Daily Archives: September 12, 2012

CFPB: Consumer complaints coming faster and faster

Complaints about mortgages, credit cards and other financial products are still rising at the Consumer Financial Protection Bureau.

CFPB Director Richard Cordray will tell the Senate Banking Committee Thursday the bureau received nearly 72,300 such complaints as of Sept. 3.

That’s up more than 30% from 55,300 reported through June.

Nearly half of these complaints concern mortgages.

“The pace of complaints has been increasing over the past year,” Cordray said in his prepared written testimony.

Read on.

RBC prices first SEC-registered covered bond for U.S. investors

The Royal Bank of Canada ($56.77 -0.59%) priced the first-ever covered bond backed by mortgages for U.S. investors.

The $2.5 billion offering carries a coupon of 1.2%, according to a bank spokesperson.

RBC received a “no-action” letter from the Securities and Exchange Commission in May allowing it to register its covered bond program with the agency.

The bank previously could, but the RBC covered bond guarantor, which will guarantee payments of interest and principal on the offering, previously could not, which is why a “no-action” letter was needed.

Read on.

Whistleblower Is Key to New York AG Tax Probe on Private Equity Firms

New York state Attorney General Eric Schneiderman’s probe of tax practices at private-equity firms is based on information from a whistleblower, according to a person familiar with the matter.

The information came from someone who approached Mr. Schneiderman’s office between roughly nine months and a year ago, this person said. Under the state’s False Claims Act, the attorney general can investigate alleged fraud against the state based on a whistleblower’s allegations.

The ongoing probe is examining whether partners at private-equity firms changed management fees into investment income to delay and pay less taxes—or avoid taxes altogether. Some private-equity firms use so-called management-fee conversions, while other firms avoid them.

If Mr. Schneiderman files a lawsuit and wins, defendants could be liable for damages of as much as three times the taxes owed. It isn’t clear when he will decide whether or not to proceed with a lawsuit.

At least two other whistleblower claims related to management-fee conversions have been filed with the Internal Revenue Service, which has the authority to pay whistleblowers up to 30% of proceeds collected in large cases. Such whistleblower cases usually take four to seven years to resolve.

Read on.

BofA & Wells Fargo Must Turn Over Iranian Funds

(CN) – Two U.S. banks must turn over $364,500 to benefit terrorist victims trying to collect on a $591 million judgment against Iran, a federal judge ruled.
Before the judgment holders can collect, however, the court in Washington said it will first consider third-party interpleader claims so that the banks can protect themselves from multiple claims on the same funds.
“This court is under no illusions that the path ahead will be much easier for victims than it has been in the past,” Chief U.S. District Judge Royce Lamberth wrote.
He noted that the relatively small assets at stake represent less than one-tenth of 1 percent of the funds to which the plaintiffs are entitled under the Foreign Sovereign Immunities Act (FSIA).
“This tiny sum is dwarfed by even greater magnitudes when compared to the endless suffering of these victims,” Lamberth wrote.
Iran owes this group more than half a billion dollars for the 1996 bombing of Khobar Towers, a U.S. Air Force housing complex in Dhahran, Saudi Arabia. Hundreds died in the Hezbollah attack, which Iran had sponsored, and 19 military personnel were killed.
The current case against Bank of America and Wells Fargo represents the plaintiffs’ second phase of “the often-frustrating and always-arduous path shared by countless victims of state-sponsored terrorism attempting to enforce FSIA judgments,” Lamberth wrote.

Read more from Courthouse News.

Here is the court document.

Madrid inject 6 billion in assistance funds to banks

Translated in English:

 It’s done. The Spanish Treasury has injected Wednesday, September 12  6 billion euros in public funds help the banking sector , the FROB – an advance on EU aid to a maximum of 100 billion promised to the country’s banks . “From In this way, the FROB acquires additional financial capacity to fulfill its mission “ , said the fund said in a statement.

The Treasury launched Monday a syndicated issue (through a direct agreement with banks) to raise this amount through six-month bills and bonds at seven and eight years. The operation, which spend maximum capacity of FROB 9 to 15 billion euros, was included in a decree adopted by the government in February but had hitherto not been launched.

South Florida homeowner has $570,100 mortgage forgiven by bank

A client of Wellington foreclosure defense attorney Malcom Harrison may have cringed when he saw the Bank of America envelope in his mailbox. Instead, he’s more than half-a-million dollars out of debt.

The company, as part of the $25 billion agreement with the state attorneys general, is cancelling $570,100 in second mortgage debt the homeowner owed.

“You are approved for a full principal forgiveness of your Home Equity Account,” the Sept. 8 letter says in bold print.

Although the homeowner’s foreclosure will continue on the first mortgage, the second account will be reported as paid and closed, according to the letter.

Read on.

Too Much Protection for Derivatives in Bankruptcy

I have written before about my opinions regarding the “safe harbors” in the bankruptcy code.  These are the provisions that exempt derivatives and repo contracts from the automatic stay, the prohibition on termination of contracts with the debtor, the prohibition on constructively fraudulent transfers and the prohibition on obtaining preferential treatment on the eve of bankruptcy.

In general, I think the current safe harbors are too broad and amount to little more than a subsidy to the derivatives industry. Similar provisions protect “securities contracts,” and open up the argument that any transaction that occurs in the general vicinity of a broker-dealer is immune from the normal rules of bankruptcy.

Maybe Congress wants to subsidize the industry, but it probably should stop pretending that these provisions are vital to protect mom, apple pie and the American economy from systemic risk. You could do that with narrower provisions, as I have shown.

My latest concern with regard to the safe harbors is not so much the statutory provisions, but the role that courts have come to play in expanding the provisions beyond their already broad statutory language.

Read on.

Jamie Dimon likes banks just the size they are, thank you very much

NY Times:

During a question-and-answer session with Jason Goldberg, a Barclays analyst, Mr. Dimon responded to questions about things like his stance on the mounting turmoil in Europe and regulatory changes, in particular the Volcker Rule, which restricts banks from trading with their own money.

Mr. Dimon has long been a vocal opposition of some of the regulation being hammered out in Washington, although some lawmakers have seized on the trading losses to push their case for a stronger oversight of the banks.

Mr. Goldberg started by asking Mr. Dimon about the rationale behind shaking up the upper echelons of JPMorgan’s executive suite in July.

“It had nothing to do with the chief investment office,” Mr. Dimon said.

He added that  “there is nothing mystical, folks,” because the moves enabled greater cross-selling. “Cross-selling is a big deal, and we do an exceptionally good job,” he said. “If you reimagine the business from the bottom up, it’s a consumer business.”

Part of his management decisions, which elevated a stable of younger executives, was an effort to “make sure we have a generation trained for other big jobs in the company,” he said.

Tackling the issue of whether the big banks should be broken up, Mr. Goldberg asked Mr. Dimon about recent calls to break up the major banks. Sanford I. Weill, the former chief executive of Citigroup and once Mr. Dimon’s boss, rocked Wall Street when he suggested in July that the big banks should be broken up.

“There are huge benefits to size,” Mr. Dimon said. He noted that JPMorgan’s size allowed it to be “a port in the storm” during the market turmoil of 2008. “Big banks have a function in society.”