlike some other states and even the largest investment banks, has had only minimal exposure to the market troubles brought on by the worldwide subprime crunch."
Senate Republican leaders last month called for an investigation into the state treasurer's $20 million investment of cash pool funds in Mainsail II commercial paper whose rating slipped from high to low this summer.
Mainsail II assets were frozen, putting the state's investment in question.
Lemoine has said nearly $20 million, representing about 3 percent of the cash pool, were invested in Mainsail II in August and that a financial adviser from Merrill Lynch advised the treasury that the investment met the state's criteria.
In his statement Wednesday, Lemoine specified that "while it was indicated by the broker that the instrument was asset-backed commercial paper meeting the state's rating requirements, it was not indicated that Mainsail was a structured investment vehicle which arbitrages between short-term and long-term debt."
More than a dozen state-run cash pools that manage money for local governments have some exposure to mortgage-related and other high-risk holdings that roiled credit markets this past summer, according to rating agency Standard & Poor's.
Mainsail II, which attracted Maine and others like Connecticut, Florida, Montana and King County in Washington, was an SIV that was operated by British hedge fund Solent Capital Partners.
Mainsail's commercial paper offerings were downgraded to junk by rating agencies because of concerns about whether the SIVs could repay the money it owed.
As someone that worked in high-tech in the 80s-90s and lived through the boiler-plate lawsuits of Bill Lerach and the San Diego lawyers I can tell attest they don't do it for the "common" man. Most of these were settled due to the nuisance factor and the lawyers kept the bulk of the settlement funds. A shareholder was lucky to get a few bucks!
What!?!? You don't say
Seriously, the major benefit for me personally (besides the joy of watching someone else's legal circus), is the IB banker jokes that our resident lawyers are bound (in a very real and legal sense) to tell us. For example: Q: How many IB bankers does it take to screw in a light bulb? A: I don't know, but it only takes one to screw New South Wales.
Interesting that MBIA is in on this one. I wonder how much of the 1 Billion CDO is theirs. Also how this will flow through their financials.
We got one IB screwing the entire USA Paulso
ScoProLaw - It is called schadenfraude, bro.
I sure as hell don't need to congratulate myself or seek the approval of anonymous posters on some random blog.
Bloomberg's Article.
MBIA's LaCrosse Unit Removes Wachovia's SAI From Managing CDO - Bloomberg.com
Charlotte, North Carolina-based Wachovia set up SAI in April 2004.
LaCrosse Financial Products LLC, a unit of bond insurer MBIA Inc., removed Wachovia Corp.'s Structured Asset Investors LLC as manager of a $1 billion collateralized debt obligation.
MBIA, based in Armonk, New York, set up LaCrosse in 1999 to arrange derivatives used to guarantee CDOs, according to the bond insurer's Web site. The announcement didn't provide details on LaCrosse's role in Sagittarius.
Lacrosse canceled SAI's position as collateral manager under its so-called ``for cause'' conditions, according to the statement. Reasons for termination under the conditions include certain events of default, declines in the value of the assets backing the CDO beyond a certain point or a sale of the asset manager, according to the CDO's prospectus.
I'm interested in how the market will react to the combination of Moody's affirmation of MBIA's AAA rating with negative outlook. Plus this little tidbit.
My guess is that the market already priced in the affirmation when the Warburg investment was announced, since they wouldn't have done it if it wouldn't defer a downgrade.
Jeffs Moped said, "You would not believe the amount of fraud, both real and alleged. Well, actually you probably would.
It is absolutely astonishing stuff. I'm not just talking about the borrowers, which is now at the "no duh" stage - I'm talking amongst institutions and supposedly "sophisticated" folks."
actually JM, we here at CR understood a long time ago that too often, it is the "sophisticated folks" that are usally capable and willing to engage in the greatest fraud.
AND, by the way your comment about this being "some random blog" is way off the mark. You would probably learn much about economics and the mortgage industry if you review the archives.
obviously you are new here...demonstrate some savoir faire
Jeffs Moped,
great post
damn i am tempted to strap on the yellow legal pad again after retiring ... ah nah , more fun just betting against these pos, you will be busy for as long as you can stand it
rok
There has been some credential brandishing here lately, but so what?
Shaw said that All professions are conspiracies against the laity. But clearly the magnanimous posts from CR, Tanta and the cohort, many highly educated professionals, provide evidence to the contrary.
And the best part, hard knock schlubs like me gradually become a more informed laity, and can occasionally chime in.
Without encouraging lawyers too much (and not that I expect that theyll be as generous with insights on this forum!), Get me a specialist is something well all have to say sometime in our lives.
jg --
When someone (Nemo) calls me a bozo, I bite, every time.
Please check your irony detector; it seems to be malfunctioning.
Any publicly listed law firms?
They may be the only stocks that go up in the next year....
Wasn't just the Oz local governments who got burned in US RE.
Centro Properties (ASX code CNP) just took a HUGE hit, down 75% in a single day.
If the Australians want to sue because they were misled that's great. But what is up with some of the councils having 70% of their assets invested in CDOs? Haven't they heard about having the correct ration of eggs to baskets?
DaveNYC, could it possibly be that something sweet was promised to our lowish-paid bureaucrats in exchange for polluting government funds with risky debt?
I expect that side of things will surface in the lawsuit mire. Ugly, ugly.
OT...is anyone following CIBC? This is in several of the UK papers, but no mention of it in any of the Canadian papers. Surely the canucks would be interested to know?
"CIBC has already written down almost C$1bn of investments linked to the US mortgage market more than any other Canadian bank. Analysts expect it will face more and could even have to realise losses next year."
FT.com / Financials - Analysts forecast C$2bn writedown at CIBC
"If we are going AC/DC probably Highway to Hell.
Unfortunately I think it will be a long time before we can consider using one of their classic's "Back In Black"....
I cannot resist the AC/DC humor!
Let's NOT forget the song that made all this possible.
Dirty Deeds Done Dirt Cheap!!!
As someone who uses a little yellow laptop to get to this blog I appreciated Jeff moped's original comments, auntie dotal as they may be.
Sorting out how to value the assets, who gets paid and whether to pull the plug on struggling CDOs is complicated business. Often little is known about who holds what. "If there's one safe prediction for 2008, it is that legal teams will be busy," wrote J.P. Morgan Chase in a recent report led by analyst Chris Flanagan.
Comment: After the lawyers get paid there won't be to many bonars left. That's my prediction for 2008.
A promise of Candy (the one in the fishnets) is possible. I could see that explaining why a government would choose to do business with Grange (or anyone), but not why they'd be OK with so much of their funds in one type of security.
daveNYC,
To make matters worse, while I can't claim to be an expert I believe local governments in Australia have less responsibilities than their US equivalents.
For example, education and law enforcement are not handled at local levels here.
All you have to do is have one person on the take convince other mathematically challenged, politically preoccupied colleagues that this is a fabulous investment.
That would explain a lot. Because that is the biggest question here - why would the goverment invest in these funds if they are opaque, complicated and promising returns to good to be true.
It's the flip-side of the moral hazard coin -- there has to be strong incentive for public officials to be very cautious when playing with taxpayers/pensioners money -- otherwise they are vulnerable to strangers with candy - (of the fishnet -- or more likely -- kickback kind).
Investing in the securities I can understand. Investing such a large percentage in the securities I can't. It's like the people who had 90%+ of their 401(k) in Enron stock. Eggs and baskets.
Tin foil hat time!
What if the investment banks took pictures of said fund rep with Candy (of the fish net kind) having a good time?
This week's issue of National Underwriter (insurance industry trade magazine) just landed on my desk. Cover story is how the the subprime mortgage crisis is resulting in potential insured losses: initial estimates are $3B for D&O claims and $16B for E&O claims. Industry forecasters are saying this could be just the tip of the iceberg. The article was able to find 29 securities class action lawsuits related to the subprime mortgage crisis so far.
Okay, if 'bozo' was irony/tongue-in-cheek, I'm placated.