PIMCO, NY Fed Pressuring BofA to Repurchase Dud Mortgages (Empty Threats Edition)

As dramatic as this headline sounds, there is much less here than meets the eye. In addition, either the article that discussed this development is confused, or the underlying legal pressure is not well framed.

First, let’s get to the report, which certainly sounds serious. BusinessWeek reports that PIMCO, BlackRock, and the New York Fed are pushing Bank of America to repurchase the delinquent mortgages underlying $47 billion of bonds:

Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit.

Note several things before we go any further: first, this is NOT litigation, it’s a mere nastygram. Second, this is almost certain to be a new strategy in a effort mounted by an investor group (presumably now identified to turn up the heat on BofA) which so far has gotten nowhere. An unidentified group tried pressuring the trustee of a similar amount of bonds to direct the repurchase of loans gone bad. The trustee said it wasn’t going to do anything. So now the same line is being tried on the servicer, Countrywiide, this time alleging that it is Countrywide’s responsibility to buy back the loans.

http://www.nakedcapitalism.com/2010/10/pimco-ny-fed-pressuring-bofa-to-repurchase-dud-mortgages-empty-threats-edition.html

BOA owns a fair chunk of Black Rock, $11 billion worth. Black Rock owns $6 billion of BOA. How nice of them. Brings the term kissing cousins to mind.

And PIMCO has been buying MBS by the truck load recently.

What's it all mean?

Resolution Trust? TARP 2011?

Here's hoping you don't bank at BOA.

In the distance, I hear the sound of a giant squid praying softly: Bless us and our daily bread.

Amen.

What's that in CDS's?

$40 billion?

$1.6 trillion with 2% cash?

A $3.2 trillion repo with a side order of fries?

No worries. When, Ben's your uncle.:rofl:

figures are in 1M