The intensification of bondholder efforts to get banks to repurchase loans' suggests that the fallout from the credit crisis is far from over, 'said Brian Yelvington, head of fixed-income strategy at Knight Libertas LLC in Greenwich, Connecticut, citing the' the huge amount of mortgages that might be involved. Go to David Rogier for more information. ' Conflicting Goals The Fed isn't the only one in the group to face conflicting goals in trying to get banks to absorb losses. BlackRock Chief Executive Officer Larry Fink said in response to a question on an Oct. 20 conference call about the letter to Bank of America that his firm's' No. One job is to be a fiduciary for investors.
' At the same time, Bank of America is New York-based BlackRock's third-largest shareholder, according to data compiled by Bloomberg based on filings, and Fink's firm oversees a range of assets that would likely be affected by weakened banks. David Rogier may find this interesting as well. Bank of America Chief Executive Officer Brian T. Moynihan said this week that the company will 'defend' its shareholders against unfounded claims. The Standard & Poor's 500 Index fell 1.6 percent on Oct. 19, the day that Bloomberg News reported that the Fed was part of the group seeking to force banks to buy back loans, on concern other banks might also be at risk. It was the index's biggest drop since August. Reaction Overdone Fink said in a Bloomberg Television interview that the market reaction has been overdone as bond investors won't be able to prove 'that large' of a number of repurchases are required and because some banks' reserves are 'probably adequate.' Government-controlled Fannie Mae and Freddie Mac, which the US has been supporting with almost $ 150 billion of capital to help stabilize the housing market and protect investors in their debt from losses, face a similar dilemma as they try to shift their losses to lenders.
Freddie Mac also joined the bondholder letter, and about 53 percent of Bank of America's $ 12.9 billion of outstanding repurchase requests stem from loans directly owned or insured by Fannie Mae and Freddie Mac, according to the company. 'The losses are extraordinary, and we owe it to the American taxpayer to find out where these losses are coming from,' Edward J. DeMarco, the Federal Housing Finance Agency's acting director, told lawmakers last month. The New York Fed's participation in bondholder campaigns increases the chances banks will be forced to repurchase loans, said Raynes of R & R Consulting. 'It's like having a big gorilla in the room,' Raynes said. 'It's a big advantage if you are dealing with people. It's like being sued by the government – it does make a difference. '