MBIA’s VERY Weak Response to Bank of America
- Posted by ToddSullivan
- on November 13th, 2012
This is piss-poor on a few levels…
Bank of America’s tender offer is nothing more than an outrageous attempt to improperly interfere in MBIA’s corporate affairs in order to pressure us to accept a grossly unfair settlement of our fraud and contract claims against BofA, which would disadvantage other policyholders and all of MBIA Inc.’s stakeholders. Contrary to BofA’s contention in the tender offer, it is not the Consent Solicitation that increases the risk of MBIA Insurance Corp. being placed in rehabilitation or liquidation, rather it is BofA’s own refusal to honor its obligations and its strategy of delaying the put back litigation. This reprehensible conduct is yet another example of the lengths to which BofA will go to evade its obligations to MBIA and reflects the kind of self-serving behavior that precipitated the financial crisis and required hundreds of billions of dollars in taxpayer funded bailouts.
Why is this a lousy response?
- Why did $MBI attempt to segment the debt of MBIA insurance? They did it so that if there was a liquidity event, they could protect the rest of the company AND as a kicker stick it to $BAC. This makes their actions on par with BAC’s
- Regarding “risk of a liquidity event” and who is causing it. I think there is more than enough blame to go around here. MBIA went from being essentially an insurer of municipal debt for most of it existence to an entity that decided to insure just about any mortgage loan of any type during the housing bubble. It should be noted many of the same people involved in that are still there today and those insured loans are what continue to threaten the existence of the company. Yes, $BAC sold them some steaming piles of horse dung but, as an insurance company, it was MBIA’s job to actually know what they were insuring. The point here is that there are plenty of fingers that can be pointed as to “who is to blame”
- “Delaying put back litigation” … well, isn’t that what their lawyers are supposed to do? Just because you do not like what they are legally doing does not mean it is reprehensible. BAC is not fighting to deny a cancer drug to a patient, this is a squabble between to coporations over restitution over who screwed up the most in the housing bubble.
- “…self-serving behavior that precipitated the financial crisis and required hundreds of billions of dollars in taxpayer funded bailouts” said the pot to the kettle. Seriously? Is that the best they have? Unless I am mistaken MBIA needed some opportune cash themselves and some rather “lenient” and questionable decisions from the NY State Insurance Commissioners Office to remain a viable entity. This is not the tact they want to take.
- How is offering to by debt on the open market from bond holders “improperly interfering” with MBIA’s corporate affairs? BAC is not just issuing a press release to stir thing up, they are offering to make a monetary commitment.
It would have been nice to hear why anything $BAC said about $MBI ‘s reason for the Consent Solicitation were wrong. Is BAC buying this debt helping to ensure their CDS portfolio insured by MBIA Insurance is protected or are they blowing smoke in saying so? That is was not even addressed can only mean the statements behind their actions are legitimate. It is very telling that they attacked the action and not the reasoning behind the action. This is more akin to a tantrum on a corporate level than a reasoned objection to statements made by BAC today.
To see more posts on any of the companies mentioned in this article, enter their stock ticker symbol in the search box.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Todd's investing strategy is essentially long with the rare short. He seeks to buy undervalued issues with an upcoming catalyst that will help them realized.... More »
aapl acas ackman aig AN bac BAM BBI bgp BPO buffett CC CODi davidson dow einhorn employment ETFC f fairx FNMA fnmas ggp gse hhc housing IGOI jcp jmba joe mbi mcd MO oesx oil rail sbux seth klarman SHLD spg spy theory trade VIC xom