Countrywide (NYSE: CFC) directors and executives never did anything wrong? How can people tell? Because they say so.
The judge in a suit against the big mortgage company is not buying it. He wants a trial against the firm and its bosses to continue. According toThe New York Times, the court ruled that management "must answer shareholder accusations of insider trading and an overall failure to monitor lending practices that led to the company's collapse."
The charges are serious enough to put some of the Countrywide people in jail, but are they important enough to get Bank of America (NYSE: BAC) to back away from its purchase of the company?
The case looks pretty bad for the mortgage company, at least on the face of it. Officers and directors sold $850 million worth of shares between 2004 and 2007. Toward the end of that period, the company was buying back $2.4 billion in stock, which would tend to keep the price up.
Almost no one would be unhappy to see some of the company's management behind bars. Countrywide issued huge numbers of mortgages to subprime borrowers, which reset at higher prices after the first few years. The homeowners could not make payments and often faced foreclosures. Countrywide got paid for each one of those, a clear reason it might have been aggressive in getting in more customers.
Countrywide executives cannot pay all of those people back, but they can make them license plates from inside a big federal prison.
BAC call option volume of 42,197 contracts compares to put volume of 19,995 contracts. BAC June option implied volatility of 30 is below its 26-week average of 34 according to Track Data, suggesting decreasing price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
TheStreet.com's Jim Cramer says the guys at the top don't know what they're doing, and it shows.
AIG's (NYSE: AIG) (Cramer's Take) making everyone's life difficult today. That's in part because AIG had been the biggest proponent of "super senior," meaning they repeatedly said that their collateralized debt obligation (CDO) exposure was of the kind that was intelligent, measured and thoughtful. They talked endlessly about how their due diligence made the difference and that unlike all of the other buyers, they kicked the tires three times and never bought the plain ol' CDOs. Then they brought in professors from Wharton to be sure that even if all heck broke loose and they were being too aggressive, they would be hedged.
They also were the first to give you the percentages of how much could go bad and that even in the worst-case scenario, they were overcapitalized. And, most important, they were insurers, no need to mark to market, they can play it all out.
Plus, they touted their own struggles. They made the point that because of the turmoil at the top, they hadn't bought any bad stuff and stopped buying residential real estate products after 2005. What they did buy -- they assured us in that big teach-in dog-and-pony show in December -- was the extra-special nature of their particular buys and that, unlike everyone else, risk officers scrutinized every single piece of paper that went into their super senior insurance, meaning only the top-top part of a CDO-squared, the part where everything had to default ahead of it; they made a point of how impossible that would be.
In January, Bank of America (NYSE: BAC) made a gutsy move when it decided to purchase Countrywide Financial (NYSE: CFC). True, it would greatly expand its mortgage footprint, but it would also mean taking on lots of risk.
Of course, since then, the financials went into a swoon. In fact, the US financial system almost imploded because of the Bear Stearns (NYSE: BSC) debacle.
As a result, there is much skepticism that Bank of America will close its deal, as evident by remarks from an analyst with Friedman, Billings, Ramsey & Co. – Paul Miller – who thinks that Bank of America should forgo the deal.
His belief is that there will be a need for a whopping $30 billion writedown, which would be tough to swallow for Bank of America's shareholders.
Interestingly enough, there are already signs that Bank of America is getting skittish. Last week, the firm was not clear that it would back Countrywide's debt. The upshot was that S&P downgraded the debt to junk status.
And yes, in today's trading, Countrywide's stock is down 10% to $5.35.
Countrywide Financial (NYSE: (CFC) is recently trading at $5.42 in pre-open trading, below its close of $5.98.
Bank of America (NYSE: BAC) announced on Jan. 11, 2008 it will pay CFC shareholders 0.1822 per share of BAC for each share they own.
S&P lowered CFC debt to junk on May 2. Friedman Billings Ramsey says: "downgrading to Underperform and lowering price target to $2 (from $7). Given continued deterioration in CFC's loan book."
CFC overall option implied volatility of 74 is near its 15-week average of 77 according to Track Data, suggesting non-directional risk.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Countywide Financial (NYSE: CFC) reported a loss of $893 million for the first quarter. BloggingStocks' Peter Cohan wrote that "Fortunately, Countrywide has an exit strategy. In January, Countrywide agreed to sell itself to Bank of America (NYSE: BAC) for about $4 billion in stock. The question is whether Bank of America will pull out of the deal now that it sees the rising costs it will incur if it moves forward. Since Countrywide trades 15% below that takeout price, the market has its doubts."
But now that may be in further doubt. In a surprise move, Standard & Poor's downgraded Countrywide's debt to junk status, citing concern that Bank of America might not back the company's debt once the buyout is completed.
But some analysts say that the fact that Bank of America hasn't stood up and said it will back the debt raises questions about whether the deal can be completed at all. Friedman Billings Ramsey & Co. analyst Paul Miller said that "A lot of things have changed in the last 30 days. Home prices are still falling very rapidly and Countrywide's credit costs are getting worse from what we hear."
Shares of Countrywide fell on the initial news of the downgrade but rebounded to close down just 1.16% on the day. Still, the wide premium to the proposed takeover offer reflects a great deal of skepticism about the deal's prospects.
Bank of America (NYSE: BAC) is paying $6 million in fines to settle SEC charges that the company favored the recommendation of its own mutual funds while purporting to be offering unbiased advice. From the SEC's release on the matter, "The recommendations were supposed to be based upon an objective and unbiased research methodology that was outlined for clients and prospective clients in promotional literature and disclosures. However, in certain instances, Banc of America Investment Services and Banc of America Capital Management focused on subjective criteria in the research process, which favored Nations Funds, and resulted in increased assets under management for Banc of America Capital Management."
15,000 customer accounts were effected, and the settlement will be used to compensate those customers: an average of $400 each. The average "losses" to consumers were quite small, but there's an important principle here for investors to keep in mind: be wary of any advisor who suggests that you buy their products.
If you choose to work with a financial planner/advisor/manager, make sure it's a fee-only one, not someone paid on commission.
Better still, put together your own portfolio of low-cost index mutual funds. For a couple great examples, check out Ben Stein's model portfolios.
Analysts surveyed by Thomson Financial expect Countrywide Financial (NYSE: CFC) to post a much smaller profit for the first quarter, while Archer Daniels Midland (NYSE: ADM) is expected to report a profit gain. Both companies are scheduled to report results Tuesday morning.
Countrywide Financial is expected to earn two cents per share, which is down 97% from the same period in 2007 when it earned 72 cents per share, but that swings from a loss of 79 cents per share in the most recent quarter. However, the company tended to fall short of earnings estimates even before the credit crunch set in; that fourth-quarter loss of 79 missed estimates by 163%.
Formerly one of the top residential mortgage lenders, California-based Countrywide Financial is being bought out by Bank of America (NYSE: BAC). In the past year, Countrywide's revenues were $24 billion, and its net income is in the red to the tune of $703.5 million. Not surprisingly, the consensus recommendation of analysts remains to hold CFC.
The stock has fallen 84.9% in the past year and closed Monday at $5.83.
The Bank of America, seeking approval of its Countrywide Financial Corp. takeover, announced Monday it will modify at least $40 billion in troubled mortgages during the next two years to keep customers in their homes, Bloomberg News reported Monday.
The action could help as many as 265,000 homeowners, Liam McGee, president of the Bank of America's (NYSE: BAC) global consumer and small-business banking unit, said Monday in Los Angeles at a U.S. Federal Reserve hearing on the pending purchase, Bloomberg News reported.
``No one benefits from a foreclosed home,'' McGee told Bloomberg News. ``It is bad business for banks.''
Bank of America's shares moved 10 cents higher to $38.40 while Countrywide (NYSE: CFC) gained 7 cents to $5.91 on the news in Monday afternoon trading.
Dow Chemical (NYSE: DOW) reported a smaller-than-forecast 3% profit drop Thursday and said it would have a good second quarter. Higher feedstock and energy costs were blamed for the drop. The chemical giant reported earnings of 99 cents per share, beating the 94 cents estimate.
If two weeks ago some hoped we've seen the bottom of the subprime mortgage crisis, since then more problems, especially with European banks seem to pop. Credit Suisse (NYSE: CS) reported a wider-than-forecast loss of $2.1 billion on a $5.3 billion writeoff as the global effects of the U.S. subprime mortgage crisis continued to spread. Share of CS though are rising in premarket trading about 1.8% as the bank may have seen the worst.
Bank of America Corp. (NYSE: BAC) shareholders don't want the bank to proceed with the $4 billion acquision of Courntrywide Financial Corp. (NYSE: CFC), the mortgage lender that has become the poster child for the subprime mortgage problems. The have pleaded on Wednesday with the bank's CEO.
If the financial crisis hasn't crippled banks enough, the cost to build bank loan reserves may be just as painful, according to the Wall Street Journal's "Heard on the Street". The need for larger reserves is eating away at earnings and is showing up in first quarter reports for banks such as Bank of America Corporation (NYSE: BAC), whose results took an additional hit because of a $6B addition to its loan loss reserve.
Just four months after Journal parent Dow Jones & Co. was bought by Rupert Murdoch's News Corporation (NYSE: NWS), Wall Street Journal managing editor Marcus Brauchli is expected to resign, according to the Wall Street Journal. Journal publisher Robert Thomson may temporarily take over until a new managing editor is hired.
According to Reuters, activist shareholders in ASM International (NASDAQ: ASMI) believe, by giving more equity to top managers, that they can boost its value by $1.6B.
Royal Bank of Scotland (NYSE: RBS) made an anticipated announcement that it would raise $12 billion because of losses. According toReuters,the money is "to cover a potential 5.9 billion pound writedown on the value of toxic assets and help rebuild a stretched balance sheet."
The fact that one of Europe's largest money center banks has to raise so much capital is probably not a good sign for large U.S. banks like Citigroup (NYSE:.C) and Bank of America (NYSE:.BAC). The asset mix at RBS is likely not terribly different from most other huge financial institutions.
There have been concerns that if the housing market continues to fall and credit problems move to consumer debt and car loans that the writeoffs at banks could spike up again. Those who hoped that the worst was behind U.S. banks may well be wrong.
Douglas A. McIntyre is an editor at 247wallst.com.
Today was an odd day, with technology stocks taking the trump card and dominating most earnings reports. The NASDAQ was the strong index today, although the DJIA and the S&P tried unsuccessfully to erase most of their losses toward the closing bell today. With oil rising every day, you'd think at some point it would affect things. Not yet. Here are the unofficial closing bell prices for major US index levels:
Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) reported first quarter losses of $68.8 million, or $0.51 EPS, wider than the $49.4 million in the first quarter of 2007. Losses are credited to a drop in sales in diabetes treatment, Byetta, a drug they co-market with Eli Lilly (NYSE: LLY), and increased expenses. Analysts estimated losses of $0.47 EPS. The 52-week range is $23.75 to $53.25. Shares were down over 10% at $28.13 in the final minutes of trading today.
Private equity firm Corsair Capital and several of the banks bigger shareholders are expected to inject over $6B into Cleveland regional bank National City Corporation (NYSE: NCC), the Wall Street Journal reported.
According to sources, the Financial Times reported that Bank of America Corporation (NYSE: BAC) is planning to sell a portion of its 9% stake in China Construction Bank in order to raise capital. However, Bank of America will offset some of the share sales by exercising options it holds to buy additional stakes in the bank at levels that are now well below market rates.
The UK Telegraph reported that the BBC is talking to private equity firms to join in a bid for Virgin Media Inc's (NASDAQ: VMED) Virgin Media Television, which owns a percentage of the UKTV content business that the BBC doesn't already own.
.jpg){kind=logo}
Countrywide (NYSE: CFC) directors and executives never did anything wrong? How can people tell? Because they say so.
Bank of America
In January, 
and 
. He also operates 
Countrywide Financial is expected to earn two cents per share, which is down 97% from the same period in 2007 when it earned 72 cents per share, but that swings from a loss of 79 cents per share in the most recent quarter. However, the company tended to 
Here are some highlights from this past week's 
.gif){kind=logo}
Oil hits record $127.43 on supply concerns, raised Goldman forecast
Icahn's 'shock and awe' on Yahoo -- a gutsy play
Housing starts surprisingly rise in April on apartment construction
