Please do NOT watch this if you are offended by raw language or crude caricatures. (Sorry I’m a couple of weeks behind with this – I just saw it.)


Well, not so much. Click here . . .

On Wednesday, John McCain’s home state Arizona Republic did some good excavation work in the ongoing demolition of the GOP nominee’s maverick myth. Analyzing his Senate voting record since 1999, the paper found McCain rarely strayed from the Republican Party line. But that’s only a small part of the unraveling of the McCain maverick fable. As I previously detailed, John McCain in his eternal quest for the GOP nomination has repeatedly reversed long-held positions and compromised core principles to curry favor with right-wing Republican primary voters.

As the Republic details, when the going got tough, McCain got in line. When it mattered most in the closest votes, Senator McCain since 1999 sided with his GOP colleagues. . . .


Troy Cassel: ‘In addition to Ctrl+, you can also hold down Ctrl and use the trackball on the mouse to adjust the size of the text. It also works in Outlook, Word, Adobe Reader and various other programs.’


So now the company is being sued on behalf of disgruntled shareholders (which I assume includes all of us), but I’m not so sure there’s much to it.

I asked my FMD guru – a somewhat rueful sobriquet by this time – who responded:

My gut wrenches every time I think about FMD….for so many reasons….

But as to the lawsuit:

The complaint alleges that during the Class Period, defendants (being the corporation and selected members of the management team) issued materially false and misleading statements that misrepresented and failed to disclose: (a) that the loans underlying the Company’s bonds were experiencing increasing default rates; (b) that the guarantor of those loans – TERI – did not have the money to buy all of the loans that were in default; (c) that the Company lacked adequate internal and financial controls; and (d) that as a result of the foregoing, banks would look elsewhere to package their loans, which would have a negative impact on First Marblehead’s business and operations.

Based on what I know and interpret, (a), (b), and (d) appear to be without merit. On (a), I cannot recall or identify any instance when the company misrepresented the credit performance on their book of business… the collateral damage caused by the subprime mortgage meltdown has caught almost all lenders by surprise and rendered many highly sophisticated underwriting and performance management tools ineffective; (b) the deterioration of loan guarantors is not specific to FMD, and the coverage ratios set aside should have been more than adequate to cover historical performance thresholds; (d) the primary cause of FMD’s current troubles is the seizing up of the securitization markets, and the inability of client banks to move their assets off balance sheet – symptoms shared by almost all players in the private student loan space (and most other asset classes that rely on securitization for liquidity).

(C) may or may not be true, and will require an extensive review of the company’s internal control structures and processes.

☞ If the lawsuit is successful and there’s any cash to be had, those of us who held the stock during the time period covered in the suit may get a few pennies whether we still hold the stock (as I do) or not.

I do think that students will continue to go to college and that some of them will need to borrow beyond the limits of government-sponsored loans. So there may be a business here yet. But there is certainly the possibility FMD will not survive. So if you never bought FMD – thank heavens. And if you buy a few shares now, down nearly 95% from its peak, only do so with money you can truly afford to lose, because you may.


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