Isaac Gradman: Investor End Games: All Is Not Well in the Garden


Isaac Gradman: Investor End Games: All Is Not Well in the Garden

Isaac Gradman: Investor End Games: All Is Not Well in the Garden

“As long as the roots are not severed, all is well. And all will be well in the garden.”

– Chance the Gardener, Being There (1979)

The Subprime Shakeout-

With Judge Barbara Kapnick announcing earlier this month that the approval hearing in Bank of New York Mellon’s (BNYM) proposed $8.5 billion Article 77 settlement over Countrywide bonds will take place in May 2013, this next year will be truly one of reckoning for mortgage investors and the U.S. mortgage market as a whole.  Though Her Honor’s proposed timetable may be a bit ambitious, what is clear is that the window of opportunity for investors be made whole for the toxic waste they were sold is finite and rapidly shrinking.

In the case of Countrywide, the end game will depend on the evidence that objecting investors can uncover prior to the approval hearing that might demonstrate that BNYM was conflicted or that its assumptions were unreasonable, both of which would suggest that the settlement number is too low.  For example, the Steering Committee of objecting investors has now sought to intervene in MBIA v. Countrywide to persuade Judge Bransten to remove Countrywide’s confidentiality designations from evidence that MBIA will be presenting to support its summary judgment motions.  Should these documents become public, they would not only encourage Bank of America to settle its 4-year battle with the bond insurer, but they would provide objecting investors in the separate Article 77 action with evidence that might undermine Bank of New York’s assumptions that BofA could ring fence Countrywide.


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