Thomson Reuters News & Insight.
A federal judge said on Thursday that shareholders can proceed with a lawsuit accusingGoldman Sachs Group Inc of concealing conflicts of interest in several collateralized debt obligation transactions, the fallout from which caused Goldman’s stock price to drop.
The lawsuit in Manhattan federal court consolidates claims from Goldman shareholders who said the firm failed to disclose it was betting against its clients by taking short positions in four CDO transactions it sold to investors.
U.S. District Judge Paul Crotty ruled that investors could proceed with claims that Goldman should have disclosed those positions to clients, as well as hedge fund Paulson & Co’s alleged role in hand-picking risky subprime mortgages that went into one of the CDOs, known as Abacus.
According to the complaint, Goldman’s actions caused its shares to trade at inflated levels. The shares fell 12.8 percent on April 16, wiping out more than $12 billion of value, after the SEC filed a civil fraud lawsuit against Goldman over the Abacus CDO. Goldman settled the lawsuit for $550 million.
The wheels of litigation move slowly, but there are a couple of recent securitization fail litigation decisions that are worthy of note. First, in the Congress case, a wrongful foreclosure action in Alabama (see my previous blogging on it here), the Alabama appellate court reversed and remanded, a victory for the homeowner. The reversal and remand was on a rather narrow ground, namely that the trial court applied too demanding a standard when evaluating the homeowner’s argument that the allonge in the case had been fabricated. Yet this means that this securitization fail case is still alive. It’s also interesting to see how suspicious some courts have become about mysteriously appearing allonges and the like.
The motion judge’s decision on the preliminary injunction does not consider the question of Green Tree’s (or MERS’s) authority to act on behalf of BankUnited or an assignee of BankUnited in initiating foreclosure proceedings, and our examination of the Superior Court record suggests that this issue was not raised below. In the circumstances, we conclude that Eaton’s allegation on information and belief that Green Tree was not authorized by the note holder to carry out the foreclosure sale did not offer an adequate factual basis to support the preliminary injunction that was issued. Consequently, the order granting the preliminary injunction must be vacated. On remand, Eaton may renew her request for a preliminary injunction, and in that context seek to show that she has a reasonable likelihood of establishing that, at the time of the foreclosure sale, Green Tree neither held the note nor acted on behalf of the note holder. [FN29]
In re Jolley ::: Secret FDIC & JPMorgan Chase Bank 118 Page Purchase and Assumption Agreement for Washington Mutual Bank Uncovered.
Taken From The Sworn Testimony of Jeffrey Thorne Currently I am employed as an asset manager for the FDIC . . . When Washington Mutual failed, I was involved in the takeover of Washington Mutual by FDIC . . . Pursuant to the public part of the agreement with the FDIC, of which were approximately 39 pages, the balance of the contract and the complete agreement with the FDIC and Chase bank is 118 pages long which has not been made public.
How 500 people saved a 78-year-old widow from losing her home.
Mary Cate Jones can finally rest easy in the home she built with her late husband 56 years ago. For the past two months, the 78-year-old widow has been heartbroken, packing up her Strawberry Plains, Tenn., house that had been foreclosed on, ABC News reports. After Jones’s mortgage was sold a number of times, she wasn’t sure where she was supposed to send her payments and she fell behind on her bills. She then learned via a local paper that the deed for her house had been sold and she would need $72,000 to avoid eviction.
Moodys cuts ratings of big banks including BofA, Chase.
UPDATED 6:23 p.m. EDT: NEW YORK — Moody’s Investors Service lowered the credit ratings of 15 of the world’s largest banks late Thursday, including Bank of America, JPMorgan Chase and Goldman Sachs, saying their long-term prospects for profitability and growth are shrinking.
The ratings agency said it was especially concerned about banks with significant financial markets businesses because those markets have become so volatile. Some of the largest European banks were also downgraded, including Barclays, Deutsche Bank and HSBC.
The downgrades mean Moody’s is more concerned about the ability of the banks to repay their debts. Moody’s had said in February that it was considering downgrading the credit ratings of major banks in the U.S. and in Europe