MBIA will get a 5% stake in BoA, as well as receive a $500 million credit line. MBIA will also have no further payment obligations on any of its insurance policies held by Bank of America.In exchange, the bond insurer will drop its litigation brought against Countrywide Financial, a BoA mortgage subsidiary. Countrywide’s out of control lending of shoddy mortgages all but destroyed MBIA when the housing bubble burst. The company has already paid out $3 billion to policyholders on ‘bad’ BoA loans on some $20 billion in securities it insured and BoA allegedly ‘misrepresented’ to clients.MBIA Chief Executive Jay Brown has hailed the deal as a ‘significant milestone’.MBIA shares surged to the highest since September 2008 on the news, up 57% after the settlement news broke. BoA shares also closed up 5.2% in New York at $12.88.If MBIA didn’t settle with BoA, it would have risked running out of money within months. Previously MBIA had accused BoA of ‘dragging out’ the litigation, but on Monday, Brown said he appreciated the bank’s efforts in arriving at a fair settlement.“This comprehensive and important settlement is a very positive step forward for both Bank of America and MBIA,” Benjamin Lawsky, New York’s superintendent of financial services, said in a statement.“It resolves significant exposure and expensive litigation for Bank of America, while also giving MBIA a path forward,” said Lawsky.High stakes paybackThe 2008 crisis was the perfect financial storm, and MBIA, formally the largest bond issuer in the United States, just barely survived. Suffering from heavy losses from ‘bad’ mortgages through Countrywide and BoA, the company’s market capitalization dropped from $10 billion pre crisis to its current $2 billion valuation.After the US Federal Reserve cut interest rates to record lows, the real estate market became the driving force of the economy. Looking to capitalize on the market, investment banks, driven by short-term profits, issued too many loans to low and moderate income borrowers in 2006-2007 to people buying homes, fulfilling their ‘American dream’.Investment banks starting providing loans to keep up with demand for home purchases, but the loans proved to be harmful, because it left them with very little equity in their property. Payments were deferred, and eventually, an enormous number of homeowners defaulted on their mortgage, which left the banks, and their bond issuers, with huge liabilities.The MBIA settlement is a continuation of BoA’s marathon payouts to regain credibility within the industry. In January the lender reached an $11.6 billion settlement with government mortgage agency Fanny Mae and in April BoA settled a class-action lawsuit by investors who said they were misled by around $350 billion mortgage investments from Countrywide.Next Hurdle: NY Attorney General plans to sueThe same day it settled with MBIA , a fresh accusation against BoA came from New York Attorney General Eric Schneiderman for violating last year’s national mortgage settlement by failing to process hundreds of refinancing requests in a timely manner.Wells Fargo also allegedly did not carry out the requests on time.The Attorney General cited complaints of 210 prompt-processing violations by Wells Fargo and 129 by BoA.Last year the banks agreed to provide $25 billion in relief to homeowners to make reparations for foreclosure misconduct during the housing mortgage bubble which triggered the 2008 financial crisis. … Read More
Market Buzz: No news means cooler heads, little movement
Russian stocks closed higher on Monday, with the MICEX up 0.38 percent to 1,413.43 and the RTS adding 0.16 percent to close at 1,432.15.European markets saw minor losses on Monday: The LSE was closed for a holiday, while other major indices saw slight corrections following strong gains last week. The German DAX 30 fell 0.13 percent to 8,112.08 points in Monday trading, France’s CAC 40 slipped 0.15 percent to 3,907.04 and the Spanish Ibex 35 closed 0.48 percent lower at 8,503.8 points, with banking shares among the biggest losers.Germany will release official data on factory orders on Tuesday, May 7, and France will publish data on industrial production later in the day.US stocks traded mixed on Monday: The S&P 500 set another record-high close at 1,617.50, up 0.19 percent, the Dow Jones slipped 0.03 percent to 14,968.89, and the Nasdaq grew 0.42 percent to 3,392.97. Bank of America demonstrated strong gains on news of a major mortgage securities settlement.Asian markets saw no big drivers on Tuesday due to cooling sentiments on the better-than-expected US jobs report. Tokyo stocks have come roaring back following a four-day holiday amid strong performance in Europe and the US. Japan’s Nikkei jumped 2.6 percent to 14,083.26 for the first time since June 2008, boosted by the US jobs report. Hong Kong’s Heng Seng and the Shanghai Composite in mainland China are trading flat. South Korea’s Kospi has fallen 0.37 percent, and Australia’s S&P/ASX 200 has declined 0.3 percent.Oil is trading lower, with Brent down 0.4 percent and WTI down 0.6 percent. … Read More
April’s flaccid jobs report
We remain in the gravitational pull of the Great Recession. The Labor Department reports that 165,000 new jobs were created in April – below the average gains of 183,000 in the previous three months.We can’t achieve escape velocity. Since mid-2010, the three-month rolling average of job gains hasn’t dipped below 100,000 but has exceeded 250,000 jobs just twice.This isn’t enough to ease the backlog of at least 3 million (estimates range up to 8 million) job losses since 2007, just before the Great Recession began. (And as I’ll point out in a moment, 2007 wasn’t exactly jobs nirvana.)Moreover, most of the new jobs now being created pay less than the ones that were lost.What’s wrong?First, government is doing exactly the opposite of what it should be doing. It raised payroll taxes in January (ending the temporary tax holiday), thereby reducing the incomes of the typical family by about $1,000 this year.More damaging, government cut spending through the damnable sequester – thereby reducing overall demand for goods and services. (Direct government employment dropped another 11,000 in April.)Continue Reading… … Read More
Central banks bought record amount of gold before collapse
Central banks have bought the most gold since 1964 in 2012 just before the precious metal took a plunge on the stock market, and are now stuck with record losses and a stockpile of devalued gold.The World Gold Council reported central banks bought the most gold since 1964 in 2012 adding 534.6 metric tons to worldwide reserves, and then the price fell.The banks are now stuck with huge stocks and bear market prices: in 2013 gold has tumbled 14%.In textbook economic terms, they bought high and will most likely have to sell low.The Gold Council expects purchases of 450 to 550 tonnes in 2013.On April 12 gold entered a bear market, and plunged 9.3%, the most in 33 years. According to Bloomberg’s figures, $560 billion has been wiped from the value of gold held by central banks since September 2011, when gold reached a record-high of $1,921 an ounce.In the glory days of a bull market, governments, hedge funds, and equity funds alike stocked up on gold. Many governments are still stockpiling gold – on Thursday Russia and Kazakstan bought 5.9 metric tons of gold, which eagerly sent prices up 1.4 percent on European markets. Russia has emerged as the world’s top gold buyer. The Kremlin added 570 metric tonnes to its reserves in the past decade.The WinnersCentral banks were ransacked by the gold slump, but there have been margins of profit for other gold industry niches.Sales of gold coins by the US Mint have hit a 3 year high. As of Wednesday, sales totaled 196,500 ounces, outselling March, according to the mint’s website.Jewelers are also taking advantage of low gold prices. China, India, the US, and Australia are buying both coins and bars after futures plummeted 13 percent, hitting rock bottom on April 15th. The China Gold Associated has reported that Australian mint sales have doubled and that purchases in China have tripled.Japanese consumers are also positioned to buy gold. The yen’s decline and looming inflation may attract them to the hedge gold to provide a hedge against a wavering currency. In Japan, it may be logical to seek safety in bullion.Gold has jumped 2.73% in New York, up to $1447.00 an ounce at 9:46am EST, hitting a 10-day high. Gold’s bump has coincided with improved Sterling futures, as it has appreciated more than 1% against the dollar since London opened on Thursday.The pound strengthened the most in a month against the dollar after a report showed the UK economy nearly avoided a triple-dip recession with strong 1st quarter growth. … Read More
Putin on Boston bombings: We suffered from terrorists, whom the West called insurgents
Putin was commenting in Moscow during his annual Q&A session on the flood of comments in the US, many of them from common people, which blamed Russia, where the suspects in the bombing were born, over the crime.“Common fold in the US are not to be blamed, they don’t understand what is happening. Here I am addressing them and our citizens to say that Russia is a victim of international terrorism too,” he said.He lashed out at the double standards that spring up when terrorism is concerned.“I was always appalled when our western partners and the western media called the terrorist, who did bloody crimes in our country, ‘insurgents’, and almost never ‘terrorists’,” Putin explained.“They [the terrorists] were receiving help, informational, financial and political support. Sometimes directly and sometimes indirectly. And we were saying that we must do the job and not be content with declarations proclaiming terrorism a common threat. Those two have proved our position all too well,” he added.Putin said that Chechnya’s painful common history with Russia should not be grounds for speculation, and does not justify branding all Chechens as terrorists: “It’s not about nationality or religion. It’s about the extremist mindset of those men.”“I’m saying all this not to put the blame, but to call on bringing ourselves closer together in resisting our common threats, of which terrorism is one and more dangerous. If we truly join our efforts, we will not allow these strikes and suffer such losses,” Putin concluded. … Read More
Daily Report: Fisker Automotive Captured Imaginations but Failed to Deliver
With technical problems, management turmoil and mounting losses, Fisker offers a cautionary tale of alternative-fuel vehicles and government subsidies, Bill Vlasic reports in The New York Times. … Read More
Syrian opposition claim dozens killed in ‘massacre’ by Assad forces
According to the Syrian opposition, the number of victims of what they described as a “massacre” at the Jdeidet al-Fadel area in the country’s capital may be higher than 250, including women and children. However, it was impossible to independently verify the information.A member of the Revolution Leadership Council opposition group, Jamal al-Golani, claimed that the victims were mostly shot at close range, adding that the presence of army patrols made documenting all of the dead difficult. He said he had counted 98 corpses in the streets and 86 more people were “executed” in makeshift clinics.The alleged killings happened during and after pro-government forces stormed an area where there were up to 270 rebels, according to Golani.Another opposition activist, Abu Ahmad al-Rabi’, said that they “documented 85 summarily executed, including 28 shot in a makeshift hospital after Assad’s forces entered Jdeidet al-Fadel.”Menawhile Syria’s SANA state news agency has reported that “Armed Forces units inflicted heavy losses upon terrorists” in the town.The rights groups also released footage of the alleged aftermath of the bloodshed in the area, but it is difficult to ascertain what exactly took place, as journalists are not allowed in the area.President Assad’s government has also been involved in a war of words with the opposition and rights groups, maintaining that his forces are only interested in fighting terrorists who are being sponsored from abroad, and that massacring his own people for the sake of dominating the country is a heinous twisting of actual events.Meanwhile, Russia, one of Syria’s closest allies, has been advocating a dialogue between the president and the opposition, and has repeatedly blamed foreign powers for exacerbating the crisis and allowing Islamic extremists to flourish in the war-torn country.The Syrian uprising has been going on for two years and has killed over than 70,000 people, according to UN estimates. … Read More
