liability management

  • 14 Dec 2012 at 10:11 AM

Bank of America And MBIA Pretty Much Just Fighting Each Other For Fun Now

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There are some financial jobs that come with a perhaps undeserved swashbuckling cachet. “Oh, you know, I do hostile takeovers,” you say, and a certain crowd will treat you like you just got back from plundering a Spanish ship-of-the-line, even though you mostly sit in a cubicle updating spreadsheets and changing the wording in press releases. Then there are other jobs. When you say “I do liability management for insurance-company bonds,” everyone instantly thinks of spreadsheets.

Still, you swashbuckle on unrecognized, taking a quiet satisfaction in your piratical ways. Everyone in this story is a pirate, and this is a bond that somebody made or lost or made and lost a lot of loot on:

Read the Bloomberg article, and/or our last discussion of this situation a month ago, for more information. The quick back story: Read more »

  • 13 Nov 2012 at 5:51 PM
  • Banks

You Fight With Bank Of America Over Bad Mortgages, Bank Of America Fights Back

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Was there mortgage-related misbehavior at Bank of America and its various after-acquired subsidiaries? I wasn’t there, but on public information, I mean, sure, why not. Some days it looks like there was mortgage fraud everywhere. But whereas everyone else is all “sorry about the mortgage fraud” and “here is a large settlement,” BofA is not into that. When you accuse them of mortgage fraud, they take the fight to you. They did that with Fannie Mae, refusing to sell it any new mortgages just because Fannie thinks BofA should be buying back some of the old mortgages it mmmmaybe fraudulently sold Fannie. And they’re doing it with MBIA, suing the bejesus out of them just because MBIA is suing the bejesus out of BofA over mortgage fraud.

But that’s old news; the new news is this Bloomberg article about how BofA is opening another front in the MBIA battle. You should read it because it is amazing. Here is the story so far, from BofA’s offer today:

  • Bank of America1 bought $6.15 billion notional of insurance/CDS contracts against (surprisingly?) commercial mortgages from MBIA Insurance Corporation, which everyone calls “MBIA Corp.,” and which is a subsidiary of MBIA Inc., which is a public company and which everyone calls just “MBIA.” There’s a deductible, and BofA hasn’t yet eaten through it, so these policies are all outstanding and untouched though dicey-looking.
  • Bank of America2 also bought a lot of insurance against home loans that it packaged, also from MBIA Corp.; those loans were terrible, MBIA Corp. has paid off some of the insurance, and now it’s suing to get it back because fraud fraud fraud fraudy fraud fraud.
  • Meanwhile MBIA did some internal rejiggering, taking its nice relatively sensible municipal-insurance business, called National Public Finance Guarantee Corp. (everyone calls it “National”), out of MBIA Corp., and put it directly under MBIA, leaving MBIA Corp. with mostly terribleness like Bank of America mortgage insurance. This, one assumes, was done in preparation for casting MBIA Corp. into the fires of Mount Doom. Read more »