Sunday, October 23, 2011

Sunday School Teacher/Church Band Singer Leaves Banksters Terrified After Squeezing BofA For $8.5B; Once Told Them To 'Take Their Money & Shove It!'

Forbes reports:

  • The biggest private legal settlement in the history of Wall Street was a few sentences away from death. In early June a ­little-known Texas lawyer named Kathy Patrick was putting the final touches on her carefully crafted $8.5 billion deal with Bank of America over so-called mortgage put-backs, when she got a last-minute demand from the other side.

  • Sitting in her Houston office, Patrick learned that BofA wanted her clients—a clutch of the world’s most important investment firms, including BlackRock and Pimco—to promise they would not go after the bank with separate claims over the same mortgage pools.

  • No way, she answered. As far as Patrick was concerned, she had made clear such a release was not on the table. Some of her clients had already filed securities claims against Bank of America. “It’s not every day that you write a letter to someone,” the 51-year-old says, “and tell them to take their $8.5 billion and shove it.”

  • Bank of America’s gambit turned out to be a bluff. On June 29 the nation’s largest bank announced it had struck the second-biggest legal settlement in American history, trailing only the 1998 tobacco master settlement. Three weeks later BofA reported an $8.8 billion quarterly loss, the start of a long and difficult summer in Charlotte.

  • Rather than celebrate a career-capping victory, Patrick viewed it a different way: round one. And that has Wall Street terrified right now.

  • Publicly the financial industry and the White House are dancing around a potential $20 billion settlement being forced on the nation’s biggest banks by state attorneys general over improper foreclosure practices.

  • Quietly and without fanfare, Patrick and her 23 bondholding giants—one of the most powerful investor groups ever assembled for litigation—are gearing up for something big: a painful new reckoning for the mortgage-lending debacle, with most of Wall Street’s big banks in her crosshairs.

  • This group did not come together just to deal with Bank of America. They came together because they wanted a comprehensive industrywide strategy and an industrywide solution,” Patrick tells FORBES. “They started with Bank of America because they thought they could achieve a template that they could extend to other institutions.”

  • The new sheriff of Wall Street, a private-sector Eliot Spitzer described by a peer as “the toughest lawyer you will see,” works out of an unassuming 33-lawyer Houston firm. She teaches Bible study on Sundays and sings in her church band, while raising two teenage boys with her husband. And backed by the biggest investors in bum mortgage-backed securities, she has a mandate to lay siege.

  • Who else has ever gotten $8.5 billion out of anyone? Go find a settlement where anybody in history got $8.5 billion in a private settlement,” says Jason Kravitt, a lawyer who represented Bank of New York Mellon in the Bank of America settlement talks. “She manages to be sufficiently aggressive and constructive with the right combination of threats and creativity.”

For more, see Wall Street's New Nightmare: The Next Wave Of Mortgage-Backed Securities Claims.

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