Fed's `Pit Bull' Takes on Bank of America in BuyBack Battle

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Fed’s `Pit Bull’ Takes on Bank of America in BuyBack Battle

Fed’s `Pit Bull’ Takes on Bank of America in BuyBack Battle

By Thom Weidlich, Laurel Brubaker Calkins and Jody Shenn – Oct 26, 2010 12:01 AM ET

Kathy D. Patrick is a Houston lawyer who spends her Sundays teaching children about God. The rest of the week, according to one attorney who knows her, she can be “as frightening as a pit bull on steroids.”

That’s bad news for issuers of mortgage-backed securities like Bank of America Corp. Patrick represents bond investors including the Federal Reserve Bank of New York and BlackRock Inc. who are seeking to force the bank to buy back bad home loans, claiming the debt failed to match contractual promises about its quality.

Her law firm, Gibbs & Bruns LLP, is a 30-lawyer outfit that says it specializes in “bet the company” litigation. This month, it reached a settlement with JPMorgan Chase & Co. and Bank of Montreal stemming from an alleged fraud at a Canadian gold company. Earlier this year, Goldman Sachs Group Inc. and UBS AG settled with the firm over the sale of $550 million in mortgage-backed securities. Patrick reached that settlement on behalf of her clients just two months after filing suit.

Patrick, 50, is “fearless and tenacious,” said Dan Cogdell, a Houston criminal-defense lawyer who said she is capable of pit bull-like aggressiveness “if the need be.” If she succeeds in getting Bank of America to settle, it may trigger more calls for buybacks in the $1.4 trillion market for so-called non-agency mortgage securities, which lack government backing.

Bank costs from repurchasing mortgages in such securities may total as much as $179.2 billion, including expenses related to suits against bond underwriters, Chris Gamaitoni, a Compass Point Research and Trading LLC analyst, estimated in August.

$1.73 Billion

In June 2009, Patrick got Credit Suisse Group AG and Deutsche Bank AG to agree to pay $1.73 billion to end litigation over their decision to back out of the leveraged buyout of Huntsman Corp. Her firm is suing Zurich-based Credit Suisse as bond underwriter for a now-defunct Ohio company that sold securities based on health-care providers’ unpaid bills.

“She has a deep understanding of the banking process and the constraints, motivations and incentives of the banking industry,” said Harry M. Reasoner, a partner at Vinson & Elkins LLP in Houston, who also represented Huntsman.

In the fight against Charlotte, North Carolina-based Bank of America, Patrick represents the biggest bond investors in the U.S., including Pacific Investment Management Co., which runs the world’s biggest bond fund.

$47 Billion

On Oct. 18, she wrote Bank of America and Bank of New York Mellon Corp., the trustee for $47 billion of bonds created by Bank of America’s Countrywide Financial unit. In the letter, she accused Countrywide of failing to service the home loans properly. Her clients want Bank of America, which bought Countrywide in 2008, to take back some of the underlying loans, and are questioning its servicing as a way to broaden their legal options, Patrick said the next day.

“We continue to review and assess the letter, and have a number of questions about its content, including whether these investors have standing to bring these claims,” Bank of America Chief Financial Officer Charles H. Noski said Oct. 19 on a conference call with analysts. “We continue to believe the servicer is in compliance with the servicing obligations.”

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2 Responses to “Fed’s `Pit Bull’ Takes on Bank of America in BuyBack Battle”

  1. J Glenn Lowe says:

    EVERYONE TELL OBAMA TO CRASH THE BIG BANKS NOW!

    Big Wall Street Banksters created the Foreclose Economy because they are that greedy and “Too Big to Care” about the American Dream and basic Contract Law. It was done by design and with treasonous and willful intent strictly for power and profit.

    The Illegal Securitized Mortgages that became the death blow to our economy actually bet on the foreclosure of the homeowner for as much as a 30 times return on investment. This is true financial terrorism. It is actually better for the investor to foreclose than to help someone stay in their home.

    Want to know how easy it is to fix this problem? Crash all of the Big Banks now and fund local banks only that serve to enrich local economies only. Look at the example of the state owned banks in North Dakota, whose population has only a 4% unemployment rate.

    The Fed and their complicit banks must be abolished to save the Republic!

    It’s the only thing we can do. CRASH THE BIG BANKS NOW “Too Big Too Fail” apparently means “Too Big To Succeed” and “Too Big for their own Wallets”

    The sooner the better. Why don’t we ask a 3rd grade math student what he thinks? The real problem is that a politician who could do something about it has his own mathematical challenges about healthy economies. “Bite the hand that feeds him” (by indicting Banksters), or make millions putting children in the streets for power and profit.

    Apparently ALL politicians are going to make the same choice over and over again. They have always sold the souls of your children and their future and they always will. Take the big Banksters out of the picture. Build a local banking system that cares about its community and helps it thrive instead of sucking the life out of it by bribing and fixing the entire system for itself, taking us all of a cliff with it.

    Crash all the big banks now. Create new local Banks only = No more Wall Street Banksters.

    Problem Solved!

    J Glenn Lowe

    Die Banker Die – A Tribute to the Wall Street Banksters that suck the life from all of us and our economy just to get a nice Christmas Bonus – http://www.youtube.com/watch?v=YGFZ1Jj3ui8

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