Friday, November 16, 2012

Victims of the crisis

"Two villains in the financial crisis — whose negligence, or worse, caused untold suffering when the property bubble burst — are fighting it out. They are battling in the courts, and now in the bond market, where lucky owners of one bond issued by a company that may yet go broke are being offered the chance to cash out at par value. Lawyers are cleaning up.The only people who don’t seem to be doing very well are those who are most deserving: the victims of the crisis.
Countrywide, which Bank of America later acquired, sold mortgage loans to securitizations and paid MBIA for insurance. 

The battle being fought on the most fronts is between Bank of America — the bank that made the critical mistake of acquiring Countrywide Financial, once the country’s largest mortgage lender — and MBIA, the troubled monoline insurer that now warns it may not be able to keep paying claims on structured finance securities unless the bank pays it billions for the sins of Countrywide. 

The insurance claims that could well tilt MBIA into bankruptcy are likely to be made by Merrill Lynch, which Bank of America acquired during the financial crisis, not long after it bought Countrywide. Kenneth D. Lewis, the bank’s chief executive then, will go down in history as the Ado Annie of Wall Street, after the character in the musical “Oklahoma” who sang, “I always say ‘Come on, let’s go!’ just when I ought to say nix.”

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