Buffett invested 5 Billion in B of A after Fannie Mae (AKA the Feds) took huge amounts of dud mortgages off of the troubled bank's balance sheet - and paid them half a billion to boot. More importantly, the value of the dud assets has not been disclosed. Thus a bankrupt Fannie took money from the Feds to take (undisclosed) bad assets from a tottering B of A and then magically, two weeks later, BH swoops in to pick up $5 Bills worth of now more attractive B of A paper.
What did the Feds tell Buffett that they haven't told the rest of us? More here.
Given Bank of America’s recent struggles—its stock has fallen 55 percent from the beginning of 2011 to its lowest point last month—it has had a not-so-clandestine need for capital and confidence. Warren Buffett’s $5 billion capital injection to this end was a much-discussed event in August. The Treasury Department’s $500 million-plus capital injection via Fannie Mae two weeks before the Oracle of Omaha got back in the bank saving game was not.
The secrecy is a problem, particular given the absurdity of Fannie Mae—which itself needed a $5.1 billion bailout just two months ago—bringing more liabilities onto its balance sheet.
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