The line sbetween the 5 major banks, Federal government, Fannie/Freddie, and the Federal Reserve are blurry. The last Rob-signing settlement prevented big banks from being sued, is happening again.
Posted: 10/03/2012 4:40 pm
Eric Schneiderman’s financial crisis lawsuit against Bear Stearns and JPMorgan Chase has one thing in common with the start of the zombie movie 28 Days Later: They’re both devoid of human life.
In the New York Attorney General’s suit, no human is at risk of even being mildly embarrassed, much less going to jail or coughing up any cash, for what happened to Bear Stearns. Instead, the shareholders of JPMorgan Chase, which bought Bear Stearns at a government-sponsored fire sale in March 2008, will end up donating whatever pound of flesh Schneiderman manages to carve out of what’s left of the failed bank.
The lack of any named individuals undercuts Schneiderman’s claim that the suit is a major step toward holding Wall Street accountable for the mortgage-bond monkey business that led to the financial crisis. It sends an awful message to Wall Street: Break whatever you want, your shareholders (and the taxpayers) will pick up the tab.
Schneiderman has accused Bear Stearns of costing investors billions of dollars by selling them mortgage bonds stuffed with subprime junk. His lawsuit, for better or worse, includes many of the same allegations made last year in a private lawsuit by mortgage-insurance company Ambac Assurance Corp.
But there’s a notable difference between his suit and Ambac’s: Ambac last year attempted to name several human beings as defendants in its lawsuit, while Schneiderman names only the firms involved. Ambac’s effort to add individuals to its suit was denied by a judge, but at least it tried.
Former Bear Stearns CEO James E. “Jimmy” Cayne tops the list of people Ambac tried to add to its suit, but is not mentioned in Schneiderman’s. He was once named one of the worst CEOs in American history, leisurely playing bridge while his company went under.
But Cayne was enough on the ball to take home $388.25 million in cash and stock sales from Bear Stearns between 2000 and 2008, according to a 2009 study, entitled “The Wages of Failure,” by Harvard Law professor Lucian Bebchuk.
During that period, when the investment bank was taking increasingly bigger risks with mortgage-backed securities, Cayne and the other top four executives at Bear Stearns pocketed nearly $1.5 billion in cash bonuses and stock sales.
The other officers listed in the study include:
- Alan “Ace” Greenberg, former CEO and chairman of the board, who was chairman of the bank’s executive committee from 2001 to 2008;
- Samuel Molinaro, who was chief financial officer from 1996 to 2008 and chief operating officer from August 2007 to 2008;
- Alan Schwartz, who was co-COO from June 2001 to August 2007 and then CEO from January 2008 until the merger with JPMorgan; and
- Warren Spector, co-COO from June 2001 to August 2007.
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Proprietary OC Housing News home purchase analysis
$409,900 …….. Asking Price
$409,900 ………. Purchase Price
9/21/2012 ………. Purchase Date
$0 ………. Gross Gain (Loss)
($32,792) ………… Commissions and Costs at 8%
($32,792) ………. Net Gain (Loss)
0.0% ………. Gross Percent Change
-8.0% ………. Net Percent Change
0.0% ………… Annual Appreciation
Cost of Home Ownership
$409,900 …….. Asking Price
$14,347 ………… 3.5% Down FHA Financing
3.60% …………. Mortgage Interest Rate
30 ……………… Number of Years
$395,554 …….. Mortgage
$103,282 ………. Income Requirement
$1,798 ………… Monthly Mortgage Payment
$355 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$102 ………… Homeowners Insurance at 0.3%
$412 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
$2,668 ………. Monthly Cash Outlays
($270) ………. Tax Savings
($612) ………. Equity Hidden in Payment
$17 ………….. Lost Income to Down Payment
$122 ………….. Maintenance and Replacement Reserves
$1,926 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$5,599 ………… Furnishing and Move In at 1% + $1,500
$5,599 ………… Closing Costs at 1% + $1,500
$3,956 ………… Interest Points
$14,347 ………… Down Payment
$29,500 ………. Total Cash Costs
$29,500 ………. Emergency Cash Reserves
$59,000 ………. Total Savings Needed
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