Warren Buffett’s Berkshire Hathaway stormed back into court yesterday in a continued effort to upend the government-sanctioned reorganization of crippled mortgage lender ResCap.
The billionaire investor, having already beaten Uncle Sam by gaining court approval to name an independent examiner to probe ResCap’s pre-Chapter 11 settlements, pushed Bankruptcy Judge Martin Glenn to name his firm as the leading bidder for ResCap’s mortgage business.
Buffett failed on that account — although he forced Fortress Investment Group, run by New York hedge fund titan Wes Edens, to up its bid and cut its breakup fee.
The hearing yesterday capped a whirlwind two-day blitz of witnesses, charges and countercharges in Buffett’s full-frontal assault on the government-backed plan to rid itself of ResCap’s toxic mortgages.
The court matter also left some lawyers at the hearing scratching their heads over why Buffett — whose Berkshire conglomerate is not in the mortgage-servicing game — is making such a hard run at the ResCap reorganization.
The only position Buffett holds in ResCap is secured bonds — and he’s already assured of getting paid full face value on that paper.
Some lawyers who were in the courtroom said that Buffett might be making such an intense run at ResCap in order to undo the settlement by Ally with the insurers of ResCap’s soured mortgages.
Ally recently settled with several insurers on a batch of bad mortgages worth $8.7 billion — agreeing to pay them 4 percent of issuance, a source said.
“Ally paid so it did not have to wait years and years” to rid itself of mortgage liability, the source close to the bankruptcy said.
That 4 percent settlement, sources said, is twice as much as defunct Countrywide Financial agreed to pay to settle its toxic mortgage liability.
Buffett, lawyers said, may be looking to protect his huge stake in Wells Fargo and other banks.
Wells Fargo and the other banks have set aside about 2 percent of its toxic mortgage liability.
The lawyers, speaking on background and not on the record during the court hearing, said Wells and the other banks could have to pony up more capital if Ally’s 4 percent settlement became the yardstick for future bank settlements.
Therefore, the lawyers added, Buffett is aggressively pushing to probe ResCap’s pre-Chapter 11 deals — which includes the 4 percent settlement — possibly with an eye toward undoing the Ally settlement and re-settling it closer to 2 percent.
Berkshire Hathaway owns a leading 7.4 percent stake in Wells Fargo, worth $12 billion, and $5 billion in preferred Bank of America shares.
Buffett has personally invested an undisclosed amount in JPMorgan Chase.
In court, a Berkshire lawyer said Buffett is pushing for the examiner because he believes a lower settlement would maximize value for creditors.
Berkshire Hathaway did not return calls.
jkosman@nypost.com
Berkshire Hathaway, Berkshire, Warren Buffett, Bankruptcy Judge Martin Glenn, Fortress Investment Group, mortgage, Wells Fargo online, settlement, Wes Edens, ResCap
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