Now that it's been a very long 10 weeks since the article 78 hearing concluded, I've been trying to understand what's taking Judge Kapnick so long. Then today I thought, aha! Maybe she has little or no intention of issuing a ruling whatsoever, because she's staying in tune with Judge Bransten, and over in Bransten's jurisdiction, possibly B of A and MBI are indeed getting quite close to a settlement. Further, that as part of that settlement, MBI has insisted that B of A withdraw their action in the article 78 hearing, thus negating the need for Kapnick to stick her neck out and issue a decision. Or possibly the imminent settlement by B of A is so monetarily significant that the question of MBIA's ability to pay claims as a split company becomes a moot point.
There could be a major flaw in this thought if in fact Kapnick is required by law to render a decision even if plaintiffs belatedly try to withdraw.
Any opinions on this from legal scholars out there?
Soc! Yes excellent points! I'm sure that BoA is scarred out of thier wits about the data that MBIA has. AIG would love to have it to help in their fight. They wrote a letter asking Branstein to release it.
Another reason why they will settle soon is why Morgan Stanley did. MS said they settled because of the tougher accounting rules that go into effect in 2013.
It is best for both of them to settle up and move on!
Alison Frankel tweeted the judge was on vacation for two weeks (1 more to go). Maybe she told the lawyers before she left that she would like it settled.
We are coming to one of the many inflection points where settlement is more likely. On the amount... BOA reportedly already offered $3 billion (search Bloomberg)and Jay Brown said he wants all his money back. He is entitled because CW committed fraud and BOA is now not honoring the contract. The Judges know contract law very well.
MBIA contractually should get all their money back plus penalties.
If you read Fairholme fund Bruce reports the value this way.. $10 per share book, $20 per share of reversals of CDO, plus 1/2 of the recoveries of the $35 spent to date. His low estimate of book is $45 a share. If they get the entire $35 back that is $65 a share. (BOA also said that losses on monolines could exceed $5 billion over the $1.5 bill reserved)
Option market appears that settlement is soon. Using deductive logic there are a couple of points to consider. 1) BOA is being critized for not resolving these issues, 2) Recent letter from BOA attorney's saying that Banks need to reserve more for Monoline cases (telegraph to prepare), 3) recent Bloomberg article on how BOA and GSE discussions have become productive, 4) Schneiderman statment he wanted settled prior to Judge rulling on 78, 5) Jay Brown statement he wants all his money back, 6) Judge Crotty rulling in the Synacora/JPM case, 7) consistent winning of all major rullings by monolines, 8)in the background and not discussed is the OCC regulators hate these unknowns. 9) BOA has to protect the $8.5 billion settlement and cannot have the information that MBIA has to be released or a rulling by Judge Branstein on Successor liability.
BOA probably has entire amount reserved in legal reserves..regulators would demand this. So no hit to bottom line. BOA might have a hit to capital by reserving the insurance that MBIA provides. Consider this... BOA has paid down $175 billion in debt in the past two years... They can easly afford the payment to MBIA.
If it does settle soon it could be a year of positive events for MBIA. More recoveries from RESCAP, perhaps settlement from UBS, division into 3 companies, credit upgrades, and resumption for new business.
Exciting times might be coming soon!
dont forget that NY interest on damages is 9%, and damages accrue from date of breach...>4 years compunded annually. that has to make the negotiation even more testy.
as well, after having gone through >10 commutations, mbia knows exactly what they think bac is due on the securit. side; bac is influenced by their carrying value.
i think the unseal motion has to concern bac. last we heard from bransten, she was "ticked" at bac lawyers.
She bigger fish to fry. She is working on the $8.5 billion case of investors vs. BAC.
Ever write a 50 or a 100 page paper where every statement/footnote is scrutinized in excruciating detail by some of the best attorneys in the world?
She is not in tune with Judge Bransten. Kapnick hopes they will settle and she might drag her feet a little but writing an opinion like that isn't easy. The more time she takes the more likely she will rule in State's favor as it would be easy to pick a few issues if she wanted to reverse the restructuring and just ignore all the other issues. Too bad, but that is the way things go.
I do think the Article 77 is on her mind though. She won't want to be seen as a patsy for the banks or unfair as she does genuinely care about justice and the law.