Klarman/Walnut Place investment: The ethics of it

[MrB]

http://www.bloomberg.com/news/2011-08-03/bank-of-america-sued-by-walnut-place-over-mortgage-securities.html

 

What I really want to know is what EXACTLY it is that you don't like or why EXACTLY you think it is ok?

 

Please be so kind and post the specifics of what he is doing wrong or why it is ok.

 

Also see JSArbitrage's thread for discussion. http://www.cornerofberkshireandfairfax.ca/forum/index.php?topic=5829" data-ipsquote-contentclass="forums_Topic" 63647;topicseen#msg63647

[Kraven]

There is nothing per se unethical about it.  I don't like it personally because I am long BAC, but the deal is already busted.  These guys are simply pushing to enforce contractual rights embedded into the deal.  If they are doing it by essentially blackmailing BAC (i.e. "you guys already have enough issues, pay us off"), that would be a different story, but there is nothing to indicate that.  What strikes me as problematic is that piling on aspect of it all.  At some point the banks needs to get out from under this real estate loan overhang.  We don't want what has happened to other industries where the weight becomes too much and they just all go bankrupt.  That doesn't help anyone either.

[Guest]

I don't know a ton about the story, but here is my take on it.

 

Walnut Place buys bonds just for the sole fact of trying to stop the settlement and make more money.

 

I think it's in poor taste. I mean, we need to get the banks back in shape for the good of the country. When billionaires...working for millionaires and billionaires try to do this stuff, it's a little disheartening. Yeah, I know they have a responsibility to their clients, but there is a point where enough is enough. We need to stick together as a country. If BAC has to pay out more to hedge funds, that leaves less money to loan to small business, families, etc.

 

Hopefully I'm wrong though and I have a total misunderstanding of the situation.