Once the Harbinger founder got a taste of how good it felt to serve someone papers, he just couldn’t stop. This morning it was the entire GPS industry; tomorrow, anyone who sold their LightSquared debt to Charlie Ergen, these guys, for not winning the Stanley Cup, and maybe the SEC, in some sort of countersuit. Which, if you were looking into the not too distant future, might go down something like this:
[Somewhere in midtown.]
Phil Falcone, to someone on the other line. It’s not clear who it is, but we get the impression she hashooves: Have you seen this American Express bill?! I told you we need to be cutting BACK, not spending MORE right now. [pauses to listen to Unknown Caller’s response.] Well maybe I don’t care if Barney’s had a mumu that was speaking to you. [pauses to listen to Unknown Caller’s response, with increasing impatience.] Well maybe I don’t care if you needed a pick-me-up, I told you we can’t be borrowing from the fund anymore. [deafening shrieking on the other end of the phone.] I’m sorry, I didn’t mean that. I’m just really stressed these days…
These lawsuits against Bank of America are pretty lame, aren’t they? The SEC and Department of Justice each sued BofA yesterday for fraud in a 2008 prime jumbo mortgage securitization but it doesn’t really feel like fraud. The guns are smoke-free. The DoJ gets itself all excited because someone proposed including some bad mortgages in the deal, and a Bank of America trader said of those mortgages that, “like a fat kid in dodgeball, these need to stay on the sidelines,” but they did! The trader thought some of the mortgages were crap, and they were crap, and so they weren’t included in the deal. The system worked! It’s like if Fabulous Fab emailed his girlfriend saying “I am creating monstruosities,” and she told him to stop, and he did.
The complaints put their fraudy eggs in two main baskets. The first is that Bank of America omitted to tell investors some material facts, of which the most important is that 70% of the loans in this securitization were wholesale loans (originated through brokers), and that wholesale loans were worse – for both credit and prepayment risk – than loans originated by BofA directly. Read more »
The judge hearing the Justice Department’s CDO-rating lawsuit against S&P refused to dismiss it yesterday, rejecting S&P’s much-mocked theory that its pre-crisis claims of independence and objectivity and, like, plausible ratings were just “puffery” that no one should have taken seriously. Here is the story, and here is his opinion, and here is a rhetorical question:1
At the hearing on this matter, Defendants repeatedly asserted that no reasonable investor would have relied on S&P’s claims of independence and objectivity. Regarding the question of materiality, S&P argued that, since the issuer banks had access to the same information and models that S&P analysts did, they could not have been fooled by faulty credit ratings. This begs the question: if no investor believed in S&P’s objectivity, and every bank had access to the same information and models as S&P, is S&P asserting that, as a matter of law, the company’s credit ratings service added absolutely zero material value as a predictor of creditworthiness?
Well so I mean do you want an answer? How much value do you think they added?
The S&P case is a pretty weird beast because it’s brought under the FIRREA, a law designed to protect federally insured banks, and so the government has to assert that: Read more »
This lawsuit is mostly about the (alleged!) unapologetic Antisemitism of Knight Capital managing director Brendan Joseph McCarthy, which former employee and plaintiff Robert Morris Milloul claims caused him and others to lose their jobs in the algorithmic trading unit of the firm; we don’t need to summarize the allegations but we did think it was important to highlight the motivational technique he was said to use around the office. Read more »
If you had to pick a current or former Wall Street CEO to be your father-in-law, it stands to reason that Dick Fuld would have to be close to the bottom of your list, yes? Lloyd, obviously, would be a delight. Vikram would probably be fun, too. Something about Jamie just seems very pal-y, father-in-law-ish, once you get past him letting you know he’ll take you out in the middle of the night, no questions asked, no finger prints left behind if you ever do anything to hurt his child. Brian Moynihan would finally loosen up and stop being awkward around you circa your 20th anniversary. Hank would probably be slightly scary but in a good way. Someone who gets into “physical altercation[s]” with fans of the opposing team at a children’s hockey game is probably not a guy you want to sit across from at Thanksgiving or play squash with after he’s figured out you can “earn points by hitting your opponent with the ball when he/she is between you and the front wall.” And looking down the line, it stands to reason that Dick Fuld would definitely be close to the bottom of your list of candidates for ex-father-in-law, yes? Aaron Packles knows what we’re talking about. Read more »
Bank of America Corp., the second-biggest U.S. lender, rewarded staff with cash bonuses and gift cards for meeting quotas tied to sending distressed homeowners into foreclosure, former employees said in court documents. Mortgage workers falsified records and were told to delay U.S. loan-assistance applications by requesting paperwork that the Charlotte, North Carolina-based bank had already received, according to statements from ex-employees filed last week in federal court in Boston. The lender improperly disqualified applicants to the Home Affordable Modification Program, or HAMP, according to a May 23 statement from Simone Gordon, a loss-mitigation specialist who left the company in 2012…Loan collectors who put at least 10 customers into foreclosure, including those who were in trial modifications, were given a $500 bonus, said Gordon, who worked at Bank of America for more than four years. Other rewards included gift cards for retailers including Target and Bed, Bath and Beyond, she said. [Bloomberg]
I find the story of Dragon Systems hilarious and horrifying so I’m never going to miss an opportunity to tell you about it and one occurred today. The story, quickly, is (1) Dragon Systems, a closely held speech-recognition company, hired Goldman to advise it on a merger with Lernout & Hauspie, (2) Goldman assigned Dragon an extremely JV team of bankers, (3) Dragon sold itself to L&H in June 2000 in an all-stock deal, (4) L&H soon turned out to be a massive fraud, and (5) L&H filed for bankruptcy in November 2000 and Dragon’s shareholders lost $300 million. Dragon sued, Goldman won a trial in January, and today they won some more, for reasons I’m not clear on. That is, I’m not sure why they had to win again – the judge issued an opinion finding in favor of Goldman, even though a jury did the same thing in January. Also it’s not much of a stirring win: Read more »