April 19, 2010

TD has bought three failed US banks:

Toronto-Dominion added $3.1 billion in deposits to the $117 billion it holds in two other U.S. lenders, according to a company statement. The lender picked up 69 branches in yesterday’s purchases, bringing its total in Florida to 100.

Toronto-Dominion, which has about 1,000 U.S. branches, has spent more than $15 billion over five years buying Portland, Maine-based TD Banknorth and Cherry Hill, New Jersey-based Commerce Bancorp.

The Toronto-based lender acquired the Florida assets and deposits of Clement-based AmericanFirst Bank, First Federal Bank of North Florida in Palatka and Riverside National Bank of Florida of Fort Pierce.

The FDIC press release states:

As of December 31, 2009, AmericanFirst Bank had total assets of $90.5 million and total deposits of $81.9 million; First Federal Bank of North Florida had total assets of $393.3 million and total deposits of $324.2 million; and Riverside National Bank of Florida had total assets of $3.42 billion and total deposits of $2.76 billion. Besides assuming all the deposits from the three Florida institutions, TD Bank, N.A. will purchase virtually all their assets.

The FDIC and TD Bank, N.A. entered into a loss-share transaction on $2.20 billion of the failed institutions’ assets. Initially, TD Bank, N.A. and the FDIC will share in the losses on assets on a 50% – 50% basis.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for AmericanFirst Bank will be $10.5 million; for First Federal Bank of North Florida, $6.0 million; and for Riverside National Bank of Florida, 491.8 million.

DBRS comments:

This transaction has limited downside credit risk as there is a loss-sharing agreement in place (FDIC has a share in 50% of the loan losses up to certain thresholds and then 80% in excess of those thresholds). It also has no material impact on earnings and a minimal impact on capital. DBRS notes that TD purchased $3.8 billion in assets, including $2.1 billion in loss-covered loans, and assumed $3.1 billion in deposits.

Stories in Saturday’s Globe by Derek DeCloet and Boyd Erman failed to include any of the Goldman’s four critical points highlighted here on April 16. I guess reporting what the defendant has to say isn’t really exciting news.

Scribd has the marketting material, which shows that Goldman Sachs is the protection buyer; it would be expected in the normal course of events that this would be laid off to clients, rather than retained by the firm. The more I learn about this transaction, the more convinced I am that the SEC charges are a load of hooey. ACA, as the selection agent, can only buy what others want to sell. If there was any malfeasance, it has to be because ACA did not exercise due diligence in its purchases; not because they bought stuff from Goldman’s menu of available instruments without knowing who wrote the menu. ACA, by the way, did not have a meaningful track-record as PMs for this type of deal.

I mean, hey! If I’m running the Very Big Preferred Share Fund and I need to buy 100,000 PerpetualDiscounts to get my allocations where I want them, and I call Friendly Brokers Inc. to find some for me, and they do and it’s executed as a cross …. does it really matter to me who the client on the other side of the cross was? If the shares’ issuer goes bankrupt tomorrow, is the broker really liable because the seller was the Very Smart Preferred Share Fund and they didn’t tell me that because it was none of my business? Really?

Basically, what the SEC is saying in this lawsuit is that “Me too!” constitutes due diligence and safe harbour for Portfolio Managers.

But it’s all just politics:

“We must pass Wall Street reform to bring practices like these into the light of day and protect our economy,” Senate Banking Committee Chairman Christopher Dodd, the Connecticut Democrat who wrote the bill, said in a statement.

Senate Majority Leader Harry Reid, a Nevada Democrat, said the Goldman Sachs case reinforces the need to “pass strong Wall Street reform this year,” and urged Republicans to “stop obstructing our efforts to hold Wall Street accountable.”


President Barack Obama’s political advisers are trying to harness the government’s case against Goldman Sachs Group Inc. to build support for a financial- markets overhaul pending in Congress.

A Google Inc. search of “Goldman Sachs SEC” yields an advertisement entitled “Help Change Wall Street” that is sponsored by Organizing for America, Obama’s official political arm outside the White House.

“Help Pres. Obama Reform Wall Street and Create Jobs,” the ad says. “Families First!”


The U.S. Securities and Exchange Commission split 3-2 along party lines to approve an enforcement case against Goldman Sachs Group Inc., according to two people with knowledge of the vote.

SEC Chairman Mary Schapiro sided with Democrats Luis Aguilar and Elisse Walter to approve the case, said the people, who declined to be identified because the vote wasn’t public. Republican commissioners Kathleen Casey and Troy Paredes voted against suing, the person said.

You know what I figure? I figure it’s the whole David Berry thing all over again. They spent untold hours, untold millions of dollars trying to nail the firm – and the best they could come up with is THAT? The guys at Goldman must be saints.

One commenter has suggested:

To make matters worse, Goldman Sachs is circling the wagons around Fabrice Tourre which I believe is a big mistake. The company should have simply issued a press release saying:

Goldman Sachs does not comment on any current litigation and will address any issues in court proceedings.

In addition, Goldman Sachs could have said that:

The company takes any allegations of impropriety seriously and is placing Fabrice Tourre on leave pending the outcome of the SEC litigation.

In any company, especially a company that is the size of Goldman Sachs, there are always some employees who bend the rules or break the law and end up getting a company in legal trouble. By circling the wagons around Fabrice Tourre, Goldman Sachs raised the ante from a single employee issue involving a certain corporate transaction to a corporate wide issue involving the entire company. A very dumb move!

In other words, that Mr. Tourre should be assumed guilty and thrown to the wolves; that management should not stand up for their staff in times of trouble. Let’s just say that I’m glad I don’t work for that blogger!

But the smarminess is spreading:

Prime Minister Gordon Brown today called for the Financial Services Authority to start an investigation, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.

Goldman has other problems: the EU wants to scapegoat them for Greece:

providing swaps to the Greek government to help reduce its budget deficit will be “profound and thorough,” EU Monetary Affairs Commissioner Olli Rehn said.

The investigation relates to “our relationship with Goldman Sachs,” Rehn said at a press conference in Madrid today after a meeting of EU finance chiefs and central bankers. “I have asked the Ecofin and Eurostat to conduct a profound and thorough investigation in which the Greek authorities are very well cooperating.”

As discussed on March 1, Eurostat explicitly endorsed the type of transaction Goldman facilitated (note the word “facilitated”, and note that they owed no duty to either Eurostat or the EU) at the time.

There was a bit of a switch in the preferred share market today, with PerpetualDiscounts losing 5bp, while FixedResets lost 19bp to take the median weighted average yield on the latter index up above 4%, territory last traversed in November 2009. Volume was down a bit from the peaks, but remains elevated (FixedResets dominating), while price volatility remains muted.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 2.59 % 2.67 % 55,218 20.90 1 0.0000 % 2,137.6
FixedFloater 4.93 % 3.00 % 49,069 20.40 1 0.1817 % 3,245.3
Floater 1.91 % 1.65 % 47,251 23.45 4 -0.1571 % 2,420.3
OpRet 4.90 % 3.53 % 97,630 1.08 10 -0.1790 % 2,306.1
SplitShare 6.35 % 2.43 % 139,177 0.08 2 -0.0219 % 2,149.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1790 % 2,108.7
Perpetual-Premium 5.87 % 4.77 % 31,633 15.87 2 0.0203 % 1,837.3
Perpetual-Discount 6.15 % 6.19 % 199,873 13.63 76 -0.0484 % 1,730.5
FixedReset 5.45 % 4.03 % 491,056 3.64 44 -0.1903 % 2,164.9
Performance Highlights
Issue Index Change Notes
PWF.PR.O Perpetual-Discount -1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 22.58
Evaluated at bid price : 22.70
Bid-YTW : 6.42 %
NA.PR.N FixedReset -1.41 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-09-14
Maturity Price : 25.00
Evaluated at bid price : 25.79
Bid-YTW : 4.24 %
PWF.PR.E Perpetual-Discount -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 21.60
Evaluated at bid price : 21.60
Bid-YTW : 6.40 %
GWO.PR.L Perpetual-Discount -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 22.91
Evaluated at bid price : 23.05
Bid-YTW : 6.19 %
MFC.PR.B Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 19.09
Evaluated at bid price : 19.09
Bid-YTW : 6.17 %
HSB.PR.C Perpetual-Discount 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 6.23 %
Volume Highlights
Issue Index Shares
RY.PR.T FixedReset 320,960 RBC crossed blocks of 250,000 and 14,400, both at 27.65. Desjardins bought 13,500 from anonymous at 27.65; National crossed 20,000 at 27.69.
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.65
Bid-YTW : 3.92 %
TD.PR.C FixedReset 105,564 RBC crossed 39,500 at 26.45; Nesbitt bought 19,600 from TD at the same price. RBC crossed 38,800 at the same price again.
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.37
Bid-YTW : 4.03 %
TD.PR.O Perpetual-Discount 83,919 National crossed 25,000 at 20.41.
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 20.33
Evaluated at bid price : 20.33
Bid-YTW : 6.00 %
RY.PR.Y FixedReset 78,500 Nesbitt crossed 30,000 at 27.50; anonymous crossed (?) 19,500 at the same price.
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 27.45
Bid-YTW : 4.07 %
RY.PR.X FixedReset 69,923 Nesbitt crossed 50,000 at 27.65.
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.64
Bid-YTW : 3.95 %
RY.PR.R FixedReset 63,828 Nebitt bought 11,900 from anonymous at 27.51; Desjardins crossed 30,300 at the same price.
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 27.50
Bid-YTW : 3.84 %
There were 45 other index-included issues trading in excess of 10,000 shares.

One Response to “April 19, 2010”

  1. […] Gee, and I thought it was all Goldman Sachs’ fault, as mocked 2010-4-19. […]

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