"Just last week I told you that the Fed seems to be intent on buying MBS, Pimco went on margin, buying MBS. Today the headline came out that the New York Federal Reserve, Blackrock and Pimco (among others) are all said to be looking to force BOFA to repurchase bad loans packaged into MBS. This would explain quite a bit, including Pimco's margin buying of MBS. This could be anywhere from $45 billion dollars to hundreds of billions of dollars, this could take BOFA down. The argument is Countrywide Financial didn't live up to their obligation as the servicer of the loans. In the end, it'll come down to repurchase demands and/or lawsuits.
The gist is there's a consortium of interests on the verge of suing BAC to buy back Billions of dollars in mortgages. The interesting thing is that BAC owns 34% of BlackRock and ironically BlackRock owns the biggest chunk of BAC, 5.35%-what a conundrum! Also an apparent conflict of interest, but Wall Street will eat their own young so that will be interesting to watch as it unfolds. The Proverbial Second Shoe? And it's second verse same as the first-MBS (MortgageBacked Securities)- back to where it all started."
AIG just files suit against BAC, the options for BAC, spin off the Countrywide devision and let it become a ward of the Fed or BANKRUPTCY-AND APPROPRIATE NAME IN THIS CASE.
BAC credit default swaps just hit 260 basis points on a share price of $6.89 (-15.67% today alone).
And thus one of my favorite shorts may end up in bankruptcy court.
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