Anonymous writes:
...do I smell bacon...?
Anonymous | 05.19.08 - 5:37 pm | #

Shnaps writes:
hold the gorgonzola, already!
Shnaps | Homepage | 05.19.08 - 5:38 pm | #

Shnaps writes:
This sooooo makes my day. Did you find this yourself? If not, a hat tip is seriously in order!
Shnaps | Homepage | 05.19.08 - 5:43 pm | #

Tanta writes:
This sooooo makes my day. Did you find this yourself?

I am happy to have brought some light and joy into your existence.

In fact, it was just in the gazillion MarketWatch emails I get. Mostly I ignore the PRs, but oh! serendipity! I actually clicked on this one.

I'd really like to know what allegation (i) means. Really, I would. DSL "concealed" "millions" in subprime securities in a whole-loan portfolio? And how, do you suppose, did these intrepid attorneys ferret that out?
Tanta | 05.19.08 - 5:47 pm | #

DEC writes:
Geeze..........you'd think they could at least understand the basics of the business before they start drafting complaints.

Can't wait to see the meat of (iv). I think we all want to know what "real underwriting" is.
DEC | 05.19.08 - 5:56 pm | #

barkingtribe writes:
Yikes..where did these guys lerned??...had seen Countrywide's growth and had started to get more aggressive...forgot to mention me thinks, ...had doned got greedy.
barkingtribe | 05.19.08 - 5:58 pm | #

Elvis writes:
(vi) Prior to the Class Period referred to in (ii), Downey was seen in the mens bathroom writing graffiti on the mirrors, smoking, and bullying members of the freshman class all while failing to insure that no doc loans contained true and verifiable statements of income.
Elvis | 05.19.08 - 6:00 pm | #

lama writes:
"And how, do you suppose, did these intrepid attorneys ferret that out?"
Tanta | 05.19.08 - 5:47 pm

I'll guess they are repeating what disgruntled ex-employees told them. In many situations, failure to drink the Koolaide is grounds for termination. (just like Jonestown, BTW)
lama | 05.19.08 - 6:04 pm | #

gab writes:
Well written or not, screw 'em!
gab | 05.19.08 - 6:05 pm | #

KnotRP writes:
Spent the weekend cleaning up a family rental home, for sale, post grandparent death. Lake/golf community in the sierra foothills. 35 homes for sale currently; one or two sell per month (lately), at discount to list, and usually on a deep water cove or other nicety. Almost nothing moving.

At current home prices (not what the family paid originally to build it several decades ago, but what a buyer would have to pay), the net rental profit yield looks like an intermediate term treasury note, but with the hassles of renting it. These prices simply don't make sense, from a buyer standpoint. I suggest my cousin take the next "low ball" knife catcher who has approved financing. I suspect it's already too late, and that the price will drop to a point where the family should just retain it and continue to rent it, rather than sell.

This leads me to believe that "homes for sale" might very well dry up just around the point where they become economically viable compared to rents.
I know there is a price where I would tell my cousin to just re-rent it.

Interesting times.
KnotRP | 05.19.08 - 6:09 pm | #

daveNYC writes:
Given the degree of stupid we've seen so far, I wouldn't be shocked to discover an email saying "Lets get really aggressive with these things. Don't bother with the underwriting, we can fake it later."
daveNYC | 05.19.08 - 6:09 pm | #

Berserker writes:
Time for the lawyers full employment act of 2008.
Berserker | 05.19.08 - 6:12 pm | #

Ethan writes:
Unlike most state courts where one has to plead "ultimate facts" showing the cause of action, under the Federal Rules of Civil Procedure one uses "Notice Pleading" where all the pleader has to do is plead enough to give "notice" of what he is complaining about.

I have no idea if this pleader reached that standard, but it is pretty easy to do. Usually, a plaintiff pleads that the naughty defendant failed to comply with thus and so statute and then copies in the operative language of the statute.

Anyway, federal discovery is a massive undertaking and usually brings to light whatever the plaintiff suspects was wrong with the defendants actions -- sort of a "where there's smoke" process.
Ethan | 05.19.08 - 6:12 pm | #

Lee writes:
Tanta, I get the feeling you do not like lawyers. As a lawyer myself, I'm hurt. Not that your wrong. I am confused however by "I can't wait to find out what the evidentiary standard is for (ii)." That's a factual allegation, not a cause of action. It will either be proven true or untrue during discovery.

By the way, the sentence "the Complaint alleges that defendants concealed the following:... (ii) prior to the Class Period, Downey had seen Countrywide's growth and had started to get more aggressive in acquiring loans from brokers such that the loans were extremely risky;..." doesn't make grammatical sense.
Lee | 05.19.08 - 6:19 pm | #

ottnott writes:
Tanta - the firms that file these suits draw these up very quickly (less than 36 hours after the Downey press release).

The goal of the immediate response is not to demonstrate merit. It is for marketing purposes (to prospective plaintiffs) and to stake out the broad areas that might eventually be pursued in the case.

If they don't get a big response from aggrieved shareholders, and if the claims don't appear to have any traction after further investigation, the suit will disappear without any press release.

All of which suppports, rather than discredits your criticism of the claims.
ottnott | 05.19.08 - 6:22 pm | #

Elvis writes:
(vii) Downey engaged in silly, and often goofy ways, when constructing its mortgage portfolio.
Elvis | 05.19.08 - 6:22 pm | #

Tanta writes:
Tanta, I get the feeling you do not like lawyers.

Some of our very best blog friends are lawyers. I figured they'd get a chuckle out of this one.

So it's a factual allegation that DSL saw Countrywide's growth? Yeah, but so did I. So did everybody else. The Tanned One kept going on CNBC; there can't be anyone who didn't see Countrywide's growth.

Are they just trying to work the dreaded C-word into the complaint, or do they intend to try to prove that DSL wasn't "aggressive" until it looked over at Angelo's answers and decided to copy?
Tanta | 05.19.08 - 6:23 pm | #

albrt writes:
The standard for proving envy of Countrywide is clear and convincing evidence.
albrt | 05.19.08 - 6:25 pm | #

quartz writes:
I wonder how much an hour someone got paid to draft that nearly incoherent gibberish? I must be in the wrong job.
quartz | 05.19.08 - 6:25 pm | #

ottnott writes:
(viii) Elvis, while claiming to be dead, concealed by his own admission that he was living among the undead.
ottnott | 05.19.08 - 6:25 pm | #

Tanta writes:
The standard for proving envy of Countrywide is clear and convincing evidence.

Like what? Somebody wore a wire in a staff meeting in which somebody said, "Dang nabbit, that Countrywide is STILL 1500 times our size! We're gonna have to get AGGRESSIVE, boys!"
Tanta | 05.19.08 - 6:26 pm | #

Elvis writes:
(ix) Ottnott, while standing in the mirror, revealed his scandalous secret that he was the Lone Ranger's sidekick making the insurance claim on his life insurance policy by his widow, Wauqs, appear fraudulent.
Elvis | 05.19.08 - 6:31 pm | #

SR writes:
Okay, I just clicked through the links and scanned the complaint. A few things worth pointing out.

1. The firm that issued the press release is NOT the firm that filed the complaint.

2. The firm that issued the press release is looking for potential class members so that they can possibly join the lawsuit.

3. The actual complaint is inartfully drafted (and arguably done so by someone with a poor understanding of the relevant issues, but I will reserve judgment since I just scanned it). But it is only when paragraphs of the complaint are cut-and-pasted into the press release that it takes on the truly horrendous legalese-meets-caveman tone.

4. I personally frown on class actions that accuse corporate management of screwing up (See threatened Yahoo shareholder suits for backing out of Microsoft buyout). But those cases are pretty tough to prove as management is pretty well insulated by the Business Judgment Rule.

Fraud, OTOH, is something that needs to be actively ferreted out in order to preserve the integrity of the market. What idiot would invest in any company if management could lie about a company's financials, siphon off corporate assets, and engage in insider trading, all with impunity?

I have no idea whether Downey is guilty of fraud, although circumstantial evidence suggests that there was rampant fraud throughout the industry during this time.
SR | 05.19.08 - 6:41 pm | #

Average Joe writes:
"Class Action Salad"

That is awesome.

What takes longer, to write and post, or to think up the perfect title?

I love this site.
Average Joe | 05.19.08 - 6:44 pm | #

Elvis writes:
That poor Downey. Just when he kicks the drug habit and has a mega successful movie out, he gets hit with these awful mortgage allegations.
Elvis | 05.19.08 - 6:47 pm | #

Malaclypse writes:
"What idiot would invest in any company if management could lie about a company's financials, siphon off corporate assets, and engage in insider trading, all with impunity?"

I suppose that all depends on what the Wright Model B is predicting.
Malaclypse | 05.19.08 - 6:58 pm | #

Shnapster writes:
I'd really like to know if this was written by a bot as some sort of Turing test/prank for Ubernerds.
Shnapster | Homepage | 05.19.08 - 7:03 pm | #

Average Joe writes:
Citigroup curbs 'near prime' lending in UK

By Jane Croft, Retail Banking Correspondent
Monday May 19 2008 17:00
Citigroup (NYSE:C) is to stop offering some new UK mortgages and personal loans to customers who have a patchy credit record in a move that could threaten 700 British jobs.

In other news a man who cut all ten of his fingers off decided to stop cutting his fingers off.
Average Joe | 05.19.08 - 7:08 pm | #

Elvis writes:
"In other news a man who cut all ten of his fingers off decided to stop cutting his fingers off."

He then proceeded to cut off his nose to spite his face for resembling the Queen Mother.
Elvis | 05.19.08 - 7:13 pm | #

Lawyerliz writes:
This is the funniest thread in a long time.

Harrah for all of you and CR and Tanta too!!

A new cause of action or possible psychological problem: Countrywide-envy!!
Lawyerliz | 05.19.08 - 7:30 pm | #

jim 94121 writes:
cut his own fingers off? I thought it was from catching the Falling Knife.
jim 94121 | 05.19.08 - 7:31 pm | #

anon writes:
Carefull Tanta,

Downey is now likely to subpoena you as an expert witness in their defense.
anon | 05.19.08 - 7:49 pm | #

El Cliffo writes:
Guiltied!
El Cliffo | 05.19.08 - 7:56 pm | #

albrt writes:
Circumstantial evidence is fine, as long as it is clear and convincing.

For example, a 2004 photo of Marangal "Marito" Domingo at a party holding up two fingers behind Mozilo's head would be evidence of envy. You get a picture of Rosenthal doing the same thing a few months later and I would think you've got yourself a pretty good case on envy.
albrt | 05.19.08 - 7:57 pm | #

Anonymous writes:
Re: "salad"
The food price index of the U.N. Food and Agriculture Organisation rose by 9 percent in 2006 and 23 percent in 2007. As of March this year, wheat and maize prices were 130 and 30 percent higher than a year earlier. Rice prices have more than doubled since late January.

A new briefing this week by the U.N. Economic and Social Council says that the poor, especially in urban areas but also the rural landless and small farmers who are net food buyers, have been most vulnerable to food price hikes, as a very high proportion of their household income is spent on food.

However, "Even within rich countries, increasingly large portions of the population are having real problems bringing food to the table and paying for other basic necessities," Garcia-Delgado said.
Anonymous | 05.19.08 - 8:06 pm | #

Anonymous writes:
Is anyone else balls itching?
Anonymous | 05.19.08 - 8:20 pm | #

swampfella writes:
Methinks this is the old "throw enough shit at the wall, maybe some will stick" strategy.
swampfella | 05.19.08 - 8:33 pm | #

wawawa writes:
Rats. I covered my shorts too early. I shorted DSL from $55 and covered at $21, that is OK, do not be greedy :)
wawawa | Homepage | 05.19.08 - 8:44 pm | #

Angry Renter.com writes:
OT-- Times Are Tough, Except in the Repo Business

“I oversaturated myself with long-term debt,” he said. “It was a risk, a calculated risk. I obviously lost.”

http://www.nytimes.com/2008/05/ 2...agewanted=print
Angry Renter.com | Homepage | 05.19.08 - 9:02 pm | #

rich writes:
OT

There's great stats posted here every day. But lately, I find myself not focusing on economic statistics as much and on another question more.

To understand this question, it pays to read Kevin Phillips' article about the Polyanna creep in how the U.S. govt. has gradually manipulated statistics over time.

http://www.tampabay.com/news/ art...ticle473596.ece

What if GDP really has been growing by 1% over the past decade instead of 3%?

What is CPI really has averaged 7-8% instead of 2-3%?

In that case, a lot of things start to make sense. Why consumers suddenly seem so overstretched. Why corporate profits hit the wall and ran out of gas. Why Greenspan had to create the bubble. Why the U.S. govt. and most state/local govts. really are bankrupt, right now.

There's so much great debate on CR about the meaning of statistics.

But what stats are real? If any.
rich | 05.19.08 - 9:14 pm | #

rich writes:
Kevin Philips' article in Harpers' also would explain why oil has spiked so sharply. If you are an oil exporter and began to doubt that U.S. economic statistics are real, then you would be less willing to trade your commodity for dollars. Because you would begin to doubt that dollars are stores of value.

If American wage-earners and consumers start to doubt that the statistics are real, it will be much worse. I think that soon they will.
rich | 05.19.08 - 9:18 pm | #

Bob Dobbs writes:
"If American wage-earners and consumers start to doubt that the statistics are real, it will be much worse. I think that soon they will."

Pay no attention to the man behind the curtain!
Bob Dobbs | Homepage | 05.19.08 - 9:27 pm | #

mack writes:
rich- that's a great comment. i wondered around 2000 if this was true and that whether we were expanding the money supply through debt via low rates as a way to push money into the system and the "great moderation" was just MZM expansion w/ rights attached (debt).

as a degree-d but non-practicing economist (thankfully i'm out of rotten tomato range from everyone:)), it's been in the back of my mind to do a research study into whether zero/negative REAL interest rates correlated to de-facto money supply expansion causing a delayed inflationary effect on commodities (b/c it wasn't non-sterilized printing), but, I'll put that off til retirement, I guess.

Anyway, good point. Sorry, Tanta, we're getting OT...again.

PS- did a quick scan of the heavy CRE local, regional banks here in the Atlanta MSA yesterday. Average deposit liability for brokered deposits looks around 30-35%. Not sure where that puts them, but it seems strangely consistent (via FDIC).
mack | 05.19.08 - 10:14 pm | #

sdtfs writes:
Good night Tanta!
sdtfs | 05.19.08 - 10:19 pm | #

sdtfs writes:
rich's post reeks of paranoia. The government wouldn't lie to the US public, that would be wrong. However, it is incumbent upon them to only as much truth as the public can handle,...wouldn't want to start a panic. So rest assured we have your best interests at heart. Oooops, I mean they have you best interests.

Damn it! Close that curtain!
sdtfs | 05.19.08 - 10:30 pm | #

gamma writes:
so I'm reading that the housing bailout plan that Dodd ihas put forward is going to be financed by profits (??????) from FNM and FRE. Hmmm, last I checked they weren't making any money...

bwahahahahahha
gamma | 05.19.08 - 10:31 pm | #

sdtfs writes:
bwahahahahahha
gamma | 05.19.08 - 10:31 pm

I'm not sure why you're laughing. Unless you've got your treasure where thieves cannot break in or moth and rust corrupt not, they can reach from DC to assess that portion of profit that they think you should have given to FRE and FNM and yank it out of your hand. The arm of the law may be long, but the fingers of the IRS are stickier.
sdtfs | 05.19.08 - 10:43 pm | #

rich writes:
>The government wouldn't lie to the US public, that would be wrong.

Kevin Philips' argument is that the govt. never did actually lie or blatently manipulate statistics. It just did a little fudging here and there. And like little lies, the little twists of statistics got baked in and had to be covered up with more.

I felt that a lot of the corporate earnings from about 2005-07 weren't real of sustainabale. They were a series or tricks played by many companies on the borderlines of the rules.

When people talk about a second half 08 turnaround, you think they're talking about earnings?

I doubt earnings will turn around. We'll see.
rich | 05.19.08 - 10:56 pm | #

hs writes:
rich:
You might be interested in John Williams work at www.shadowstats.com where he takes apart the inflation and unemployment figures and shows the effects of different statistical fudge factors over time. Some of the site is by fee, but there is a lot of free information, too.
hs | 05.19.08 - 10:57 pm | #

Anonymous writes:
Back in the '80's, when ketchup officially became a vegetable for 'accounting purposes' (basically) -- that's when it first dawned on me that our government might play fast & loose with the facts. . .
Anonymous | 05.19.08 - 11:09 pm | #

sdtfs writes:
the govt. never did actually lie or blatently manipulate statistics.


Yup, the quintessential slippery slope. Except that I think that all along the way the decision makers knew that it was wrong but they had plausible denialability, after all, they're trained to look at these things. I am firmly in that Tin Foil Hat/Conspiracy Everywhere group,...except I'm less excitable than most.
sdtfs | 05.19.08 - 11:13 pm | #

FinanceGuy writes:
albrt

As I am sure you are aware Marito Domingo actually was employed by Countrywide after leaving Downey. Reverse envy?

He joined Downey from Washington Mutual. The last I had heard he was at Doral. I think the only observation that I would make is to short the stocks of his former and current employer....
FinanceGuy | 05.19.08 - 11:22 pm | #

barely writes:
dubya still talkin' tough. But so was Shelby, the pansy lender shill, until today. Figured Shelby would fold up. When you're in their hip pocket it pays to talk tough and do the exact opposite. Makes you look like a tough defender of J6P so you get to tilt the table another day.

http://news.yahoo.com/s/ap/20080...go_pr_wh/ bush_3
barely | 05.20.08 - 12:00 am | #

probert writes:
Tanta, nice find...LoL...must be some heavy drinkers in the class-action lawyer circle
probert | 05.20.08 - 12:33 am | #

byzantine_ruins writes:
I can't wait to find out what the evidentiary standard is for (ii).

Given that we live in the world of "Death Star" and "Dr. Evil" trades, there's probably a memo that says this explicitly somewhere.
byzantine_ruins | Homepage | 05.20.08 - 7:32 am | #

El Goyo writes:
Class Action / Ass Smaction, who cares? The important fact is that my DSLTD puts are up 112%. Burn baby burn.
El Goyo | 05.20.08 - 12:45 pm | #

BG writes:
"The important fact is that my DSLTD puts are up 112%. Burn baby burn."

I like the way you think, man. :)
BG | 05.20.08 - 12:58 pm | #

Tim B. writes:
Under the 1995 PSLRA (Private Securities Litigation Reform Act) discovery is stayed in securities class actions until after the motion to dismiss is decided.

In California (the Ninth Circuit) to survive a motion to dismiss, plaintiffs must allege facts showing that each statement made by defendants was false.

And more difficult, plaintiffs must allege facts showing that each false statement was either known by defendants to be false at the time it was made, or how defendants were extremely reckless in not knowing their statements were false when made.

These are tough hurdles to climb.
Tim B. | 05.20.08 - 4:42 pm | #