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Mortgage Settlements Decoded, AIG Thanks Government for Bailout by Considering Lawsuit

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Receiving Wide Coverage ...

B of A Settlement: "An albatross that the bank has fought hard to loosen," that's what a Washington Post article on B of A's $11.6 billion settlement with mortgage giant Fannie Mae calls the bank's acquisition of Countrywide, which has now collectively cost B of A more than $40 billion in losses. It remains unlikely that the bank's most recent related payoff will help them shake that bird entirely. According to this American Banker article, several analysts think, moving forward, B of A's mortgage woes will linger with one writing in a research note that the bank's "financial penance for legacy issues will continue." And, even if the litigation is over, the apparently accursed acquisition's already had a lasting effect on the megabank's business model. Both the Post and the Times point out that the settlement represents B of A's continued efforts to pull out of the mortgage market, since the bank was required to sell off about 20% of its already scaled back loan servicing business to pay off Fannie Mae. This retreat, of course, isn't exactly a good thing. "This is part of a broader consolidation of banks and that is something that we should all be very, very concerned about," one analyst told Dealbook. "Anything that leads to less competition can only be bad for consumers." "You have less competition, and as a result the pricing has gotten worse," another told the Post. "Mortgage rates should probably be closer to 3.25 rather than 3.5. One of the reasons they aren't is because banks aren't that competitive and don't have to be to get business."

An $8.5 Billion Mortgage Hangover Cure?: Also unclear is whether the separate $8.5 billion settlement that ten of the largest U.S. banks have entered into with regulators to end disputes over alleged foreclosure abuses will do anything to increase competition in and bolster the mortgage market. "Reducing banks' legal uncertainty could ultimately clear the way for a wave of new loans," a Journal article notes. "But soft job growth and stagnant incomes, as well as policies adopted by regulators and … Fannie Mae and Freddie Mac are crimping the availability of credit." The lingering uncertainty is unfortunate since increased lending is the primary upside of a settlement many consumer advocates and pundits view as way too low. "The settlement is a cheap out for banks like Bank of America, Wells Fargo and JPMorgan Chase," blogger Francine McKenna wrote over at Forbes. "There's no accountability, transparency or behavorial changes required at the servicers."

Adding salt to the wound is the fact that the settlement also serves as an indication that earlier efforts to help homeowners, in the form of an expensive foreclosure review process that unduly benefitted the consultants hired to conduct them, were, as this FT article notes, "flawed from the start."

Financial Times

HSBC's sale of its stake in Asian insurer Ping An may not go through after China Development Bank changed its mind about providing financing to potential buyer Thailand's Charoen Pokphand Group.

Jes Staley, "a senior lieutenant to [JPMorgan's] chief executive Jamie Dimon" has been hired by Blue Mountain, the hedge fund that brought down the bank's now infamous London Whale.

New York Times

The government may be about to learn the hard way that no good deed goes unpunished. According to this Dealbook article, court records show the board of AIG will meet on Wednesday to "consider joining a $25 billion shareholder lawsuit against the government." Yup, you read that right. The insurer, whose $182 billion bailout was a major point of contention during the financial crisis, may sue the government for depriving "shareholders of tens of billions of dollars" and violating "the Fifth Amendment, which prohibits the taking of private property for 'public use, without just compensation.'"

Add Andrew Ross Sorkin to the list of pundits who think regulators made the right call in loosening Basel III's liquidity rule. In a Dealbook op-ed that cites yesterday's BankThink column from Mayra Rodríguez Valladares, Sorkin writes, "While there is no question that the original rules would do a better job preventing the next 100-year flood in the banking system, their quick adoption most likely would have created their own drag on the economy because bank lending would most likely have been curtailed … the push for stricter rules just as the global economy is trying to nurse itself back to health, simply to satisfy the public, rather to find a solution that balances the risks to the economy and the banking system, would have been a mistake."

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Comments (1)
Government made $18B in profits off AIG bailout. The bailouts the federal government made numerous years ago, to keep some large financial firms open and to prevent additional fiscal mayhem, may have not been as bad an idea as many thought. One of the biggest bailouts was the AIG bailout, which came to almost $200 billion being lent to the institution by the working class individuals. So far, the federal government has actually made a profit on AIG, about $18 billion worth. How often have you expected more details on how to getinstant approval payday loans, and turned to an internet search on "reputable payday loan companies?" Your search is over, all of the details you will need is at http://MatchFinancial.com.
Posted by JimmyQ | Tuesday, January 14 2014 at 4:12AM ET
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