September 29, 2012 archive

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“The smartest bankers we got”

Bank of America Settles Suit Over Merrill for $2.43 Billion


September 28, 2012, 8:49 am

The settlement, however, may undermine a battle between the New York attorney general and the bank. In 2010, Andrew M. Cuomo, New York’s attorney general at the time, sued Kenneth D. Lewis, the bank’s former chief executive, and Bank of America, contending that the bank and its executives hid from shareholders billions of dollars in losses at Merrill, later causing Bank of America to need a bailout from Washington.

The case, which now falls to Eric T. Schneiderman, could lose much of its steam. Under a decision by New York’s highest court, the attorney general can recover losses on behalf of shareholders. Once the shareholders settle, though, Mr. Schneiderman’s office can expect to obtain little more than a penalty, according to people briefed on the matter. The attorney general’s office declined to comment.

It is unclear how much relief the shareholders – those who owned Bank of America shares or call options from September 2008 to January 2009 – will receive. A chunk of the settlement amount will go to the plaintiffs’ lawyers, who are expected to ask the court for $150 million in fees. Bank of America will use its litigation reserves and litigation expenses to cover the settlement, saying that it and other legal expenses cost it $1.6 billion.

The bank also said on Friday that it had agreed to adopt a “say on pay” shareholder vote, an independent compensation committee of the board and policies for committees focused on acquisitions, among other corporate governance changes.

Despite the legal woes, the Merrill Lynch business has helped bolster Bank of America, contributing roughly half the bank’s revenue since 2009, according to bank analysts.

The Countrywide acquisition has proved to be a bigger albatross for Bank of America. The purchase effectively saddled Bank of America with hundreds of thousands of homeowners struggling to keep up with their mortgage payments.

The bank has spent billions of dollars to defend lawsuits related to Countrywide’s mortgage business. In the second quarter of 2011, for example, the bank reported an $8.8 billion loss, mainly related to a settlement with mortgage investors.

Earlier this year, Bank of America and four other banks agreed to a $26 billion settlement related to their foreclosure practices. That deal evolved from an investigation of the mortgage servicing practices by state attorneys general that was begun in 2010 amid mounting fury over revelations that banks evicted homeowners from their residences with false or incomplete documentation.

Bank of America’s Cascade of Settlement Payoffs Continue

By: David Dayen, Firedog Lake

Saturday September 29, 2012 11:30 am

This was outright securities fraud, and I’m more than surprised that the investors plaintiffs, led by public pension funds in Ohio and Texas, accepted this. BofA clearly withheld information from their shareholders that caused a material loss; the stock is down 2/3 since the Merrill deal, even while the bank returned to profitability (though not this quarter, as we’ll see). But the investors had little leverage. The SEC should have been all over this, but they settled over the acquisition in 2009, in a settlement so bad that the judge made them rework it. In the end, the SEC got just $150 million for their settlement, and the fact that the investors got 16 times as much should truly embarrass them.

Incidentally, Ken Lewis was specifically sued in this case and would have been personally liable for withholding information, but BofA will cover his costs in the settlement, so he won’t have to pay a dime.

This is just the latest in a long line of settlements BofA has managed to negotiate over a string of fraudulent and abusive activity since 2009. In all, BofA has paid out over $29 billion, including the $11.8 billion in cash penalties and “credits” from the foreclosure fraud settlement. The other big number included in that, the $8.5 billion settlement with mortgage backed securities holders for repurchases, hasn’t been finalized yet. But it’s clear that Bank of America has become a waystation for abused parties to take out settlement money, rather than a lender allocating capital efficiently. And of course, given the inadequacy of these settlements, the real cost of Bank of America’s practices in the economy are much, much higher.

In fact, between this settlement, some tax charges and litigation expenses (none of that $29 billion includes legal fees), BofA expects to book a loss for the third quarter, years after the end of the financial crisis. While Merrill Lynch at least provided investment banking revenue, that acquisition and the Countrywide acquisition have been extremely problematic for the bank. Countrywide in particular has been the main cause for a loss in BofA’s mortgage business of $35 billion.

If it weren’t for a massive sell-off of assets and a government lifeline, there would not be a Bank of America today. And policymakers should ask themselves why they propped up a zombie bank so it could pay off its legal exposure and not much else.

What will it take?


Jay Ackroyd, Eschaton

Saturday, September 29, 2012

What would it take to get you to bail on the pres. line on your ballot?  What could Team Dem line up on that would lead you to say “Fuck, no!”? I’d say something like reproductive rights, but the Senate Majority Leader is anti-choice.

I can’t say anything related to “national security” because “Yay! Dead bin Laden” and the only people  the drones kill are terrorists, and no, we’re not gonna tell you who we killed because the fact we killed them is doubledownsecret, so STFU and get in line.

All we got is the New Deal social insurance systems, Social Security, Medicare, Medicaid (which is the backstop when they cash out your house to pay for the nursing home) and Unemployment Insurance. So maybe a good question to ask your elected officials running for office is whether reduction in these programs is off the table–despite Bowles-Simpson, and Dancin’ Dave slavering after “pain.”

The Village Fix in in on Cutting Medicare

thereisnospoon, Hullabaloo

9/29/2012 07:30:00 AM

Do most voters really “understand” that we’re going to be cutting Medicare? Or has the Village decided that we’re going to cut Medicare, and that it’s going to happen no matter what the American people actually want?

To continue funding corporate welfare, wasteful wars and tax cuts for the obscenely wealthy while telling voters that Grandma should eat cat food is insane and immoral.

But second, Fineman is disastrously wrong on the politics. For a Democrat to cut Medicare would be politically disastrous.

If the Congress and the President take up Simpson-Bowles during the lame duck session or the new year and enact minor tip money tax increases for the wealthy in exchange for cuts to the most vulnerable, a majority of Republicans will oppose the deal. Democrats will be left holding the bag, insisting on being the “bipartisan adults in the room.”

Voters will hate the deal. Republicans will run successfully against Democrats for the next twenty years, accusing us of cutting Medicare and raising taxes. And when Republicans easily win that argument and gain Executive and Legislative power, President Christie and Speaker Ryan will voucherize Medicare, restore the funding for current seniors, and act as the cavalry riding to America’s and Medicare’s rescue.

The Village Consensus is awful, immoral policy. It’s also suicidal politics. And Howard Fineman and friends appear to be walking into it with open eyes and open arms.

But I’m still voting for the lesser evil!  What choice do I have?

As long as you think that way, none at all.

Electoral victory my ass.


Mary PickfordPollyanna (1920) (:57)

Somebody was wondering what a ‘Pollyanna‘ was (besides Pickford’s first film for United Artists).

On This Day In History September 29

Cross posted from The Stars Hollow Gazette

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

September 29 is the 272nd day of the year (273rd in leap years) in the Gregorian calendar. There are 93 days remaining until the end of the year.

On this day in 1547, Miguel de Cervantes, author of Don Quixote, is born this day near Madrid.

Cervantes led an adventurous life and achieved much popular success, but he nevertheless struggled financially throughout his life. Little is know about his childhood, except that he was a favorite student of Madrid humanist Juan Lopez, and that his father was an apothecary.

In 1569, Cervantes was living in Rome and working for a future cardinal. Shortly thereafter, he enlisted in the Spanish fleet to fight against the Turks. At the Battle of Lepanto in 1571, he took three bullets and suffered permanent damage to his left hand. Later, he was stationed at Palermo and Naples. On the way home to Madrid in 1575, he and his brother Roderigo were captured by Barbary pirates and held captive in Algiers. Cervantes was ransomed after five years of captivity and returned to Madrid, where he began writing. Although his records indicate he wrote 20 to 30 plays, only two survive. In 1585, he published a romance. During this time, he married a woman 18 years younger than he was and had an illegitimate daughter, whom he raised in his household. He worked as a tax collector and as a requisitioner of supplies for the navy, but was jailed for irregularities in his accounting. Some historians believe he formulated the idea for Don Quixote while in jail.

In 1604, he received the license to publish Don Quixote. Although the book began as a satire of chivalric epics, it was far more complex than a simple satire. The book blended traditional genres to create a sad portrait of a penniless man striving to live by the ideals of the past. The book was a huge success and brought Cervantes literary respect and position, but did not generate much money. He wrote dramas and short stories until a phony sequel, penned by another writer, prompted him to write Don Quixote, Part II in 1615.

Cervantes died in Madrid on April 23, 1616. In honor of the date on which both Miguel de Cervantes and William Shakespeare died, UNESCO established April 23 as the International Day of the Book. (Shakespeare and Cervantes, however, did not actually die on the same day, as the April 23 date for Shakespeare is Julian calendar (Old Style) and the April 23 date for Cervantes is Gregorian calendar (New Style) as those were the calendars in effect in England and in Spain, respectively, at that time. The Gregorian calendar was then ten days ahead of the Julian.)  



  1. an organism that lives on or in an organism of another species, known as the host, from the body of which it obtains nutriment.
  2. a person who receives support, advantage, or the like, from another or others without giving any useful or proper return, as one who lives on the hospitality of others.
  3. (in ancient Greece) a person who received free meals in return for amusing or impudent conversation, flattering remarks, etc.

Popular Culture 20120928 — Jethro Tull Thick as a Brick Side 2

Last time we covered the first side of the 1972 album.  The link in that piece goes to the history of the record and has a link to the wonderful album cover and you should look at that if you have not already.

Since this is one long (21:06 minutes) song, we shall do like we did the last time and break it into chunks.  Just hit the pause button after each chunk and we shall discuss.  For your convenience I have also posted the entire lyrics before the embed.  Here we go!

Props for Nashua, NH

An elementary school in Nashua, NH, has agreed with the parents to allow an unidentified transgender third grader to dress appropriately for her gender at school, be addressed as a girl, be treated like a girl, and use the female restroom.

The child and her parents were represented in the proceeding by Janson Wu of Gay and Lesbian Advocates and Defenders (GLAD).

I think that as the environments become more and more welcoming to transgender and gender variant youth, we’re going to see a lot more students coming out.  And that’s something that schools and parents will need to be prepared to deal with.  Children often have difficulty having schools respect them for who they believe they are.  If a transgender girl wants to be able to wear feminine clothes to school and be addressed as a girl, often times we see schools feeling a fair amount of discomfort around that.  What we’re hopeful is that when the schools work with the student and the parents is they learn to understand that this is a sincere belief on the student’s part and they learn to support that.

As parents and educators and community members, you want to do what’s right for the children.  When you speak to the youth themselves, you really do get the sense that these are children who have sincere belief about who they are.

–Janson Wu