Unfortunately the Federal Reserve has already jammed its balance sheet with $29 billion of Bear's "assets". This is really starting to get ugly....taxpayers should not be on the hook for any of this stuff.
Your life insurance doesn't pay on suicide. First Franklin's loan underwriting in the last couple of years was clearly sucidial. So Ambac shouldn't pay. Besides, I'm sure Merrill can handle taking the loss. Right????
2:06[BAC] Bank of America eliminates dividend - CFO
2:01[BAC] Bank of America well capitalized - CEO
2:01[BAC] Bank of America sees no reason to change dividend - CFO
CR "Canadaman, yes, it sounds like JPM will be responsible for any legal and settlement costs."
The way I see it is, JPM is on the hook for the first $1b. After that the hook turns into a shaft for the US taxpayer.
Ben gave an estimate last summer that the full extent of the housing related losses would be $100b. Last month he said the $29b obligation would be safe and could actually be profitable. Inflation is going to ease too.
I don't much like Ben's ability to predict the future, or his negotiating capacity.
Are the losses Ambac is talking about real or just projections as to what might happen if certain insured assets default when they reach maturity?
If Ambac really isn't on the hook to pay out on the really bad assets on it's books until maturity, then maybe they can stay in business for quite a few years. The losses won't become "real" until there is an actual default event at maturity.
So was the 12% loss projection at the time they signed the deal? Seems kind of shaky to me. I'm surprised that it may only be 80%, I guess all that paper has recycling value.
The only thing surprising is that it took them this long to get the lawyers started. I thought insurance companies always keep an eye or whether it would beneficial to deny claims based on the cost of lawyering up. Or have they already done the preliminary and know they have a case, hmmm.
The JPM/BSC deal has no MAC. It is one of those things that seemed to have slipped through the cracks in the rush to get the deal done before Japan opened.
First, after today's announcement they're gonna lose 1.66 billion less until BK. I think in a forward-looking market this should be regarded as good news.
Second, they have lawyers. This is good news, too. Hell, a company like that needs them badly.
Would be cool to see Lawrence Yun up on the stand, under oath.
"Let the court show that NAR chief economist Lawrence Yun swears that these mortgages have not, in fact, deteriorated as the plaintiff claims, and will rebound in value in the second half."
That's not precisely true. I believe there is a MAC that allows any defaulting paper to be placed at par to one Bernanke Capital LLC of Washington, DC.
sdtfs: inspecting the deals eats up man hours and cuts into the bottom line. And no one is in the game except for this quarters results. Next quarter? Next ... ? What's that? Next thing you know, you'll be talking about the fabled 3 in the morning.
I had a friend who bought three life policies for $1 mill each. One named his son, one his daughter, and one his ex. He takes 2 years and one month getting his "affairs in order" and eating and drinking a lot. Then offs himself. All three policies paid.
Turns out he had planned it all along -- according to his executor, another friend.
I'm not sure about the details, but apparently most standard life policies have a clause that they will not pay if purchased in anticipation of suicide, but if the suicide is more than 2 years after purchase, there is a conclusive presumption that the policy was NOT purchased in anticipation of suicide.
Results may vary from state to state. Consult your tax or legal advisor before investing.
Wow, that's bad news for life insurance companies, that they pay out on suicides: they are going to be taking it in the shorts on their 'investments' in stocks, bonds, private equity, and real estate during the forthcoming depression. And, I don't have statistics, but I'm guessing that suicides go up during depressions.
Today on the kindergarten baseball field, little Jimmy Ambac, 5, of New York, was quoted as saying, "it's not fair! I get a do-over because the baseball Timmy Bearsterns brought isn't a regulation major league hardball! I'm going to ask my mommy for a do-over. Waaaaaaaaaaa!"
Sadly, young Timmy Bearsterns' parents lost all of their money in Atlantic City earlier this spring and has been adopted by the JPMorgan family. Timmy could not be reached for comment.
Glad I'm still long pitch forks, torches, gallows, and lawsuits.
That's good thinking, because tar and feathers are just too expensive these days and those are good substitutes.
I believe one of the reasons that JPM went for the low ball bid on BSC was that they figured on having to reserve piles of cash for lawsuits. Whether or not they reserved enough is a different matter.
If more actions like this come out, and CRE in NYC drops in value, the BSC buyout might not turn out to be such a good deal.
Thanks, I guess, for the info on insurance and sucide. I should have made a better analogy.
Point in that I am SURE Ambac's lawyers can gin up something to get out of those obligations. Or at least fight about it for years. And you think Merrill/First Franklin wants to try to explain to a judge/jury how those loans got written?
Just closely observing a few condo foreclosures here in downtown San Diego, I see First Franklin again and again underwriting purchase loans in 2006/2007 that allowed the original buyer/investors (often a realtor) to sell profitably even as the market tanked. The supposed new buyers end up in foreclosure within a few months. Very fishy stuff.
Sorry, completely OT but I just looked at Realtor.com and houses exactly like mine are listed at 45% less than what I paid in 2006. I can't help it, I am shocked.
Sorry about that, Ceiling Fan. Talk to a knowledgeable realtor before jumping to any conclusions. Depending on where you are, some of the downgrade might be temporary.
So what are we left with? Prices that are too high and threatening to stick. Historically tight labour markets. Few obvious signs of macroeconomic stress in supposedly vulnerable Club Med countries. Rather than asking what the ECB is smoking, Macro Man can't help but wonder what the market is smoking for thinking the ECB shouldn't hike.
That's one deep hole. Can't imagine the climb out will be a quick one. Depending on your downpayment, you may have some pretty interesting moves to make this summer... at night with the headlamps off.
FXP - My EEV is getting trashed, too. I put on some trades over the past week or so based on my read of what the Fed governors have been saying about inflation and monetaty policy. Probably a terrible bet, since it's best to ignore what the say and pay attention to what they DO.
Trust me, I am not kidding. I put down 20%. I live in a low income neighborhood of old houses in Miami. It was all I could afford but obviously it was a bad move, should have rented, but whocoodanode? I sure didn't. When I retire, I will not be able to sell. Looking at the bright side, I don't have to worry about resale value when I decorate.
That's not precisely true. I believe there is a MAC that allows any defaulting paper to be placed at par to one Bernanke Capital LLC of Washington, DC.
Speaker73 | 04.23.08 - 2:59 pm | #
Hey what a coincidence... I think that's the same outfit I work for. Pretty certain anyway.
"Elvis, I am in the same boat.
I just figure we can muddle through and wait for the inflation."
A lot of people are. I live in an area on the California coast with "strong" prices, but since this site turned me on to redfin.com, I'm seeing a lot of average, older homes (not trophy homes) on the market for 15-17 percent less than their 2005 or 2006 sale price.
Trophy homes on the water are maintaining their value, but that's a different RE market, for the super-rich. The RE market that most of us live in is dropping.
Obviously, a lot of the guys in my area can't wait for inflation; must be speculators. Prices are still 'way too high, of course.
I saw diesel for sale yesterday at $4.09- with these increases food hoarding is a rational response to spiraling transportation costs going into food.
Never fear they are putting another bio-diesel plant in near me... I guess that means I'll have fuel to drive to the grocery but nothing to bring home.
"Never fear they are putting another bio-diesel plant in near me... I guess that means I'll have fuel to drive to the grocery but nothing to bring home."
Maybe you should make a deal with the KFC down the street for their used fryer oil and refine your own in the garage. I'm joking, but I've talked to guys who did that.
Sorry, completely OT but I just looked at Realtor.com and houses exactly like mine are listed at 45% less than what I paid in 2006. I can't help it, I am shocked.
Ceiling fan,
According to Mr. Mortgage, you should try to understand whether those houses are regular sales or REOs. He says they are like two separate markets. The regular sales reflect real people trying to get as much money as possible. The REOs are just banks trying to dump crap.
He says the REOs are driving prices lower for everybody. Mr. Mortgage is one of the hottest people on UTube.
Ya - I know them too. A guy wanted me to start a company doing that with him - once he found out I was a 'recovering chemical engineer'. I'd rather fry french fries all day thank you very much...
Somebody from the NAR want to get Moody's back on message? This kind of announcement just won't do:
NEW YORK (AP) -- Banks are likely to make it more expensive and difficult for struggling homebuilders to get credit in 2008, Moody's Investors Service said Wednesday.
The ratings agency said homebuilders will also have trouble getting banks to amend existing lending agreements if the companies violate terms -- something likely to increase as the housing sector continues to contract.
...
"It is likely that banks will finally begin to hold homebuilders accountable for their failure to generate cash, maintain adequate liquidity, and reduce outstanding debt," Snider said.
Following bread crumbs back to the topic: How this can be anything but a delaying tactic by Ambac is beyond me, unless they have hard evidence of actual violations of terms of the contracts that they now have lawyers poring over.
If it's just, "Oh, wait: now we want to actually read the contracts we signed--we didn't read the fine print before," they're going to be handed their asses on due diligence, implied notice, constructive notice, and actual notice.
And "forensic experts"? What--are they checking the contracts for DNA or fingerprints?
Sounds like a "say something, say anything" stalling tactic to me while they try to find lifeboats and exits.
"It is likely that banks will finally begin to hold homebuilders accountable for their failure to generate cash, maintain adequate liquidity, and reduce outstanding debt," Snider said.
When REOs are becoming greater than non-REOs for sale, how can you separate them? That is proposterous. So, celing fan, bob dobbs, and allenm, are you saying prices aren't sticky?
Hear that CR and SweetHomeKilla and everyone else who states the truism that home prices are sticky. Maybe you better rethink that.
AllenM-, sorry that you are caught up in the AZ housing mess.
At least you have interesting sights at night to view (were those UFOs?).
Prices for assets and prices for consumer goods can and do move independently.
Easy credit to households, businesses, and governments allowed:
-- Speculators to bid up prices of assets stocks, real estate -- and
-- Consumers to overindulge in high-order consumer goods and services Hummers, boob jobs, college education.
Quick, easy profits in speculation diverted resources (e.g., smart folks who otherwise would have been BSMEs but who chased the money via an MBA) from production of low-order consumer goods -- such as food and energy -- to production of assets and high-order consumer goods and services.
Now, for assets and high-order consumer goods and services, we have excess supply and falling demand due to debt overload --> falling prices.
Now, for low-order consumer goods, we have short supply --> rising prices.
DON'T walk away!!!!! Stop paying, get all your money out of your name. Have nothing in your name (except retirement accounts, they can't be touched). Continue saving what you would have sent to the lender into those accounts under someone else's name. Sit back, enjoy your home FREE for the next year AT LEAST.
What gives, the bad news is all bad. Why no impact on the market yet?
I'm getting kind of tired of signing on, checking Bloomberg's headlines of destruction and seeing no impact on the market.
Does it matter? Or are stock symbols now the Wall Street equivalent of numbers on a roulette wheel.
But Bill Miller just said the worst is over and stocks are headed up. He should know, since he's been beating the S&P...oh, wait that was more than 2 years ago. Since then a flock of black swans has been sullying his fund with their unholy excrement...Poor Bill.
I wonder if any of the paper the Fed accepted as collateral is rated AAA only because of Ambac/MBIA guarantees. Could get interesting if the rating companies wake up and do their jobs on the monolines, and then JPM and others are forced to take back the "AAA" paper and mark it down.
I suspect that if the insurers can prove widespread fraud within the pools, they can/will refuse to pay. Maybe they aren't in such bad shape after all...
"When REOs are becoming greater than non-REOs for sale, how can you separate them? That is proposterous. So, celing fan, bob dobbs, and allenm, are you saying prices aren't sticky?"
Sure they're sticky; get off your hobby horse.
One of those "down 15 percent from peak" homes in my town sells for $600K; it's nothing special. At best it would bring in $30K a year in rent.
So it still has drop to maybe $350K at least to reach its actual economic value, if we have no expectation that houses will hold or increase in value in the near term.
There's the stickiness; the expectation that houses will continue to be worth more than the price that brings a break-even on investment.
The stickiness will remain until all hope is gone from current owners and investors above the vicinity of the break-even investment price.
SBUX lowering guidace on weakest consumer environment in their history. Baristas may be getting kicked to the curb soon. What are job prospects for unemployed baristas?
Luxuries are the first to go for the "aspirational" consumer:
[The current economic environment is the weakest in our companys history, marked by lower home values, and rising costs for energy, food and other products that are directly impacting our customers, said CEO Howard Schultz]
This quote from the SBUX CEO is precious: "Underscoring my optimism is our customer research, which shows that while our customers are reducing the frequency of their visits to our stores - due to the economic pressures they are feeling - they are not substituting their Starbucks Experience with coffee products from others."
Dude, it's a drug. Damn straight they're getting their fix elsewhere.
From the just-released Mad Libs, Fictitious Capital Edition:
The Federal Reserve Bank of New York originally projected that losses on the underlying collateral of the Bear Stearns transaction would be between 10% and 12%, but now expects losses at 81.8% of underlying collateral, a transaction that has seen an unexpectedly "rapid escalation of losses," and represents an outsized percentage of the insurer's expected credit impairment, Geithner said.
Ambac is stalling for time. They're not going to get many more investors at their rate of burn.
The remaining tactic is deny liability because of fraud. This can work for a while, but not forever.
Hven't you ever dealt with an insurance company that didn't want to pay?
Ambac just had grown so used to minting money from fiancial innovation that they forgot how an insurance company under pressure to payout handles the insured party. It's not with kid gloves.
The lawyers can hold off the payout date, but the numbers, in the end, are overwhelming.
Like many other parties in the market these days, they are hoping that the NAR projections are the correct ones.
1) Possession is 9/10 of the law. Ambac has the money, the insureds (IB's or bond holders) have to come get it, and the plaintiff always has the burden of proof and the burden of going forward. Ties in evidence go to the defendant.
2) The new Federal Rules -- particularly on discovery of electronic documents -- are thought to be pro-plaintiff since they let the poor plaintiff easily find out what the bad, bad defendant did to him. But here the tables are turned. Here the damning documents are in the hands of the plaintiffs and it is the defendant (Ambac) who will have a field day with them.
3) One more thing: it is almost always a bad idea to start a law suit. Before filing you have to contend only with your opponent. After filing you have to fight the Court and the Rules as well. It ain't easy folks.
FHLB-Chicago stops mortgage-buying program
By: Steve Daniels April 23, 2008
(Crain's) The Federal Home Loan Bank of Chicago is shutting down its groundbreaking program to buy mortgages originated by member banks in Illinois and Wisconsin as it grapples with profitability and capital concerns caused in large part by the mortgage program.
The Home Loan Bank, one of 12 such regional banks around the country, provides low-cost loans to member banks a major source of funding for mid-sized and small banks that have less access to capital than their larger competitors.
Yes, ceiling fan is correct. Down 40-45% sounds about right. Here in South Florida, I've seen evidence that the stickiness has become unstuck in the last 2 weeks to a month.
I expect it' end up 50 cents on the dollar, heck, maybe 40 cents on the dollar.
I got my second ruthless default client. His property is off a mere 33 1/3 %. An identical property next door sold for 1/3 off what he paid. And he put in granite countertops too.
Actually, he would continue making payments, except he got married, has a kid and has his mother in law staying there to watch the kid--4 people in a one bedroom apt. Actually that's probably illegal under the Condo docs, or building and zoning rules.
He QUALIFIES for a mortgage to buy a house with both payments. My ruthless defaulters are running maybe 1 in 7 or 8.
"It is likely that banks will finally begin to hold homebuilders accountable for their failure to generate cash, maintain adequate liquidity, and reduce outstanding debt," Snider said.
OH OH - looks like Dad is home...
- dryfly
Well I was wondering why the homebuilders were getting pounded today (in contrast to the insane rallies and levitation in their prices over the past few months). I was beggining to wonder if my 1/09 PUTs on TOL/CTX/PHM/LEN would expire worthless...before sanity and reality take hold.
I saw diesel for sale yesterday at $4.09- with these increases food hoarding is a rational response to spiraling transportation costs going into food.
Biodiesel has finally reached price parity with dino-diesel in my neck of the woods. For the past several years I had been paying a premium at the local biodiesel co-op. FWIW, my neighbor runs on straight WVO (waste vegetable oil) and has to go several towns over to get a supply of grease. Everything around here is already claimed by other scavengers. Funny how waste grease becomes less of a "problem" with gas at $4/gallon.
Oh, and another data point from East Bay prime.
1731 6TH St is a 3bed/2bath home with 2158sq.ft. near vaunted Fourth Street shopping.
Now on the MLS for $457,000 .
Sold on 1/26/2006 for $900,000.
Foreclosed on 12/12/2007 for $770,106, by wait, guess yes, Countrywide.
Well I was wondering why the homebuilders were getting pounded today (in contrast to the insane rallies and levitation in their prices over the past few months).
On that subject, Bill Miller was pleading with his investors today not to pull out:
In a letter Wednesday to shareholders of Legg Mason Value Trust, Miller said he expects the battered financial sector to improve and that the rebound in housing shares should continue.
"Most housing stocks are up double digits this year despite dismal headlines, a sign the market had already priced in the current malaise. I think likewise we have seen the bottom in financials and consumer stocks, but not necessarily the bottom in headlines about the woes in those sectors," Miller wrote.
I wonder if he also told them that they've been the only ones on the bid for the last three months?
Elvis,
Prices are sticky, until the market unsticks them.
The overhead of inventory is building, sales are falling through, and the decline is accelerating.
In nominal terms for right now.
They will eventually reverse and head higher, under the conditions I postulated. In real terms they will be less, much less, but hey I borrowed a half million at 6% for 30 years- what do you think my payments will be worth in twenty years?
The investment banks will spend many years trying to force the insurance companies to pay off on the SIVs. It makes you wonder about the real value of all the CDS, not the "notional value".
Spire developer missed property tax deadlines
By: Thomas A. Corfman April 23, 2008
"(Crains) Garrett Kelleher failed to pay nearly $430,000 in property taxes due nearly two months ago on the proposed site of the Spire, even as the Irish developer was launching a lavish, five-city Asian tour to trumpet the massive skyscraper.
The tax payments were due March 4 on a 2.2-acre site along the north bank of the Chicago River that Mr. Kelleher acquired in 2006, reviving a stalled proposal by another developer for a twisting tower to be designed by prominent architect Santiago Calatrava.
Three days after the taxes were due, Mr. Kelleher, executive chairman of Shelbourne Development Group Inc., began courting prospective condominium buyers during a lavish road show that started in Singapore and was scheduled to include Hong Kong and Kuala Lumpur, Malaysia."
Never understood why someone from Hong Kong would want to buy a condo in Chicago...but neat looking building, or at least the pictures of it looked neat...cause I wonder if it will be built???
Hear that CR and SweetHomeKilla and everyone else who states the truism that home prices are sticky. Maybe you better rethink that.
Elvis | 04.23.08 - 4:03 pm | #
The scary part is that maybe prices are sticky
Dirk van Dijk | Homepage | 04.23.08 - 6:19 pm | #
Exactly! Imagine where the RE market would be now (and MBS & banks) if they weren't... sometimes a sluggish market isn't a terrible thing if it gives us time to grasp the consequences.
I'm surprised that no-one at this site is taking Ambac's side in this deal... (maybe it's just the ingrained, anti-lawyer phobia that most sane people have). But underlying losses of greater than 80% of collateral suggest some systematic failure that Bear Sterns should have been able to catch before buying CYA insurance.
Might be a slam-dunk case, really. Heck, JPMorgan might fold just to keep the lawyers out of Bear's books during pre-trial discovery. God knows what other bodies are buried there...
"Never understood why someone from Hong Kong would want to buy a condo in Chicago...but neat looking building, or at least the pictures of it looked neat...cause I wonder if it will be built???"
Neither do I, but I saw that (screw) building (rendition) in a (very expensive) quarter page ad in the HK paper during their road show.
I guess what they're spending on promotions has a prior claim...
"Ambac is stalling for time. They're not going to get many more investors at their rate of burn."
It is much more than stalling for time. Tanta has written about the rep and warranty issue (and I guess no one really read or remember it judging from the comments so far). If ABK can prove that BSC did not follow the guideline set out for the securitization (missing paper work, fruadelent signature, information etc etc.), they don't have to pay the AAA tranches that they insured. The liability is going to be off ABK's book. Now the ball is going to be in the court of those who bought the AAA tranch from BSC (or the trustee which is likely BSC). The trustee will sue BSC and try to recover the money they loss in holding the AAA CDO. JPM guarantee the counter party risk before the merge complete. Don't believe the guarantee extend to fruad. Now BSC asset is going to be on the hook for the loss. All these is going to play out in court time (which is going to be a long time). But it has real consequence on who acutally has to pay for the loss. And the money is not trival (since it probably set precedent for other deals as well).
The reader comments used to be a really strong part of CR's blog.. Right now it just look like everyone is trying to put their one-liner in without even thinking about the topic. Sound much like a yahoo message board...
Looks like ABK will have to do their own long due dilly... the SEC has refused to acknowledge what information they may have gleaned in an investigation of BS's misvaluation of their portfolio.
If congress asks and can't get it, I'm not sure how well any other investigation is going to go... although we all know that congressional subpoena's merely suggestions under the current rule of "law".
what a great contribution to get everyone debating semantics yet again.
"waahhh Real estate is not sticky"
Fine. Please give us a replacement word for "sticky" that you feel is acceptable so that we may describe the general trend of RE valuations to move slowly when compared to other investments such as equities.
or show me historical data that confirms that housing indices can go up and down by 4-5% per DAY (not over years, over a DAY). the stock market can often do this (Dow, S&P, NASDAQ).
ambac going dow
This could really hurt Bear Sterns
Someday this will all make a damn good movie.
Does anyone have an idea how much in CDS AIG sold? They have been getting pounded the last week or so.
JPM assumed the liabilities of Bear Stearns. I have to think this hurts JPM in two ways.
Its now an LSP - Lawyer Stimulus Plan. You know its getting serious when they start talking lawyers, guns and money.
This will only end when the deep pockets run empty - if the lawyers are any good they'll end up with most if not all.
Let the finger pointing begin.
$2.3b in assets, $8b in liabilities. It wasn't a few questionable deals, it was an unworkable business model.
Board Meeting Minutes:
"Hey, why don't we get some lawyers to look at the billions of dollars worth contracts we signed last year."
"You think?"
"Couldn't hurt."
"Brilliant idea, D.W. That's why we call you 'Chief Risk Officer.' By unanimous consent, so ordered."
(Enthusiastic nods, grunts, and "Attaboys")
Meeting adjourned.
Nothing like watching the tide start going out, and the folks are starting to grab any old thing to cover up the fat butts hanging in the breeze.
Warren was right, all this derivatives stuff was for the birds.
All it did is allow folks to keep on partying even after they turned on the lights.
Nothing changes except the person saying "Whocoodanode?"
Someday this war's gonna end...
Someday this will all make a damn good movie.
It's been done:
Bones: "He's dead Jim."
Who did it?
The one with the biggest new jet!
Unfortunately the Federal Reserve has already jammed its balance sheet with $29 billion of Bear's "assets". This is really starting to get ugly....taxpayers should not be on the hook for any of this stuff.
Canadaman, yes, it sounds like JPM will be responsible for any legal and settlement costs.
Best Wishes.
Your life insurance doesn't pay on suicide. First Franklin's loan underwriting in the last couple of years was clearly sucidial. So Ambac shouldn't pay. Besides, I'm sure Merrill can handle taking the loss. Right????
Glad I'm still long pitch forks, torches, gallows, and lawsuits.
Your life insurance doesn't pay on suicide.
My FIL's did. Surprised the hell out of me.
OT:
2:06[BAC] Bank of America eliminates dividend - CFO
2:01[BAC] Bank of America well capitalized - CEO
2:01[BAC] Bank of America sees no reason to change dividend - CFO
"Canadaman, yes, it sounds like JPM will be responsible for any legal and settlement costs."
[BART"]It was like that when I got there, man!"[/BART]
Hilarious, Will!
CR "Canadaman, yes, it sounds like JPM will be responsible for any legal and settlement costs."
The way I see it is, JPM is on the hook for the first $1b. After that the hook turns into a shaft for the US taxpayer.
Ben gave an estimate last summer that the full extent of the housing related losses would be $100b. Last month he said the $29b obligation would be safe and could actually be profitable. Inflation is going to ease too.
I don't much like Ben's ability to predict the future, or his negotiating capacity.
Casablanca: "Shocked, shocked I tell you..."
AMBAC seeking legal relief from questionable practices? Be careful what you wish for. Lawyers Full Employment Act of 2008.
Are the losses Ambac is talking about real or just projections as to what might happen if certain insured assets default when they reach maturity?
If Ambac really isn't on the hook to pay out on the really bad assets on it's books until maturity, then maybe they can stay in business for quite a few years. The losses won't become "real" until there is an actual default event at maturity.
So was the 12% loss projection at the time they signed the deal? Seems kind of shaky to me. I'm surprised that it may only be 80%, I guess all that paper has recycling value.
ipodius writes:
Bones: "He's dead Jim."
Jim (the lawyer): "Fine, you get his phaser, I'll go through his wallet."
The good news is that, while the Fed will take a $29B hit, two things will happen:
a transaction that has seen an unexpectedly "rapid escalation of losses,"
Why can't they just come right and say 'Hoocoodanode'?
Canadaman, yes, it sounds like JPM will be responsible for any legal and settlement costs.
When does the JPM/BS deal close ?
Could 81.8% be called a Material Adverse Change ?
Ray
"This has totally surprised us!!!!"
Top Gun Acting Gary!
OT,
ipodius - all time fave is....
"Dammit Jim, I'm a doctor not an escalator!"
The only thing surprising is that it took them this long to get the lawyers started. I thought insurance companies always keep an eye or whether it would beneficial to deny claims based on the cost of lawyering up. Or have they already done the preliminary and know they have a case, hmmm.
all that "performing collateral" apparently is worth .12 on the buck...
Ipodius-
sort of undermines the whole argument of your valuations of that.
Just a little...
Ciao
MS
Ray,
The JPM/BSC deal has no MAC. It is one of those things that seemed to have slipped through the cracks in the rush to get the deal done before Japan opened.
Well, I'm quite bullish on Ambac.
First, after today's announcement they're gonna lose 1.66 billion less until BK. I think in a forward-looking market this should be regarded as good news.
Second, they have lawyers. This is good news, too. Hell, a company like that needs them badly.
Would be cool to see Lawrence Yun up on the stand, under oath.
"Let the court show that NAR chief economist Lawrence Yun swears that these mortgages have not, in fact, deteriorated as the plaintiff claims, and will rebound in value in the second half."
suicide is typically covered by life insurance, but only if it occurs 2 years after the policy is taken out.
Kahni,
That's not precisely true. I believe there is a MAC that allows any defaulting paper to be placed at par to one Bernanke Capital LLC of Washington, DC.
ABK equals All But Kaput.
sdtfs: inspecting the deals eats up man hours and cuts into the bottom line. And no one is in the game except for this quarters results. Next quarter? Next ... ? What's that? Next thing you know, you'll be talking about the fabled 3 in the morning.
Re: life insurance suicide
I had a friend who bought three life policies for $1 mill each. One named his son, one his daughter, and one his ex. He takes 2 years and one month getting his "affairs in order" and eating and drinking a lot. Then offs himself. All three policies paid.
Turns out he had planned it all along -- according to his executor, another friend.
I'm not sure about the details, but apparently most standard life policies have a clause that they will not pay if purchased in anticipation of suicide, but if the suicide is more than 2 years after purchase, there is a conclusive presumption that the policy was NOT purchased in anticipation of suicide.
Results may vary from state to state. Consult your tax or legal advisor before investing.
It's going to be really funny when Ambac files for bankruptcy -- followed by S&P and Moody's affirming Ambac's AAA rating!
Wow, that's bad news for life insurance companies, that they pay out on suicides: they are going to be taking it in the shorts on their 'investments' in stocks, bonds, private equity, and real estate during the forthcoming depression. And, I don't have statistics, but I'm guessing that suicides go up during depressions.
Today on the kindergarten baseball field, little Jimmy Ambac, 5, of New York, was quoted as saying, "it's not fair! I get a do-over because the baseball Timmy Bearsterns brought isn't a regulation major league hardball! I'm going to ask my mommy for a do-over. Waaaaaaaaaaa!"
Sadly, young Timmy Bearsterns' parents lost all of their money in Atlantic City earlier this spring and has been adopted by the JPMorgan family. Timmy could not be reached for comment.
"if the suicide is more than 2 years after purchase, there is a conclusive presumption that the policy was NOT purchased in anticipation of suicide.
Results may vary from state to state. Consult your tax or legal advisor before investing."
Somebody just put his life savings in Ambac. I hope he sticks to his policy of not heeding investment advice from commenters here...
Glad I'm still long pitch forks, torches, gallows, and lawsuits.
That's good thinking, because tar and feathers are just too expensive these days and those are good substitutes.
I believe one of the reasons that JPM went for the low ball bid on BSC was that they figured on having to reserve piles of cash for lawsuits. Whether or not they reserved enough is a different matter.
If more actions like this come out, and CRE in NYC drops in value, the BSC buyout might not turn out to be such a good deal.
I see someone is going to open can of worms.
Thanks, I guess, for the info on insurance and sucide. I should have made a better analogy.
Point in that I am SURE Ambac's lawyers can gin up something to get out of those obligations. Or at least fight about it for years. And you think Merrill/First Franklin wants to try to explain to a judge/jury how those loans got written?
Just closely observing a few condo foreclosures here in downtown San Diego, I see First Franklin again and again underwriting purchase loans in 2006/2007 that allowed the original buyer/investors (often a realtor) to sell profitably even as the market tanked. The supposed new buyers end up in foreclosure within a few months. Very fishy stuff.
From the Investor Presentation:
Financial Impact to JPM
Estimated transaction-related costs of approximately $6B pretax:
Litigation
Cost of de-leveraging
Conforming accounting
Consolidation - severance, technology and facilities
FXP down 13% so far today. Anybody on that train?
Has anyone actually read the guarantee by the Fed of the Bear Stearns portfolio? I looked a couple of weeks ago and couldn't find it.
Sorry, completely OT but I just looked at Realtor.com and houses exactly like mine are listed at 45% less than what I paid in 2006. I can't help it, I am shocked.
Ceiling fan:
Unless you put a lot of cash down, it's time to put the keys in the mail.
are you joking ceining fan?
where do you live?
Ceiling fan,
Wow! Best of luck!
The pot is certainly boiling! It is a pretty high bar for them to jump legally.
Sorry about that, Ceiling Fan. Talk to a knowledgeable realtor before jumping to any conclusions. Depending on where you are, some of the downgrade might be temporary.
Ceiling fan,
Not possible. Home prices are sticky.
Macro Man with an fact based take on why the ECB won't come down soon:
What is the ECB smoking?
So what are we left with? Prices that are too high and threatening to stick. Historically tight labour markets. Few obvious signs of macroeconomic stress in supposedly vulnerable Club Med countries. Rather than asking what the ECB is smoking, Macro Man can't help but wonder what the market is smoking for thinking the ECB shouldn't hike.
@Sonic Seuss - I took some FXP today in the 63s... News there was that Chinese government has cut the per/share trading tax by 2/3rds.
Even though FXI gapped up out of a H&S, I am betting it fills the gap. It's a trade for a couple of days.
"listed at 45% less than what I paid in 2006"
That's one deep hole. Can't imagine the climb out will be a quick one. Depending on your downpayment, you may have some pretty interesting moves to make this summer... at night with the headlamps off.
Elvis, I am in the same boat.
I just figure we can muddle through and wait for the inflation.
Which is coming fast.
Right now house cost 650k in dec 2005- low value according to zillow- 450k. 200/650=30.7% toss in my improvements, and we are at 40 percent no sweat.
Underwater by 40k in improvements, 130k down, and still watching Phoenix drop.
Am I worried? Not really, as the pain grows, the certainty that our government will do something silly and very nice for me grows.
All the while, I keep hearing the deflationists ranting on about how asset deflation is going to kill my house dead.
I disagree, and the proof of my disagreement is right on the gas pump:
$3.45 a gallon.
I saw diesel for sale yesterday at $4.09- with these increases food hoarding is a rational response to spiraling transportation costs going into food.
I can hardly wait for the election.
Are you better now than you were four years ago?
Ulp.
Someday this war's gonna end...
FXP - My EEV is getting trashed, too. I put on some trades over the past week or so based on my read of what the Fed governors have been saying about inflation and monetaty policy. Probably a terrible bet, since it's best to ignore what the say and pay attention to what they DO.
Trust me, I am not kidding. I put down 20%. I live in a low income neighborhood of old houses in Miami. It was all I could afford but obviously it was a bad move, should have rented, but whocoodanode? I sure didn't. When I retire, I will not be able to sell. Looking at the bright side, I don't have to worry about resale value when I decorate.
That's not precisely true. I believe there is a MAC that allows any defaulting paper to be placed at par to one Bernanke Capital LLC of Washington, DC.
Speaker73 | 04.23.08 - 2:59 pm | #
Hey what a coincidence... I think that's the same outfit I work for. Pretty certain anyway.
anon writes:
Your life insurance doesn't pay on suicide.
My FIL's did. Surprised the hell out of me
A good insurance agent/broker can make the payment happen.
"Elvis, I am in the same boat.
I just figure we can muddle through and wait for the inflation."
A lot of people are. I live in an area on the California coast with "strong" prices, but since this site turned me on to redfin.com, I'm seeing a lot of average, older homes (not trophy homes) on the market for 15-17 percent less than their 2005 or 2006 sale price.
Trophy homes on the water are maintaining their value, but that's a different RE market, for the super-rich. The RE market that most of us live in is dropping.
Obviously, a lot of the guys in my area can't wait for inflation; must be speculators. Prices are still 'way too high, of course.
I saw diesel for sale yesterday at $4.09- with these increases food hoarding is a rational response to spiraling transportation costs going into food.
Never fear they are putting another bio-diesel plant in near me... I guess that means I'll have fuel to drive to the grocery but nothing to bring home.
"Never fear they are putting another bio-diesel plant in near me... I guess that means I'll have fuel to drive to the grocery but nothing to bring home."
Maybe you should make a deal with the KFC down the street for their used fryer oil and refine your own in the garage. I'm joking, but I've talked to guys who did that.
Ceiling fan,
According to Mr. Mortgage, you should try to understand whether those houses are regular sales or REOs. He says they are like two separate markets. The regular sales reflect real people trying to get as much money as possible. The REOs are just banks trying to dump crap.
He says the REOs are driving prices lower for everybody. Mr. Mortgage is one of the hottest people on UTube.
I mean, not counting Rev. Wright.
The Mortgage Lender Implode-O-Meter Presents Mr. Mortgage
I'm joking, but I've talked to guys who did that.
Ya - I know them too. A guy wanted me to start a company doing that with him - once he found out I was a 'recovering chemical engineer'. I'd rather fry french fries all day thank you very much...
Somebody from the NAR want to get Moody's back on message? This kind of announcement just won't do:
NEW YORK (AP) -- Banks are likely to make it more expensive and difficult for struggling homebuilders to get credit in 2008, Moody's Investors Service said Wednesday.
The ratings agency said homebuilders will also have trouble getting banks to amend existing lending agreements if the companies violate terms -- something likely to increase as the housing sector continues to contract.
...
"It is likely that banks will finally begin to hold homebuilders accountable for their failure to generate cash, maintain adequate liquidity, and reduce outstanding debt," Snider said.
Expired
Ceiling fan - JUST WALK AWAY!
In regard to Ambac, a lot of death spiral companies threaten lawsuits. Some have merit. Some don't.
But it never seems to change the death spiral. In the end, even if they win, it's just a few more dollars down the rat hole.
Remember, there's still a whole company of people at Ambac basically sitting around with nothing else to do, until they get pink slips.
.
Whocodanode?
.
Following bread crumbs back to the topic: How this can be anything but a delaying tactic by Ambac is beyond me, unless they have hard evidence of actual violations of terms of the contracts that they now have lawyers poring over.
If it's just, "Oh, wait: now we want to actually read the contracts we signed--we didn't read the fine print before," they're going to be handed their asses on due diligence, implied notice, constructive notice, and actual notice.
And "forensic experts"? What--are they checking the contracts for DNA or fingerprints?
Sounds like a "say something, say anything" stalling tactic to me while they try to find lifeboats and exits.
"It is likely that banks will finally begin to hold homebuilders accountable for their failure to generate cash, maintain adequate liquidity, and reduce outstanding debt," Snider said.
OH OH - looks like Dad is home...
When REOs are becoming greater than non-REOs for sale, how can you separate them? That is proposterous. So, celing fan, bob dobbs, and allenm, are you saying prices aren't sticky?
Hear that CR and SweetHomeKilla and everyone else who states the truism that home prices are sticky. Maybe you better rethink that.
AllenM-, sorry that you are caught up in the AZ housing mess.
At least you have interesting sights at night to view (were those UFOs?).
Prices for assets and prices for consumer goods can and do move independently.
Easy credit to households, businesses, and governments allowed:
-- Speculators to bid up prices of assets stocks, real estate -- and
-- Consumers to overindulge in high-order consumer goods and services Hummers, boob jobs, college education.
Quick, easy profits in speculation diverted resources (e.g., smart folks who otherwise would have been BSMEs but who chased the money via an MBA) from production of low-order consumer goods -- such as food and energy -- to production of assets and high-order consumer goods and services.
Now, for assets and high-order consumer goods and services, we have excess supply and falling demand due to debt overload --> falling prices.
Now, for low-order consumer goods, we have short supply --> rising prices.
CALPERS Chief resigns!!
This can't be good since they report their annual in two months. Subprime anyone?
Calpers Chief Investment Officer Russell Read Resigns (Update5) - Bloomberg.com
OT: John Oliver - Terrifying Times
John Oliver Terrifying Times part 1
What gives, the bad news is all bad. Why no impact on the market yet?
I'm getting kind of tired of signing on, checking Bloomberg's headlines of destruction and seeing no impact on the market.
Does it matter? Or are stock symbols now the Wall Street equivalent of numbers on a roulette wheel.
What gives, the bad news is all bad. Why no impact on the market yet?
Haven't you heard, the worst is behind us. Get with the program and jump in!
Ceiling Fan,
DON'T walk away!!!!! Stop paying, get all your money out of your name. Have nothing in your name (except retirement accounts, they can't be touched). Continue saving what you would have sent to the lender into those accounts under someone else's name. Sit back, enjoy your home FREE for the next year AT LEAST.
Good luck!!!!
What gives, the bad news is all bad. Why no impact on the market yet?
I'm getting kind of tired of signing on, checking Bloomberg's headlines of destruction and seeing no impact on the market.
Does it matter? Or are stock symbols now the Wall Street equivalent of numbers on a roulette wheel.
But Bill Miller just said the worst is over and stocks are headed up. He should know, since he's been beating the S&P...oh, wait that was more than 2 years ago. Since then a flock of black swans has been sullying his fund with their unholy excrement...Poor Bill.
I wonder if any of the paper the Fed accepted as collateral is rated AAA only because of Ambac/MBIA guarantees. Could get interesting if the rating companies wake up and do their jobs on the monolines, and then JPM and others are forced to take back the "AAA" paper and mark it down.
I suspect that if the insurers can prove widespread fraud within the pools, they can/will refuse to pay. Maybe they aren't in such bad shape after all...
"When REOs are becoming greater than non-REOs for sale, how can you separate them? That is proposterous. So, celing fan, bob dobbs, and allenm, are you saying prices aren't sticky?"
Sure they're sticky; get off your hobby horse.
One of those "down 15 percent from peak" homes in my town sells for $600K; it's nothing special. At best it would bring in $30K a year in rent.
So it still has drop to maybe $350K at least to reach its actual economic value, if we have no expectation that houses will hold or increase in value in the near term.
There's the stickiness; the expectation that houses will continue to be worth more than the price that brings a break-even on investment.
The stickiness will remain until all hope is gone from current owners and investors above the vicinity of the break-even investment price.
SBUX lowering guidace on weakest consumer environment in their history. Baristas may be getting kicked to the curb soon. What are job prospects for unemployed baristas?
Luxuries are the first to go for the "aspirational" consumer:
[The current economic environment is the weakest in our companys history, marked by lower home values, and rising costs for energy, food and other products that are directly impacting our customers, said CEO Howard Schultz]
Housing and transportation are luxuries. Coffee is a necessity.
What's next, we're all going to cut back on beer?
But SBUX is trying to help! at least around here, Wednesday for the next month or so they give you a cup of joe for free.
RE - did you watch Part II?
inflatable bbq's & oreo pizza's... about three minutes in. Says it all.
When folks cut back on their addictive substances, you know we're in a recession.
"What's next, we're all going to cut back on beer?"
Sam Adams, maybe. Bud and PBR -- never.
This quote from the SBUX CEO is precious: "Underscoring my optimism is our customer research, which shows that while our customers are reducing the frequency of their visits to our stores - due to the economic pressures they are feeling - they are not substituting their Starbucks Experience with coffee products from others."
Dude, it's a drug. Damn straight they're getting their fix elsewhere.
From the just-released Mad Libs, Fictitious Capital Edition:
The Federal Reserve Bank of New York originally projected that losses on the underlying collateral of the Bear Stearns transaction would be between 10% and 12%, but now expects losses at 81.8% of underlying collateral, a transaction that has seen an unexpectedly "rapid escalation of losses," and represents an outsized percentage of the insurer's expected credit impairment, Geithner said.
Uh, the bond insurers are in terrible shape, successful defense against isolated fraud or not.
MBIA at 12/31/07 had $4B in equity. That, against guarantees (principal plus interest) of $1,022B.
Little room for error, there.
My sense is that the people helocing and credit carding aren't the same people who were/are deferring discretionary income into the market.
The latter group appears willing to hold their position as the greater fools for some time to come.
Dryfly, I agree. I watched it on TV first and then seached for it on youtube. He is excellent, IMO.
Ambac is stalling for time. They're not going to get many more investors at their rate of burn.
The remaining tactic is deny liability because of fraud. This can work for a while, but not forever.
Hven't you ever dealt with an insurance company that didn't want to pay?
Ambac just had grown so used to minting money from fiancial innovation that they forgot how an insurance company under pressure to payout handles the insured party. It's not with kid gloves.
The lawyers can hold off the payout date, but the numbers, in the end, are overwhelming.
Like many other parties in the market these days, they are hoping that the NAR projections are the correct ones.
"the bond insurers are in terrible shape"
I indicated "such bad shape" as in relatively. I covered my shorts and wouldn't go long at .01.
re: lawyers, lawsuits, and Ambac
two issues at work here
1) Possession is 9/10 of the law. Ambac has the money, the insureds (IB's or bond holders) have to come get it, and the plaintiff always has the burden of proof and the burden of going forward. Ties in evidence go to the defendant.
2) The new Federal Rules -- particularly on discovery of electronic documents -- are thought to be pro-plaintiff since they let the poor plaintiff easily find out what the bad, bad defendant did to him. But here the tables are turned. Here the damning documents are in the hands of the plaintiffs and it is the defendant (Ambac) who will have a field day with them.
3) One more thing: it is almost always a bad idea to start a law suit. Before filing you have to contend only with your opponent. After filing you have to fight the Court and the Rules as well. It ain't easy folks.
Just sayi
Wow....
FHLB-Chicago stops mortgage-buying program
By: Steve Daniels April 23, 2008
(Crain's) The Federal Home Loan Bank of Chicago is shutting down its groundbreaking program to buy mortgages originated by member banks in Illinois and Wisconsin as it grapples with profitability and capital concerns caused in large part by the mortgage program.
The Home Loan Bank, one of 12 such regional banks around the country, provides low-cost loans to member banks a major source of funding for mid-sized and small banks that have less access to capital than their larger competitors.
FHLB-Chicago stops mortgage program | Crain's Chicago Business
SBUX down
APPL down
AMZn down
The consumer is dead! Let them eat mud!
"Ambac has the money"
Yes...before it's over, the insurers may have their work done for them as others prove widespread fraud.
Yes, ceiling fan is correct. Down 40-45% sounds about right. Here in South Florida, I've seen evidence that the stickiness has become unstuck in the last 2 weeks to a month.
I expect it' end up 50 cents on the dollar, heck, maybe 40 cents on the dollar.
I got my second ruthless default client. His property is off a mere 33 1/3 %. An identical property next door sold for 1/3 off what he paid. And he put in granite countertops too.
Actually, he would continue making payments, except he got married, has a kid and has his mother in law staying there to watch the kid--4 people in a one bedroom apt. Actually that's probably illegal under the Condo docs, or building and zoning rules.
He QUALIFIES for a mortgage to buy a house with both payments. My ruthless defaulters are running maybe 1 in 7 or 8.
"It is likely that banks will finally begin to hold homebuilders accountable for their failure to generate cash, maintain adequate liquidity, and reduce outstanding debt," Snider said.
OH OH - looks like Dad is home...
- dryfly
Well I was wondering why the homebuilders were getting pounded today (in contrast to the insane rallies and levitation in their prices over the past few months). I was beggining to wonder if my 1/09 PUTs on TOL/CTX/PHM/LEN would expire worthless...before sanity and reality take hold.
Stick it to 'em, banks!
I saw diesel for sale yesterday at $4.09- with these increases food hoarding is a rational response to spiraling transportation costs going into food.
Biodiesel has finally reached price parity with dino-diesel in my neck of the woods. For the past several years I had been paying a premium at the local biodiesel co-op. FWIW, my neighbor runs on straight WVO (waste vegetable oil) and has to go several towns over to get a supply of grease. Everything around here is already claimed by other scavengers. Funny how waste grease becomes less of a "problem" with gas at $4/gallon.
Oh, and another data point from East Bay prime.
1731 6TH St is a 3bed/2bath home with 2158sq.ft. near vaunted Fourth Street shopping.
Now on the MLS for $457,000 .
Sold on 1/26/2006 for $900,000.
Foreclosed on 12/12/2007 for $770,106, by wait, guess yes, Countrywide.
Just picture me and the other lawyers as Slim Pickens, riding our civilization down to its final demise.
Yeeeeeeee hoooooooo Haaaaaaaa!
Waaa Haaaaaaaaaa!
Wow, that story on the Federal Home Loan Bank of Chicago (linked above by Anonymous at 4:54 pm) seems like pretty ominous news for bailout fans...
Geez, what if no entity has enough money to save/revive the mortgage market?
My last comment should have read:
Geez, what if no entity has enough money to save/revive the mortgage market (at current house prices)?
ShortCourage writes:
Well I was wondering why the homebuilders were getting pounded today (in contrast to the insane rallies and levitation in their prices over the past few months).
On that subject, Bill Miller was pleading with his investors today not to pull out:
In a letter Wednesday to shareholders of Legg Mason Value Trust, Miller said he expects the battered financial sector to improve and that the rebound in housing shares should continue.
"Most housing stocks are up double digits this year despite dismal headlines, a sign the market had already priced in the current malaise. I think likewise we have seen the bottom in financials and consumer stocks, but not necessarily the bottom in headlines about the woes in those sectors," Miller wrote.
I wonder if he also told them that they've been the only ones on the bid for the last three months?
Elvis,
Prices are sticky, until the market unsticks them.
The overhead of inventory is building, sales are falling through, and the decline is accelerating.
In nominal terms for right now.
They will eventually reverse and head higher, under the conditions I postulated. In real terms they will be less, much less, but hey I borrowed a half million at 6% for 30 years- what do you think my payments will be worth in twenty years?
I have time to wait is also what I said.
A lot of folks don't have that luxury.
Someday this war's gonna end...
Can I haz a hat tip for that story on Chicago Home Loan Bank...?
AllenM....end this war!
The investment banks will spend many years trying to force the insurance companies to pay off on the SIVs. It makes you wonder about the real value of all the CDS, not the "notional value".
anon writes:
Your life insurance doesn't pay on suicide.
My FIL's did. Surprised the hell out of me.
anon | 04.23.08 - 2:31 pm | #
if the insurance has been in force for more than 2 years it will pay due to suicide in every state
Also this...from today's Chicago Crain's
Spire developer missed property tax deadlines
By: Thomas A. Corfman April 23, 2008
"(Crains) Garrett Kelleher failed to pay nearly $430,000 in property taxes due nearly two months ago on the proposed site of the Spire, even as the Irish developer was launching a lavish, five-city Asian tour to trumpet the massive skyscraper.
The tax payments were due March 4 on a 2.2-acre site along the north bank of the Chicago River that Mr. Kelleher acquired in 2006, reviving a stalled proposal by another developer for a twisting tower to be designed by prominent architect Santiago Calatrava.
Three days after the taxes were due, Mr. Kelleher, executive chairman of Shelbourne Development Group Inc., began courting prospective condominium buyers during a lavish road show that started in Singapore and was scheduled to include Hong Kong and Kuala Lumpur, Malaysia."
Never understood why someone from Hong Kong would want to buy a condo in Chicago...but neat looking building, or at least the pictures of it looked neat...cause I wonder if it will be built???
Hear that CR and SweetHomeKilla and everyone else who states the truism that home prices are sticky. Maybe you better rethink that.
Elvis | 04.23.08 - 4:03 pm | #
The scary part is that maybe prices are sticky
The scary part is that maybe prices are sticky
Dirk van Dijk | Homepage | 04.23.08 - 6:19 pm | #
Exactly! Imagine where the RE market would be now (and MBS & banks) if they weren't... sometimes a sluggish market isn't a terrible thing if it gives us time to grasp the consequences.
I'm surprised that no-one at this site is taking Ambac's side in this deal... (maybe it's just the ingrained, anti-lawyer phobia that most sane people have). But underlying losses of greater than 80% of collateral suggest some systematic failure that Bear Sterns should have been able to catch before buying CYA insurance.
Might be a slam-dunk case, really. Heck, JPMorgan might fold just to keep the lawyers out of Bear's books during pre-trial discovery. God knows what other bodies are buried there...
thanks CR
Have the MUNI markets already priced in AMBAC's predicaments?
FGIC downgrade and Fitch reactions have led many institutions to dump their MUNI bonds.
I wonder this would be round 2.
"Never understood why someone from Hong Kong would want to buy a condo in Chicago...but neat looking building, or at least the pictures of it looked neat...cause I wonder if it will be built???"
Neither do I, but I saw that (screw) building (rendition) in a (very expensive) quarter page ad in the HK paper during their road show.
I guess what they're spending on promotions has a prior claim...
The consumer is dead! Let them eat mud!
crispy&cole | Homepage | 04.23.08 - 4:59 pm |
They already are in Haiti.
"Ambac is stalling for time. They're not going to get many more investors at their rate of burn."
It is much more than stalling for time. Tanta has written about the rep and warranty issue (and I guess no one really read or remember it judging from the comments so far). If ABK can prove that BSC did not follow the guideline set out for the securitization (missing paper work, fruadelent signature, information etc etc.), they don't have to pay the AAA tranches that they insured. The liability is going to be off ABK's book. Now the ball is going to be in the court of those who bought the AAA tranch from BSC (or the trustee which is likely BSC). The trustee will sue BSC and try to recover the money they loss in holding the AAA CDO. JPM guarantee the counter party risk before the merge complete. Don't believe the guarantee extend to fruad. Now BSC asset is going to be on the hook for the loss. All these is going to play out in court time (which is going to be a long time). But it has real consequence on who acutally has to pay for the loss. And the money is not trival (since it probably set precedent for other deals as well).
The reader comments used to be a really strong part of CR's blog.. Right now it just look like everyone is trying to put their one-liner in without even thinking about the topic. Sound much like a yahoo message board...
Looks like ABK will have to do their own long due dilly... the SEC has refused to acknowledge what information they may have gleaned in an investigation of BS's misvaluation of their portfolio.
Yahoo! 404 - Page Not Found
If congress asks and can't get it, I'm not sure how well any other investigation is going to go... although we all know that congressional subpoena's merely suggestions under the current rule of "law".
Gosh Elvis.
what a great contribution to get everyone debating semantics yet again.
"waahhh Real estate is not sticky"
Fine. Please give us a replacement word for "sticky" that you feel is acceptable so that we may describe the general trend of RE valuations to move slowly when compared to other investments such as equities.
or show me historical data that confirms that housing indices can go up and down by 4-5% per DAY (not over years, over a DAY). the stock market can often do this (Dow, S&P, NASDAQ).