Posts Tagged ‘bailout’

One shocking aspect of the Great Mortgage Meltdown and the Bajillion Dollar Boondoggle Bailout was the fact that many of the parties that were directly responsible for the fraud, meltdown and collapse were paid off  IMMEDIATELY 100% of EVERYTHING THEY COULD EVER CLAIM TO BE OWED. No negotiation, no reduction in value, just good ole USA cuts a check to AIG, Goldman, Merrill, et. al. for 100% of their investment, to the tune of $62 Billion Dollars.

Today’s Wall Street Journal reports that the  massive payoffs were the result of a ploy by the French where they essentially floated a totally nonsense theory that their creditors had to receive their full investment back…and not one penny less…or risk jail.  According to the reports…..

The banks and the regulator, known as the Commission Bancaire, said bank executives could be criminally liable for accepting a discount on their contracts, according to a November report of the inspector general of the Troubled Asset Relief Program.

While true in the abstract, “their argument was very overstated,” said Pierre-Henri Conac, a University of Luxembourg law professor and a director of France’s oldest corporate-law review. “Banks give haircuts every day.”

Just so we’re clear, the French come up with some totally nonsense, the feds and their friends just buy right into it and US taxpayers cut a $62 billion dollar check….that’s nice work…

The Baajillioin Dollar Bailout Bonanza

Across the country more than 9 million Americans either have loans that were originated by Countrywide or which were serviced by Countrywide which had a portfolio of loans that totaled $1.5 trillion (according to Bank of America’s website) at the time Countrywide’s assets were purchased by Bank of America in an all stock deal on January 11, 2008.

Bank of America “paid” $4 billion in a stock transaction for the assets of Countrywide which at that time were valued at $208 billion.  I say “paid” because as an all stock deal which was backstopped by the taxpayers, Bank of America didn’t stroke a check as much as taxpayers actually did.  Anyway, while some value for Countrywide’s assets was given to the more than 1,000 field offices and sales force of nearly 15,000, clearly the primary asset being purchased by Bank of America was the portfolio of mortgages (many of them troubled or toxic) that Countrywide held just before Countrywide’s market value has plummeted 85 percent to $3.66 billion during the past 12 months as the lender reported its first quarterly loss in 25 years. At the time of the purchase the combined companies would handle 25 percent of U.S. mortgage originations and a 17 percent share of servicing, which involves billing and collections.  (See Wall Street Journal Article here.)

How Much Did Consumers Pay to Save Bank Of America?

Before we can determine what Bank of America paid for Countrywide assets, it’s important to remember that taxpayers paid somewhere north of a Bajillon dollars to bail out Bank of America.  God only knows what the actual cost has been thus far, but a January 2009 article in Business Week pegged the taxpayer bailout of Bank of America at $138 billion.   This bailout, when combined with all the other preferential payouts received by Bank of America in the form of taxpayer dollars in the preceeding months, represents a huge windfall BofA received at the expense of taxpayers.

So Here’s The Math:

A Bajillion Taxpayer Dollars To Buy Out Countrywide Mortgages

+

A Bajillion Taxpayer Dollars Pays Back Bank of America

=

Consumers Don’t Owe Anything on Countrywide Mortgages!

Now obviously that math isn’t quite right, but nonone really knows what kind of numbers were dealing with anymore.  The reality is if a homeowner has a $200,000 Countrywide loan on her home and Bank of America receives $100,000 in proceeds from a short sale transaction, it is clear that Bank of America would be making a net profit on that “short sale” because Bank of America didn’t pay anywhere near $100,000 for that loan.  As Wall Street annonces record profits, profits that were realized as a direct result of taxpayer intervention, it’s critically important to realize that the banks have already profited tremendously on the backs of the consumers and taxpayers who are now seeking modifications or short sales from these very institutions.  With this in mind, it’s important that we all start to re-consider what it means when we talk about a “short sale”….the truth of the matter is even the shortest payoff short sale represents a huge windfall for the institution that receives those proceeds!

Up next…..the next biggest boondoggle….OneWest purchases Indymac!

For more information visit my website at www.mattweidnerlaw.com!

Today’s headline from the Wall Street Journal…

Departing AIG Counsel Gets Millions as She Exits

the full text of the article can be found here. What’s great about this story, what’s just so fantastic is the reason she is resigning is a dispute over the huge bonuses AIG wanted to pay to their top execs.  To refresh your memory.  AIG conned millions of people and investors then lost big.  The federal government (heavily lobbied by high paid lobbyists) determined that AIG was “too big to fail” and decided to pump billions of dollars into AIG.  After the federal bailout AIG was fat and happy again (despite the fact that their poor business practices caused them to fail) and they demanded their “right” to pay the loser executives the high salaries they demanded.

Wonderful.