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Tangent Capital Partners Senior Managing Director Chris Whalen on why despite Bank of America’s positive earnings its court case is a concern for in...
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Says that Bank of America's earnings or not the biggest issue facing the company and that the -- of the nation's second largest bank will be decided in court joining us -- ask Chris Whalen tangent capital partners.
Senior managing director we've -- tale of two banks going on today Chris can on one hand Morgan Stanley on the other hand Bank of America what is what is interesting.
Is the market reaction to the news on one hand -- -- Bank of America which came in with better than expected results not.
-- and not the case for Morgan Stanley but very different reactions explain what the market is reacting to and -- -- That the numbers are showing.
Well if you follow BankAmerica you know that the real battles in -- -- litigation is still the biggest factor on the table.
The banks for okay Merrill's OK nothing terribly exciting.
-- huge growth in prospect either if you look at the analysts' estimates.
But I think that into the stock goes down largely because it's a macro story.
Number one with the four dollars and -- -- hear those because of Greece so it's hard to say why the animal spirits are trading -- off now.
But if you compare Morgan Stanley BankAmerica clearly -- Americas has huge litigation issues.
And resolve this if -- Merrill's thirty billion by the insult.
The stock near the data we need to compare that to rallying 60% year added eight vs you know Morgan Stanley -- at 19% here really not seeing.
Those worries in those risk about you know what happened in court translate into -- into what's happening.
Market -- give but -- the common stock prices a matter of indifference to me to be honest reviews all volatility.
It has nothing to do with the company itself remember it traded to four dollars because degrees because we cute short European banks and more -- -- use stop that.
So you have to remember that these top -- top six names in the banking space or really macro story -- almost traded.
Despite what's going -- the company.
However if you are following what's going all of them the other day in their litigation BankAmerica back we're losing prime -- him may have to be deposed could let -- -- -- business.
I'll let you keep talking about and I bet you most of the audience don't understand the nuances of the but obviously.
It sounds like the sort of -- -- I mean this could not only grown BankAmerica put probably -- run wider implicate.
Since the biggest piece of -- -- country want this over a hundred billion dollars and viable claims by investors who bought mortgage backed securities issued by countrywide.
Now if it's settled tomorrow -- settle for a hundred billion dollars now it would settle for much smaller number for it but the point is the plaintiffs are winning.
-- America's been trying to buy time they -- reserved adequately.
For even a reasonable settlement number for all of this stuff so that's really the sort of damocles -- -- what I really.
-- but there's no matter what the number is Chris wood that sort of be okay.
It's over.
You know Wall Street's always more worried about things as they approach and it's been in the bills like even when that the nuclear option as the outcome we sort of get over a fairly quickly in the market in the stock rebounds to -- gives -- -- Bank of America can get through this and then start this upward trend that your money was talking about the problem.
Only if you told me how we're gonna -- claims whose people are gonna go away to not discuss say sorry we didn't mean -- they're gonna wait until we get a judgment.
By federal -- and we may see a decision in court where the judge says -- you don't wanna subtle I'm gonna give summary judgment of the plaintiffs and then you're -- of that headline.
So worse case scenario here I mean what sort how bad could it be for for bank of American and obviously for the financials as a whole because it -- it's one piece in electric.
Puzzle worst case is BankAmerica -- -- get restructured in bankruptcy.
That's worst case.
What I think could happen is something like put WR grace -- -- asbestos where you set -- -- trust.
Neutral lot of shares made -- assurances are outstanding today for BankAmerica and used up honey pot the -- -- plants.
You could also sell Merrill Lynch -- -- -- a couple of banks are not consolidated remember -- -- -- separate.
I've often said you know fossil for banks and -- IPOs -- is -- billion dollars.
They're -- console all the claims comparison -- -- the creditors.
There -- that Merrill story starting -- -- full look we're look -- ally and one here we're talking about an IPO Muller -- were part of a put to rest capital bankruptcy so we're gonna make up a month when you finality.
With this legacy mortgage issues if we wanna get housing fixed.
We've got to get BankAmerica back on its feet so it doesn't have this cloud hanging over -- We need to solely auto business back to GM and -- who's -- -- -- we're almost done.
As a -- -- at -- -- -- -- the lame duck congress do not shift a lot of very lame duck congress is -- and little unicorn on -- Nancy how we'll -- buying.
