Lovin' it !
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WMI didn't have the cash to absorb all of the bad loans they originated. They only had a little over $4 billion dollars, and that wasn't even close to enough cash for a bank with that many "assets".
First it was Weil that was going to stick the dagger in JPIGs/FDIC's heart, then it was Venable, then it was the DOJ, then it was the Senate, and now it is the ""EC"/"Examiner"". LOL
2 times zero = ZERO !
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If an examiner is appointed, he/she will only uncover more fraudulently originated loans similar to the ones that the Department of Justice already found while investigating for the Senate.
WMI was claiming loans as "assets" when, in reality, no payments were even being made on the loans.
Also, if an examiner finds that WMI's management knew that most of their loans were fraudulently originated, then that means that the WMB bondholders' case regarding the price paid for their bonds gets a whole lot stronger, thereby even putting equity further out of the money.
LOL !
That article is 1 year old.
It is pretty clear that WMI was unable to find a "smoking gun" that proves JPM unlawfully damaged its former thrift unit's assets in order to buy it "on the cheap".
Thanks for posting a 365-day old article!
CORS will trade in pennyland until it trades no longer.
CORS is only entitled to a small portion of the bank's NOLs/refunds, thereby making that analysis flawed from the absolute get-go.
I suggest you familiarize yourself with the related LAWS surrounding this issue.
[Title 26, Volume 18] [Revised as of April 1, 2009]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR301.6402-7]
[Page 369-375]
http://edocket.access.gpo.gov/cfr_2009/aprqtr/26cfr301.6402-7.htm
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The NOLs AREN'T "MISSING" , and the reason the refunds don't show up on the balance sheet is because they aren't WMI's. The reason their portion of the NOLs don't show up on the balance sheet is because the settlement isn't final yet.
Under the proposed settlement, WMI will actually be getting more of the NOLs than they are legally entitled to. If there was no settlement, WMI would only get a small fraction of the NOLs.
I have posted the applicable laws surrounding NOLs, receivership, parent companies, and subsidiaries before, yet people like to ignore the applicable laws.
Susman can bring up the NOLs all he wants, but that won't change the fact that WMI is being gifted more of the NOLs than they would otherwise be entitled to.
By the way, wamuq holders will get absolutely nothing under the proposed POR, and they will get absolutely nothing under the POR that ultimately gets approved.
Time to dump at .75 in AH while you have the chance. A Bank of Montreal unit just bought the assets from the FDIC. Links should be available soon.
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
First State Bancorporation:
We consent to the incorporation by reference in the registration statements on Form S-3 (333-17727 and 333-156517) and Form S-8 (333-3048, 333-92795, 333-83132, 333-107061, 333-131642, and 333-145816) of First State Bancorporation of our report dated March 31, 2010, with respect to the consolidated balance sheets of First State Bancorporation and subsidiary as of December 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009, which reports appear in the December 31, 2009, annual report on Form 10-K of First State Bancorporation.
Our report dated March 31, 2010 contains an explanatory paragraph stating that First State Bancorporation and its subsidiary First Community Bank (the “Bank”) entered into a written agreement, dated July 2, 2009, with their primary banking regulators that among other things, restricts certain operations, and requires the Company and the Bank to maintain sufficient capital and to submit a capital plan. The capital plans for the Company and the Bank were not accepted by their primary banking regulators. Further declines in their capital ratios or failure to maintain sufficient capital could expose the Company and the Bank to additional restrictions and regulatory actions, including being placed into a FDIC-administered receivership or conservatorship. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
KPMG LLP
Albuquerque, New Mexico
March 31, 2010
http://sec.edgar-online.com/first-state-bancorporation/10-k-annual-report/2010/03/31/section37.aspx
Congrats to those who sold , and I would recommend selling soon before it drops like a rock again. It is actually sad to see the runs-up in all of the small regionals as "they" have created an endless amount of bagholders due to the upward manipulation.
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The UST appointed an EC to CHA .
The DOJ already has all the numbers.
Proof to show otherwise????
The capital infusion from TPG and the gang was already lost before the seizure.
Also, the recent hearings have shown that the OTS is/was worthless and that the bank should have been seized earlier.
Don't you find it odd that nobody can provide support for the claim that they had $29 billion in ready cash???
Don't forget they already had over $50 billion in FHLB advances on their books.
Look at the history of SEC filings and you will see that there was not "extra" billions just laying around, especially not $29 billion. KG doesn't do proper research, and she certainly doesn't understand the main issues surrounding the situation and related litigation.
They only had $4.4 billion in cash/cash equivalents. "They" means WMI AND WMB combined. WMI has already laid claim to that cash which means there was ZERO in WMB coupled with losses that were too large for them to absorb.
They only had a little over $7 billion at the end of June '08, http://www.secinfo.com/dVut2.t8tw.htm , and by the time they were seized that amount dwindled down to under $5 billion.
Also, don't forget that many of their other "assets" were simply fraudulently originated loans.
C. With respect to the Icahn/Beal Plan, Ballots need not be provided to the
holders of (i) Claims in Classes 1 (Other Priority Claims), 2 (Other Secured Claims) and/or 6
(Intercompany Claims) because they are unimpaired and, therefore, conclusively presumed to
accept the Icahn/Beal Plan; and (ii) Claims or Equity Interests in: Class 7 (Section 510(b)
Claims), Class 8 (TER Equity Interests), Class 9 (TER Holdings Equity Interests), and/or Class
10 (Subsidiary Equity Interests) because they will retain and receive no property under the
Icahn/Beal Plan and, therefore, are deemed to reject the Icahn/Beal Plan.
D. With respect to the AHC/Debtor Plan, Ballots need not be provided to the
holders of (i) Other Priority Claims in Class 1, Other Secured Claims in Class 2, Intercompany
Claims in Class 8, and Subsidiary Equity Interests in Class 12 because they are unimpaired and,
therefore, conclusively presumed to accept the AHC/Debtor Plan, and (ii) Section 510(b)
Claims in Class 9, TER Equity Interests in Class 10 and TER Holdings Equity Interests in Class
11 because they will not receive or retain any property under the AHC/Debtor Plan and,
therefore, are deemed to reject the AHC/Debtor Plan.
http://www.terrecap.com/1085_13654.pdf
Preferred AND commons are TOAST !
Icahn/Beal Exhibit 4
NOTICE OF NON-VOTING STATUS TO IMPAIRED CLASSES:
CLASS 7 (SECTION 510(b) CLAIMS), CLASS 8 (TER EQUITY INTERESTS),
CLASS 9 (TER HOLDINGS EQUITY INTERESTS), AND CLASS 10
(SUBSIDIARY EQUITY INTERESTS) THAT ARE DEEMED TO REJECT THE
PLAN
http://www.terrecap.com/1079_beal_exhibit_4.pdf
Helpful link:
http://www.terrecap.com/dis.php3
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United States Senate PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
E X H I B I T S
Hearing On
WALL STREET AND THE FINANCIAL CRISIS:
THE ROLE OF HIGH RISK HOME LOANS
http://hsgac.senate.gov/public/_files/Financial_Crisis/041310Exhibits.pdf
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wamuq is toast anyways, so from an equity standpoint, it is a non-issue.
It is relevant if THJMW feels that WMI executives didn't properly disclose information related to WMI/WMB's financial condition, loan origination practices, loan/securitization practices/issuances and other things............
Now you know what Wolfe & Co. have been working on.
Charges will be filed soon against certain people in relation to securitizing loans that were known to be fraudulently originated.
Documents Related to Long Beach:
8. a. OTS internal email, dated April 2005, re: Fitch - LBMC Review ([Securitizations] prior to
2003 have horrible performance. LBMC finished in the top 12 worst annualized [net
credit losses] in 1997 and 1999 thru 2003. … At 2/05, LMBC was #1 with a 12%
delinquency rate. Industry was around 8.25%.).
b. FDIC/Washington State Joint Visitation Report of Washington Mutual Bank, dated
January 13, 2004 (It concluded that 40% (109 of 271) of loans reviewed were considered
unacceptable due to one or more critical errors. This raised concerns over LBMC’s ability
to meet the representations and warranty’s made to facilitate sales of loan securitizations,
and management halted securitization activity.).
9. Washington Mutual, LBMC Post Mortem - Early Findings Read Out, November 1, 2005 (First
Payment Defaults (FPD’s) are preventable and/or detectable in nearly all cases (~99%) ...
High incident rate of potential fraud among FPD cases.).
10. Washington Mutual Memorandum to the Washington Mutual, Inc. and WaMu Board of
Directors’ Audit Committees, dated April 17, 2006, re: Long Beach Mortgage Company -
Repurchase Reserve Root Cause Analysis (LBMC experienced a dramatic increase in EPDs
during the third quarter of 2005. … [R]elaxed credit guidelines, breakdowns in manual
underwriting processes, and inexperienced subprime personnel … coupled with a push to
increase loan volume and the lack of an automated fraud monitoring tool, exacerbated the
deterioration in loan quality.).
11. WaMu internal email, dated April 2006, re: Jax ([D]elinquencies are up 140% and
foreclosures close to 70%. … It is ugly.).
12. WaMu internal email, dated September 2006, re: nat city mid-quarter update (LBMC is
terrible .… [W]e are cleaning up a mess. Repurchases, EPDs, manual underwriting, very
weak servicing/collections practices and a weak staff.).
13. a. WaMu internal email, dated December 2006, re: SubPrime Analysis (Short story is this is
not good. … [L]arge potential risk from what appears to be a recent increase in
repurchase requests. … We are all rapidly losing credibility as a management team.).
b. FDIC Memorandum, dated June 2, 2007, re: WaMu - Long Beach Mortgage Company
Repurchases.
14. WaMu, Home Loans - SubPrime, Quarterly Credit Risk Review, December 2006 (excerpts).
15. WaMu internal email, dated December 2006, re: It’s suprime day at WSJ (attaching Wall Street
Journal articles on subprime)(...our Long Beach securities have much higher delinquency
rates early in their life than the 2003 and 2005 vintages.).
16. WaMu internal email, dated January 2007, re: Confidential (Long Beach represents a real
problem for WaMu.)
17. WaMu internal email, dated February 2007, re: Long Beach 2nd Lien Disposition (In 2006
Beck’s team started sprinkling in deals as they could.).
18. WaMu HL Risk Management, Quarterly Credit Risk Review, Subprime, 1st Quarter, 2007 (The
root cause of over 70% of FPDs involved operational issues such as missed fraud flags,
underwriting errors, and condition clearing errors.)(excerpts).
19. WaMu Audit Report, Long Beach Mortgage Loan Origination & Underwriting, August 20,
2007 ([T]he overall system of risk management and internal controls has deficiencies related
to multiple critical origination and underwriting processes. … These deficiencies require
immediate effective corrective action to limit continued exposure to losses.).
20. WaMu internal email, dated August 2007, re: Long Beach Mortgage Loan Origination &
Underwriting (Requires Improvement)(This seems to me to be the ultimate in bayonetting the
wounded, if not the dead.).
21. WaMu Corporate Credit Review, Home Loans, Wholesale Specialty Lending-FPD, September
2007 Targeted Review (132 of the 187 (71%) files were reviewed [and] … confirmed fraud on
115 [and 17 were] … “highly suspect”. ... 80 of the 112 (71%) stated income loans were
identified for lack of reasonableness of income[.] 133 (71%) had credit evaluation or loan
decision errors …. 58 (31%) had appraisal discrepancies or issues that raised concerns.).
Documents Related to WaMu Retail Channel:
22. a. WaMu internal memorandum, dated November 17, 2005, re: So. CA Emerging Markets
Targeted Loan Review Results (Of the 129 detailed loan reviewed that have been
conducted to date, 42% of the loans reviewed contained suspect activity or fraud, virtually
all of it attributable to some sort of employee malfeasance or failure to execute company
policy.
b. WaMu Retail Fraud Risk Overview, Prepared by Risk Mitigation, November 16, 2005.
23. a. WaMu internal email chain, dated November 2005: re: Retail Fraud Risk Overview (I had
a very quick meeting with David Schneider, Tony Meola and Steve Stein today to review
the deck and the memo regarding the retail fraud risk review. The good news is that
people are taking this very seriously.).
b. WaMu internal email chain, dated August 2005, re: [names redacted] - Risk Mit Loan
review data “Confidential” (...he “did not want to give axes to the murderers.”).
24. WaMu Privileged and Confidential Memorandum, dated April 2008, re: Memorandum of
Results: AIG/UG and OTS Allegation of Loan Frauds Originated by [name redacted] .
25. Office of Thrift Supervision Memorandum, dated June 19, 2008, re: Loan Fraud Investigation.
26. WaMu OTS Exam Summary As of July 22, 2008 (OTS AQ #22 Loan Fraud Investigation.)
(excerpts).
27. WaMu internal email chain, dated August 2006, re: Hudson 3010598427 Purchase (Sales has
NOT hit oiur [sic] funding goals.).
28. WaMu Market Risk Committee (MRC), Minutes of the December 12, 2006 Meeting (The
primary factors contributing to increased delinquency appear to be caused by process issues
include the sale and securitization of delinquent loans, loans not underwritten to standards,
lower credit quality loans and seller servicers reporting false delinquent payment status.).
29. WaMu internal Memorandum, dated September 2007, re: Westlake HLC Investigation Update.
30. WaMu Significant Incident Notification (SIN), Date Incident Reported - 04/01/2008, Loss Type
- Mortgage Loan (One Sales Associate admitted that during that crunch time some of the
Associates would “manufacture” assets statements from previous loan docs and submit them
to the LFC. She said the pressure was tremendous from the LFC to get them the docs since
the loan had already funded and pressure from the Loan Consultants to get the loans funded.).
31. WaMu Internal Investigative Report, dated May 2008, re: Westlake Home Loan Center
(..tremendous pressure from Loan Consultants and from the LFC Team Manager to get the
asset documents to the LFC because the loan was already funded.).
32. a. WaMu internal email chain, dated December 2007, re: Employee HELOC Fraud (...75
suspect HELOC loans have been identified (approved & in pipeline) ... with a current
outstanding balance of $3,318,101.).
b. WaMu Significant Incident Notification (SIN), Date Incident Reported - 05/01/2008, Loss
Type - HELOC Fraud (Risk Mitigation reviewed 25 HELOC loans ... with a total exposure
of $8,538,600.00.), Exposure - $8,538,600.).
33. Radian Guaranty Inc. Review of Washington Mutual Bank, August-September 2007 (This
results in an overall “Unacceptable” rating with a score of 68.)(excerpts).
34. WaMu Corporate Credit Review, 2008 Home Loans, Risk Mitigation and Mortgage Fraud,
September 2008 Targeted Review (excerpts).
Documents Related to Option Arms:
35. Washington Mutual, Option ARM Focus Groups - Phase II, WaMu Option ARM Customers,
September 17, 2003.
36. Washington Mutual, Option ARM Focus Groups - Phase I, WaMu Loan Consultants and
Mortgage Brokers, August 14, 2003 (excerpts).
37. Washington Mutual, Option ARM Credit Risk, August 2006.
38. Washington Mutual, Option ARM, Board of Directors Meeting, October 17, 2006.
39. WaMu internal email, dated April 2007, re: Option ARM (I think we better be well prepared
to defend the option ARM portfolio.).
40. a. WaMu internal email, dated September 2006, re: Tom Casey visit (...equity investors are
totally freaking about housing now.).
b. WaMu internal email, dated February 2007, re: Option ARM MTA and Option ARM MTA
Delinquency (We are contemplating selling a larger portion of our Option ARM than we
have in the recent past. Gain on sale is attractive and this could be a way to address
California concentration, rising delinquencies, falling house prices in California with a
favorable arbitrage given that the market seems not to be yet discounting a lot for those
factors.).
41. WaMu internal email, dated, February 2007, re: Some thoughts on targeted population for
potential Option ARM MTA loan sale (I thought it might be helpful insight to see the
information Bob Shaw provides below about the components of the portfolio that have been
the largest contributors to delinquency in recent times.).
FDICFederal Deposit Insurance Corporation
550 17th Street NW, Washington, D.C. 2042~9990
TO: Steve Funaro
Examiner-in-Charge
FROM: Christopher Hovik.
Examination Specialist
Division aI Supervision and Consumer Protection
June S, 2007
SUBJECT: WaMu - Long Beach Mortgage Company (LMBC) Repurchases
Objective: Assess LBMe repurchase activity and related reserves.
Repurchase Activity
Repurchase reasons are broken down into three main categories: 1) [ust payment default (FPD) -
the mortgagor fails to make the fIrst monthly payment, 2) early payment default (EPD) - the
mortgagor fails to make the first payment due after the loan has been sold. and 3) representations
and warranties (R&W) - the seller guarantees various facts about the sold loans.
During 2006, more than 5,200 LBMC loans were repurchased, totaling $875.3 million.
Approximately 46% percent of the dollar volume was due to EPD. 43% due to FPD, and 10%
due to R& W. All of the EPD occurred during the first four months of the year as the bank:
ceased doing whole loans sales in January 2006. Consequently repurchase volume dropped off
dramatically during the second quarter and continued at lower levels throughout the remainder of
the year.
During the fourth quarter of 2006, there was a jump in repurchase requests under R& W
provisions. Management stated that it was a one time event relating to just a couple of deals.
The reasons for and steps the bank is taking to mitigate this adverse trend needs to be discussed
further.
Repurchases are not even distributed among various loan sales. The most recent sales contain
the FPD and EPD buybacks as they are relatively short lived guarantees. Loans bought back for
those reasons will typically be repurchased within 2 or 3 months after sale. In fact, about 30% of
all repurchases in 2006 came from two whole loan sales 2006-WL2 LBMLT and 2006-WL3
LBMLT. The far majority of these whole loans sale repurchases were due to early payment
provisions.
R&W constitute a longer term guarantee with loans being repurchased in 2006 that were sold as
far back as 1999. The reasons for R&W repurchases in 2006 are listed in the following table:
Permanent Subcommittee on InVestigations
EXHmIT#13b
MEMORANDUM OPINION. Signed by Judge Rosemary M. Collyer on 4/13/10. (lcrmc2) (Entered: 04/13/2010)
http://www.ghostofwamu.com/documents/09-01743/09-01743-0117.pdf
ORDER granting 87 FDIC-Receiver's Motion to Dismiss; denying 88 Plaintiffs' Motion to Dismiss FDIC-Receiver and to remand to Texas state court; granting 89 JPMorgan Chase's Motion to Dismiss. This case is closed. Signed by Judge Rosemary M. Collyer on 4/13/10. (lcrmc2) (Entered: 04/13/2010)
http://www.ghostofwamu.com/documents/09-01743/09-01743-0118.pdf
2008.10.30-Hearing Transcript
sawadee cents2ks !
You can access the 10/30/08 hearing by using the following link.
http://chapter11.epiqsystems.com/WAM/document/default.aspx?DMWin=5d1d518f-8398-46fb-a4bc-5b2a4ecc173a
"On Sept. 10, 2007, Washington Mutual CEO Kerry Killinger stood before an audience of analysts and money managers and assured them the Seattle-based thrift would come out of the housing slump stronger than ever.
WaMu, Killinger told the Lehman Brothers conference, had tightened its lending standards, could access plenty of cash, and was "picking and choosing carefully" when it came to making new loans.
"This frankly may be one of the best times I have ever seen for taking on new loans into our portfolio," he said.
But even as he spoke, WaMu was a dead bank walking. The company had plunged headlong into the business of making exotic, high-risk home loans, selling many of them to investors but holding onto others; now defaults on those loans were rising, and big investors had lost their taste for them.
Almost a year to the day after the Lehman conference, Killinger was fired. Two and a half weeks after that, federal regulators seized WaMu's banking units, effectively euthanizing a 119-year-old institution that had survived the Great Depression and the S&L crisis.
After its collapse, Killinger and other leading WaMu executives repeatedly deflected responsibility, saying the company fell victim to a housing slump turned global credit crisis that they foresaw but couldn't outrun.
But interviews with former WaMu executives and employees, along with government and internal company documents, reveal a far different picture, one of executives charting a reckless course that doomed the bank:
• In its headlong pursuit of growth, WaMu systematically dismantled or weakened the internal controls meant to prevent the bank from taking on too much risk — the very standards and practices that had helped it grow in the first place.
• WaMu's riskiest loans raked in money from high fees, but because the bank skimped on making sure borrowers could repay them, they eventually failed at disastrously high rates. As loans went bad, they sucked massive amounts of cash that WaMu needed to stay in business.
• WaMu's subprime home loans failed at the highest rates in nation. Foreclosure rates for subprime loans made from 2005 to 2007 — the peak of the boom — were calamitous. In the 10 hardest-hit cities, more than a third of WaMu subprime loans went into foreclosure.
By the summer of 2004, nearly 60 percent of the loans WaMu was making were the riskiest sort — option ARMs, subprime mortgages and home-equity loans."
From:
Part one | Reckless strategies doomed WaMu
By Drew DeSilver
Seattle Times business reporter
http://www.wafimortgage.com/Seattle+Times+Article+about+WAMU+and+its+demise!
I never said the FDIC and JPM had the right to conspire to seize WAMU illegally, nor have I said that the FDIC had the right to sell the assets for such a low price.
Of course it wouldn't be the first time they lied, however, Congress is filled with monkeys, and the Ken Lewis situation is a good example of that. He wanted to invoke the MAC clause, Bernanke and Paulson basically told him that he couldn't and that he better not disclose the forecasted losses from the deal to shareholders, Bernanke and Paulson lied to Congress about what was said, then Bernanke gets re-confirmed, and Paulson is, and will remain, free from prosecution, meanwhile Lewis currently has charges pressed against him.
WaMu loaned millions to O.C. home flippers with fraud history
By JOHN GITTELSOHN
The Orange County Register
"In July 2007, Vijay and Supriti Soni of Corona del Mar paid $440,000 for a home at 2129 W. Civic Center Drive in Santa Ana.
Five weeks later, they resold the house to Javier Hernandez - the family gardener and handyman - for $660,000. That's a 50 percent gain in 38 days - at a time when real estate prices in Santa Ana were plunging.
But the lender that financed both mortgages - Washington Mutual Bank - took a bath. In March of this year Hernandez's loan went into default and in July the bank foreclosed. On the trustee's deed, the bank listed the home's value at $377,137 - $220,000 less than the outstanding loan.
Records show that Washington Mutual, America's largest savings and loan and one of its most precariously perched lending institutions, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family since early 2007.
Of the 22 homes sold in that period, at least six have become problems for Washington Mutual: Four were foreclosed, one received a notice of default and another was listed for sale at a $260,000 loss. Total value of WaMu's mortgages on the troubled properties: $2.7 million. (Click here to see a graphic that explains how the family made money)
Washington Mutual's lending practices resembled many other home loan institutions that have run into trouble, such as IndyMac Bank, which failed in July, and Countrywide Financial Corp., which was rescued in a January merger with Bank of America. They all offered complex adjustable-rate and subprime mortgages, approving many of the loans with limited scrutiny. When soaring numbers of borrowers were unable to repay or refinance their loans, the banks collapsed.
A quality control problem
WaMu's $310 billion in assets, its diverse loan portfolio, its large base of depositors and conservative risk management were supposed to protect the thrift from collapse. Now it appears to be the next domino in the row.
WaMu said it is investigating the Soni family's transactions as part of a fraud scheme, and maintained that those loans are not a symptom of larger problems.
"We have extensive controls in place to protect the integrity of our portfolio and loan processes," WaMu spokeswoman Sara Gaugl said. "We are continually enhancing our efforts to identify and prevent any potential illegal activity."
But lending analysts said the Soni family's transactions raise troubling questions about standards at the Seattle-based thrift, which could face a federal takeover if it can not find a new source of credit. The distressed WaMu properties would then belong to the taxpayers.
"This is a quality control problem," said Paul Leonard of the Center for Responsible Lending's California office. "It certainly is curious WaMu's fraud detection system didn't pick this up. It looks very bad and it is bad. The question is how widespread it is."
No criminal background checks
Leonard and others said the Sonis' transactions probably escaped notice because Washington Mutual, like many other lenders:
Allowed financing of property flips that occur less than 90 days after purchase. The Federal Housing Administration imposed a ban on financing 90-day flips in 2006. The FHA also requires a second appraisal for homes sold at a 100 percent gain less than 180 days after purchase.
Relied heavily on imperfect fraud detection software. Computers are good at flagging statistical aberrations - such as unrealistic income statements - but can be deceived by knowledgeable and determined insiders.
Did not check criminal backgrounds. The Sonis had been convicted in 2003 of numerous felonies for a real estate fraud scheme. WaMu checks criminal backgrounds of loan originators, such as outside mortgage brokers, but not borrowers.
Last month, District Attorney investigators raided the family's homes and business offices. Now, prosecutors are investigating the Sonis and other members of their family for criminal behavior.
"Unfortunately, we are back looking at these characters again," said Doug Brannan, the deputy Orange County District attorney who prosecuted the Sonis in 2003.
Washington Mutual declined to answer specific questions about the Soni family case.
"This is an active investigation and we are fully cooperating with local law enforcement regarding this matter," Gaugl said. "We will not tolerate misrepresentation or fraud of any kind, and will aggressively pursue all legal means available to combat these offenses."
Tightened standards?
Washington Mutual once aimed to be the Starbucks of banking: A shop in every neighborhood; lending that was as simple as buying a double decaf latte.
That was before the mortgage lending industry began to implode.
In mid-2007, WaMu's then chief executive officer, Kerry Killinger, boasted that his company had tightened lending standards to protect itself from the darkening real estate market.
"It's been over two years since we first began talking to you about housing prices becoming inflated and of the high risk of a slowdown in housing with price declines in some parts of the country," Killinger said during his July 2007 quarterly earnings call. "As a result, we started to take actions to minimize our exposure, including tightening our underwriting."
It seems to have been too little, too late.
This summer, the bank reported a $4.8 billion loss in the first half of 2008 due mostly to souring home loans. On Sept. 11, the company ousted Killinger and said it was setting aside $4.5 billion for losses in the third quarter of this year.
Credit-rating agencies downgraded the bank's bond rating to junk status. The stock sank to $2 on Sept. 15, from a high of $39.25 a year ago. Last week, the bank put itself up for sale.
48 percent gain in 92 days
The Soni family's transactions with WaMu, which took place from early 2007 through March of this year, indicate that Washington Mutual continued making risky loans long after its underwriting standards were supposedly tightened, said James Barth, a senior finance fellow at the Milken Institute in Santa Monica.
"Lending institutions had an obligation to do due diligence to make sure the borrower can repay the loan, especially in 2007 and 2008 when they knew there was a mortgage meltdown taking place," Barth said.
Home prices in Santa Ana peaked in 2006 and have fallen more than 40 percent since.
While those prices were plummeting, members of the Sonis' family never sold for a loss. A Register analysis of 22 Santa Ana properties flipped by the family in the past two years shows a total gain on sale of $3.7 million.
Average gain: 48 percent.
Average time between purchase and sale: 92 days.
Todd Lackner, a San Diego mortgage fraud investigator who has examined the transaction records, said the common thread of WaMu funding makes the Sonis' transactions even more disturbing.
"To me, it looks as if WaMu had a failed policy of funding these flip transactions at drastically inflated prices," said Lackner, who furnished grand jury testimony about the real estate scheme that led to the 2005 bribery conviction of U.S. Rep. Randall "Duke" Cunningham. "I find that disgusting. Any idiot can see these sale prices are excessive."
Suit says WaMu picked appraisers
The FBI says mortgage fraud reports increased 31 percent nationally in fiscal 2007, totaling 46,717 incidents with an estimated loss of $813 million.
"During declining markets, mortgage fraud perpetrators may take advantage of industry personnel attempting to generate loans to maintain current standards of living," the FBI's annual fraud report said.
If, like most contemporary lenders, Washington Mutual continued to rely on fraud detection software to catch problems, it wasn't hard to slip under the radar, said Ann Fulmer, vice president for Interthinx, an Agoura Hills fraud detection company used by lenders.
Banks don't check criminal backgrounds of buyers or sellers, because it would be too expensive, Fulmer said. People with experience - in real estate sales, appraisals, finance and escrow - know how to game the system, she said. With a little creativity and an Internet search, they can obtain phony employment, tax and financial documents for loan applicants.
"The problem with technology, it's very easy to fabricate documents to get them through," Fulmer said. "It's not a matter of what controls you put up. If someone is determined and they know how to work inside the system and they're ethically challenged, there's no way to stop them."
In the past two years, Soni family members took out a total 14mortgages with Wells Fargo, Countrywide Home Loans, Downey Savings & Loan, J.P. Morgan Chase Bank and HSBC Mortgage Corp. But Washington Mutual was their preferred lender, with triple that number of loans.
One possible reason is suggested in a lawsuit filed in November by New York Attorney General Andrew Cuomo. The suit claims that Washington Mutual had a history of pressuring appraisers to give properties high valuations so it could make more money.
The suit alleges that eAppraisIT, a subsidiary of Santa Ana-based First American Corp., was strong-armed by WaMu into using pre-approved appraisers who offered higher property values for sales financed by the bank. The suit says eAppraisIT caved because WaMu was its largest customer, paying for 262,000 appraisals between early 2006 and October 2007.
"By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion," Cuomo said.
First American said Cuomo's allegations were "largely based on a handful of emails that have been taken out of context or mischaracterized."
Washington Mutual's Gaugl said: "After investigating these allegations, we can say with confidence that there has been no systematic effort by WaMu to inflate home appraisals."
That case is pending in New York State Supreme Court.
ID theft to buy a Mercedes
In August 2003, an Orange County Superior Court jury found Vijay and Supriti Soni guilty of forgery, falsifying real estate documents, identity theft and grand theft. Vijay Soni was sentenced to a year in jail. He also surrendered his real estate license. Supriti Soni was convicted on 19 counts in the case and sentenced to three years in prison.
Brannan, who prosecuted the case, said their scheme "took advantage of their clients' trust when they exploited the unsuspecting customers' information for their own financial gain. They left these families with large financial liabilities, goods and property purchased in their name without their knowledge, many hidden costs, and a huge amount of grief to clean up their credit."
Supriti Soni appealed, but her conviction was upheld.
The appeals court said that, under various names, the Sonis "obtained confidential information from various people - one of whom worked for Vijay and the rest who were clients for properties or mortgages - and then used it to acquire furniture, loan proceeds and commissions, real estate deeds and commissions, a Mercedes Benz automobile and cash for themselves."
A Superior Court judge later agreed to reduce seven of the 15 felony counts against Vijay Soni to misdemeanors.
Homes and offices raided
On their Web site, Vijay and Supriti Soni posted a message:
"Supriti Soni and Vijay Soni of Orange County have been acquitted of all charges and allegations. Supriti and Vijay Soni have been in Real Estate Business for many years and have been extremely successful. On their way toward success they were put under radar and charged with false allegations. Through the Internet using search engines their reputation as a successful and an honest business people were compromised. However the final judgment reveals that Supriti and Vijay Soni are innocent and acquitted of all charges and allegations."
Attached was a document showing that eight of Vijay's felony convictions had been reduced to misdemeanors.
Soni's attorney, Shirley Macdonald Juarez, told the Register she asked Soni to remove the Web posting, because it implies he has no felonies on his record. In fact, eight felony convictions remain.
On Aug. 7, 2008, investigators from the Orange County District Attorney's office and state Franchise Tax Board served search warrants on nine locations, including the homes of the Sonis, her mother Sushama Lohia and the family of her sister Suniti Shah plus four family companies - SL Realty, California Escrow, New Age Realty and First Priority Escrow. They carted out 154 cardboard boxes and 40 computers filled with evidence.
Family members declined to comment for this story, citing the advice of attorneys.
"I'm confident that the facts will reveal that Mr. Soni has not engaged in any wrongdoing," said Vincent LaBarbera, Vijay Soni's attorney.
Intra-family flipping
In the past two years, the Soni family essentially created their own market in Santa Ana by flipping enough homes in a small area, said Lackner, the appraisal fraud specialist. In at least three cases, homes flipped from one family member to another - sales later used by appraisers to give credibility to high asking prices for other properties in the area.
One example: Lohia bought the bank-owned house at 827 S. Flower for $249,500 on Jan. 4. She sold it 20 days later for $575,000 to her daughter, Suniti Shah, who financed the purchase with a $488,750 Washington Mutual mortgage.
That was a 121 percent increase in less than three weeks.
"Selling to each other, that's something an appraiser should definitely discover," said Mike Sanders, a Laguna Beach real estate appraiser and expert witness in property value litigation cases. "If the appraiser finds all the same people's names on transactions, then that's something suspicious."
No money down
Vijay Soni provided another clue to his success at selling homes in a falling market: They made the down payments for the buyers.
In an interview in June with the India Journal,Soni said his "liquidation company" bought foreclosed properties in Santa Ana, Riverside and Corona and sold them by offering "10 percent down free money to any qualified buyer. With this big burden out of the way, they only have to worry about coming up with their monthly mortgage."
That would be the equivalent of 100 percent financing, experts said.
If loan documents do not fully disclose who made the down payment, it would misrepresent the purchaser's stake in the property and potentially is a form of criminal fraud or theft, said Fulmer of Interthinx.
"Unfortunately, the bank doesn't know it's 100 percent financing," she added.
Documents show that all of the family's sales through Washington Mutual indicated that the buyer paid a down payment of 10 to 20 percent.
"Up against a wall"
But Elijio Servin Rojas told The Register that he never made a down payment on the home he bought in November for $640,000 from Sushama Lohia. Records show he paid at least $64,200 before closing.
Servin Rojas said he was renting when Lohia persuaded him to buy last year. He said he has fallen behind on payments on the $575,800 mortgage from Washington Mutual. He received a notice of default in July.
"I'm up against a wall," Servin Rojas, a tile worker who has been working only part time, said in Spanish. "They're just going to take away our house."
The Sonis were positioned to escape detection if in fact no money changed hands - because Lohia, a licensed real estate broker, also served as escrow agent on the transactions.
One alleged instance is detailed in a lawsuit filed in Orange County Superior Court in May after the Sonis unsuccessfully bid on a $13 million Newport Coast mansion.
The check bounced
Documents in the suit, filed by the home's seller Dr. William Dobkin, allege the Sonis deposited $450,000 as earnest money with California Escrow, an arm of Lohia's SL Realty. But when Dobkin asked for the money as the first step of the sale, California Escrow failed to produce the cash, the suit says. Vijay Soni then wrote a personal check for $460,000 to cover the debt. The check bounced.
"We've determined, and they've admitted, that the funds are no longer there - if they ever were," Dobkin's attorney, Jeffrey Simon, said of the California Escrow account.
Soni's attorney, Allan Leguay, said the case is not about fraud, but whether Dobkin can demonstrate he suffered a financial loss. The lawsuit has been sent to arbitration.
Witness in identity theft case
In August, an investigator from Washington Mutual told Angel Enrique Torres that his name was on a bank account and real estate in Texas.
"I don't know where that came from," Torres told the Register.
Torres' name is also on three Santa Ana properties purchased from the Sonis and their relatives, all financed with Washington Mutual mortgages. One of the homes was foreclosed in July. He said he has fallen behind on the payments of a second home.
County records show Torres refinanced his home at 339 S. Garnsey with a $496,000 mortgage from Washington Mutual in June 2007. Torres told a reporter he was unaware of the refinancing deal.
Torres is part of another family whose members both worked for the Sonis and bought properties from them and their relatives, using Washington Mutual financing. His sister, Sara Torres, bought 1609 W. Raymar from Supriti Soni for $640,000. That's $111,000 more than Soni paid for the property five days earlier.
Sara Torres was a key witness in the identity theft case against the Sonis. In 2000, she filed a complaint with the City of Orange Police alleging the Sonis put her name on a deed without her consent and applied online for a $10,000 loan in her name.
But when Supriti Soni appealed her conviction, Sara Torres wrote to the judge that her police complaint resulted from a misunderstanding.
"Gentle, harmless and giving"
In court documents, Torres described herself as the cousin of Patricia Cruz Hernandez, whose husband was the Sonis' gardener, Javier Hernandez.
Hernandez purchased two Santa Ana homes from the Sonis in 2007: 2129 w. Civic Center Dr. and 517 S. Garnsey St. Both are now in foreclosure.
Before the Sonis' sentencing in 2003, Javier Hernandez wrote a letter to the judge in Spanish urging mercy.
"I don't have words to express what good people they are," his letter said.
Sushama Lohia also wrote to the judge about her daughter and son-in-law. "They have become prey of misunderstanding and jealousy of heartless people. If you watch them closely, you will find them gentle, harmless and giving." "
Contact the writer: 714-796-7969 or jgittelsohn@ocregister.com
http://www.ocregister.com/articles/soni-19426-washington-mutual.html
What a Deal
by Kirsten Grind Dec 28 2009
"JPMorgan's purchase of WaMu was the deal of a lifetime. But did the Manhattan giant have inside information when it made that deal? "
..."We were watching money “fly out of the bank,” from a “war room” at JPMorgan’s New York headquarters, said one JPMorgan executive, according to these people.
WaMu staffers who heard the comment were startled. They believed that kind of detailed information was strictly confidential, known only to a select handful at WaMu—and the bank’s federal regulators.
There were several of us that looked at each other and thought, Did he just say that?” said one former employee who attended."
A JPMorgan official who was at the meeting denied this week that the remark was made and that the bank had such information. Dimon and other officials declined repeated requests to comment further for this story.
If JPMorgan had this kind of inside knowledge of WaMu’s deposit run, that means the corporate privacy of the nation’s largest savings and loan could have been compromised—with immense implications for WaMu executives, the bank, and its thousands of shareholders. At the time, just weeks before WaMu’s September 25 seizure, the executives were trying quietly to sell the bank, and were at the same time battling, with the help of the communications team, to control WaMu’s image and quash rumors about financial problems during the intense financial turbulence of 2008.
It is possible that JPMorgan received the information through a normal due diligence process: The bank had signaled its interest in WaMu’s auction and had access to its “data room” of financial reports. But a WaMu executive familiar with WaMu’s bidders at the time said that detailed deposit outflow information was not handed out to prospective buyers."
http://www.portfolio.com/industry-news/banking-finance/2009/12/28/what-a-deal-jp-morgan-got-for-wamu/
fsshon
Use this link, click on 103-1.pdf and go to page 45 of the pdf for the memo. FYI- The e-mails start on page 42 of the pdf.
http://www.mediafire.com/?sharekey=3b830df9f3d0e6fce7c82ed4b8f0c380aff12395630f22f3ce018c8114394287
It was an internal WM memo.
I know what a consolidated balance sheet is, and I also know what cash and cash equivalents are.
By the way, do you understand the implications of the following laws???
http://edocket.access.gpo.gov/cfr_2009/aprqtr/26cfr301.6402-7.htm
This is straight from THE balance sheet as of June 30, 2008.
June 30, 2008
(dollars in millions)
Cash and cash equivalents
$ 7,235
http://www.secinfo.com/dVut2.t8tw.htm
There's also a little thing called a POS loan.
When your POS loans add up, the value of your "assets" decline rapidly while your liabilities do not.
The report is a combined financial report that includes WMI AND its subsidiaries. The cash/cash equivalent balance is a combined balance.
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
June 30,
2008
Cash and cash equivalents $ 7,235
http://www.secinfo.com/dVut2.t8tw.htm
Per WMI’s own consolidated statements, which include assets of WMI + all of their subs (including WMB) there was a combined cash/cash equivalent total of $7.235 billion as of June 30, 2008 . There wasn’t “mega billions” sitting somewhere, so let’s put to rest the stories of $20+ billion sitting in fsb.
Also, if WMI truly believes that they are the rightful owners of $4.5 billion in cash, then that would mean that WMI was always the rightful owner of that $4.5 billion in cash, which means that WMB actually only had $2.735 billion in cash on June 30, 2008. If WMB only had $2.735 billion in cash as of June 30, 2008 , which WMI claims through their own financial reporting, then it is clear that $2.735 billion was certainly not enough cash to continue to operate as a safe and sound institution. Think about it, WMI owned $4.5 billion in cash, and WMB only owned $2.735 billion as of June 30, 2008. $2.735 billion in cash is a laughable amount of cash to have on a bank’s balance sheet. In addition, all of the claims about WMI
Most of WMB’s “assets” were loans held in their portfolio and “other assets” (both of which are “real” “assets”), AND all of their liabilities were “more “real” “than many of their assets. They already had $58 billion in advances from Federal Home Loan Banks accompanied by $39 billion in other borrowings and “other liabilities” (which are/were a lot “more real” than their “other assets” and loans held).
A lot of people are super-pumped about Solomon coming to theparty, however, Solomon can’t pull money out of a hat, those same people were pumped about Venable as well (where is he now), and a lot of those same people claim that WMI’s subs are worth “mega billions” and that they will get “2 times value” and/or a ridiculous amount per share from WMI and/or JPM/FDIC, but that will NEVER EVER HAPPEN.
By the way, one of the reasons that the FDIC and the Bank’s creditors did not sign-off on “the plan” is directly related to the NOL’s and tax refunds, and that reason is that WMI was bargaining with assets that it does not haveownership of. In “the plan” WMI was trying to get more than their fair share of the NOLs and refunds, and the real fight is between JPM, the FDIC, and the bank’s creditors. There are also several reasons why THJMW didn’t tell the WMB Creditors to get out of her court and that they have no standing. Those that say that it’s about to get ugly are correct, but many of those same people have absolutely no idea how ugly it is going to get, nor do those people know who it is going to get ugly for.
Do I think the WMI equity securities will go up one last time from these levels? Of course I do, but I certainly would not hold onto them until “the end”.
If anybody is waiting for a payout of "2 times value" for their wamuq, then you won't have to wait very long, but don't forget, 2 times zero equals ZERO .
Make sure you take FULL PROFITS because “the LAW” really is “the LAW”.
PS- Here is some nice reading that you may, or may not, have read before.
[Title 26, Volume 18] [Revised as of April 1, 2009]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR301.6402-7]
[Page 369-375]
http://edocket.access.gpo.gov/cfr_2009/aprqtr/26cfr301.6402-7.htm
******************************************************************
Sawadee my friend.
The connections between JPM and the FED are nothing new and neither are the mandy shady deals they have been involved with.
Sawadee, krup!
The Fed Crossed a Big Line on Bear Stearns
On Sunday, March 16, the Federal Reserve crossed a big line directly bailing out a non-depository financial institution and our fifth largest investment bank, Bear Stearns, for the first time since the Depression. The Fed forced Bear Stearns out of existence by loaning J.P.Morgan Chase $30 b. to purchase it at a fire sale price of $236 million on Sunday after Bear Stearns stock closed with a market valuation of $3.5 b. on Friday, March 14th.
The transaction raises a lot of questions. The ones I would like to deal with are: Why didn't the Fed just let Bear Stearns go bankrupt? How big a windfall was this for J.P.Morgan Chase? What risks does this Fed action pose for the future?
We don't know why the Fed took this action. Their press release announced the action in one sentence without any explanation.
We are left to conclude that the Fed viewed the bankruptcy of Bear Stearns, which specialized in mortgage finance, as a financial market calamity, the costs of which would exceed putting $30 b. of taxpayer money at risk and the future risk if other firms follow Bear Stearns' example.
All I can say is there must be a lot of red ink hidden in the Bear Stearns deal and a lot of potential collateral damage to justify the Fed's action. Fed Chair Ben Bernanke and Treasury Secretary Hank Paulson are rational and experienced people. I'm sure they did the math and fully considered the "moral hazard" of what this action might cost future taxpayers. Bernanke is an expert in financial market panics, and his research has taught him that only prompt and strong action can avert them.
Nonetheless, J.P.Morgan Chase appears to have hit the lottery. It's market capitalization rose 26%, or $32.1 b., between, it's close at $36.54 per share ($124.1 b. market capitalization) on March 14th and it's close on Thursday, March 20th at $45.97 per share ($156.2 b.). There are a lot of former Bear Stearns shareholders and employees who feel cheated out of their chance to do better in bankruptcy court.
We have no way of knowing what risks the Fed's Bear Stearns bailout will create for U.S. taxpayers, and it won't be possible to estimate them years from now either because we'll never see the world as if the Fed hadn't bailed out Bear Stearns. All we'll observe is whether the Fed gets our $30 b. loan back and whether any more of our money is committed beyond that.
Think of it this way: If you're the CEO of another investment bank that's "too big to fail," and you had taken on too much risk in pursuit of profits that have suddenly evaporated in the mortgage crisis, what would you do? Would you shed risk, try to recapitalize, hunker down as best you can, and own up to big losses, or would you take on even more risk in hope going "double or nothing" would pay off, knowing that the Fed would intervene if "nothing" is the outcome?
Economists used to believe that people were strictly rational, but recent research has proven that we're not. Faced with very unpalatable choices, we often act irrationally and make bad situations worse. We know some CEOs have acted badly in the past.
Today is Easter. Let's pray that Ben Bernanke and Hank Paulson, when facing very difficult choices involving huge financial risks, can steer us clear of this crisis.
http://www.capitalgainsandgames.com/blog/pete-davis/186/fed-crossed-big-line-bear-stearns
Fed's 'Loan' For Bear Deal Actually a BlackRock Managed Fund
MacroMan has a nice find, in a post aptly entitled Timmy Geithner, SIV Manager!?. He points us to details of the "loan" being arranged by the Fed to support J.P. Morgan's (JPM) purchase of Bear Stearns (BSC).
It is not a loan at all. The Fed and J.P. Morgan are creating an investment fund, to be managed by BlackRock:
The New York Fed will take, through a limited liability company formed for this purpose, control of a portfolio of assets valued at $30 billion as of March 14, 2008. The assets will be pledged as security for $29 billion in term financing from the New York Fed at its primary credit rate.
JPMorgan Chase will bear the first $1 billion of any losses associated with the portfolio and any realized gains will accrue to the New York Fed.
The money that the Fed and J.P. Morgan will provide is startup capital for the fund. All of it is referred to as "loans", but that's facile. Obviously, somebody will own these assets, bear the risk of carrying them, and realize any gains on the fund's portfolio.
Specifically, J.P. Morgan is offering financing of $1 billion dollars that is loan-like in one sense — the maximum it will be repaid is its initial investment plus interest ("the primary credit rate plus 475 basis points", currently 7.25 percent) — but equity-like in another sense — J.P. Morgan's billion bears the first loss.
The Fed's ownership stake will be $29 billion, ostensibly in the form of loans at "the primary credit rate, which currently is 2.5 percent and fluctuates with the discount rate". But, that is largely meaningless. If the investment company's assets turn out to be worth less than the principal and interest due the Fed, then the Fed's loan won't be repaid. If its assets appreciate, J.P. Morgan gets paid out, and the rest belongs to the Fed. The only significance of the "interest rate" would be if, as the fund unwinds, asset values are high enough to make only a partial payment to J.P. Morgan. In this case, the interest rate would help determine the split between the Fed and JPM.
Essentially, the Fed will own this investment fund and the Bear portfolio outright. JPM's position is basically a call option on the fund's assets at $29B plus time-value capped (short a put option) at $30B plus time-value. The Fed can deny all it wants that it is considering purchasing mortgage-backed securities. That is the economic effect of this arrangement. The Fed is buying up mortgage-backed securities and other unspecified assets at "the value of the portfolio as marked to market by Bear Stearns on March 14, 2008."
But we already knew that.
I remain interested in precisely what sort of assets besides mortgage-backed securities this fund will hold. I think that MacroMan used the term "SIV" advisedly. The signal fact about SIVs is that, though they were formally off-balance sheet, limited-liability entities, in reality SIV sponsors bore downside risk beyond their legal obligations to the funds. Reputationally, the banks who sponsored these "independent" entities could not just let them fail.
I have a simple question, one to which I think taxpayers deserve a simple answer. Will this new "limited liability company" have contingent liabilities to any parties other than the Fed, J.P. Morgan, and BlackRock for ordinary management fees? Will its portfolio consist of any positions that would make the fund a counterparty, potentially with obligations to pay, not merely rights to receive, future cash?
If the answer is no, a plain statement of that would be nice. If the answer is yes, then don't count on the "limited liability" of this investment company to provide taxpayers much protection. It's strikes me as implausible that a fund backed by the Fed would default on obligations to third parties. We've had central banks touted as lenders of last resort, market-makers of last resort, and fools of last resort. We'd better think very carefully before letting the Fed become a derivatives counterparty of last resort. The very idea represents a subsidy to those we may not wish to subsidize. There's never been such a thing as a risk-free derivatives counterparty. Every holder of a derivatives position has an implicit option to declare bankruptcy and not pay should circumstances move decisively against them. Parties who retain an option to default while the other side of the contract is taken by someone who cannot are gaining something of value, something I'm not sure we want to give.
Should counterparty risk move from a theoretical bogeyman to an actual crisis, the scale of sums at risk could be large, even on a portfolio whose current net value is only a few billion dollars, as those owing the Fed refuse to pay while Fed is obliged to cover "offsetting" positions from the public purse.
http://seekingalpha.com/article/69757-fed-s-loan-for-bear-deal-actually-a-blackrock-managed-fund
Post-petition interest to be paid to the bondholders.
Who holds a majority of the WMI debt???
"Goldman, Deutsche Bank AG, Citigroup, and Bank of America collectively hold $3.26 B of Washington Mutual Inc debt. "
That was an exact quote from a December 2nd article by Peg.
Now, tack on some juicy post-petition interest and we're looking at approximately $3.9 billion in cash that these 4 entities will receive if it is senior debt, which will mean that a large majority of WMI's cash will go to those thugs, and if it is junior debt, then these guys will essentially be the owners of the reorganized WMI as the WMI noteholders will get control of the reorganized WMI's stock as payment for their notes and post-petition interest.
Who holds a majority of the WMI debt???
"Goldman, Deutsche Bank AG, Citigroup, and Bank of America collectively hold $3.26 B of Washington Mutual Inc debt. "
That was an exact quote from a December 2nd article by Peg.
Now, tack on some juicy post-petition interest and we're looking at approximately $3.9 billion in cash that these 4 entities will receive if it is senior debt, which will mean that a large majority of WMI's cash will go to those thugs, and if it is junior debt, then these guys will essentially be the owners of the reorganized WMI as the WMI noteholders will get control of the reorganized WMI's stock as payment for their notes and post-petition interest.
The money is not bearing interest.