Tuesday, May 17, 2011

Duck, Duck, GOOSE!

Hedge-fund manager David Tepper [above] can't dump his Bank of America stock fast enough. In 2011's first quarter, his Appaloosa Management fund (according to its latest 13-F filed with the SEC) sold nearly 8 million shares of BAC, trimming its stake by almost a third. Appaloosa now holds 17.2 million shares, or 15 million fewer than what it had on January 1, 2010.

Meanwhile, super-investor John Paulson [above] sloughed off almost a quarter-million shares of BAC in Q1, after jettisoning over 27 million shares in 2010. Mega-super-investor George Soros [below] got rid of 1.2 million shares in Q1, leaving him with a small residual of 29,400 shares, which apparently no one wanted. Since September 30, twenty-five hedge funds have exited BAC completely.

MainePERS, going its own way, is holding tough at 2.5 million shares. But recent headlines about Bank of America suggest that Tepper, Paulson, Soros et al. are right to bail and that MainePERS should be following suit. The Huffington Post reports that BofA is one of five mortgage companies audited by the federal Department of Housing and Urban Development and accused of defrauding taxpayers while foreclosing on homes purchased with government-backed loans. According to HuffPost:

"The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents."

Bank of America got the inspector general's first-ever Foot-Dragging Award for failing to remediate its foreclosure practices even after announcing a temporary moratorium on foreclosures last October to clean up its act.

Over the weekend, Gretchen Morgenson of the New York Times reported on an investigation by an arm of the U.S. Justice Department that, despite the cartel's stonewalling, has gathered extensive evidence of the abusive loan-servicing practices of Bank of America, among others. An official in the the United States Trustee Program, which monitors the bankruptcy system, cites the industry-wide imposition of improper and inflated default servicing fees, including charges for legal work, property inspections, insurance, and appraisals. The same official estimates that the error rate may well be ten times higher than what has been represented in sworn testimony to Congress by the banksters.

Bank of America's stock price has retraced most of its year-end Santa Claus rally [below]. Unfortunately, MainePERS forgot to redeem its gift card.

BAC share price ($)

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