Exclusive: Libor Bosses To Require Financial Services Authority Nod

The managers of traders who set Libor and other benchmark interest rates will have to be formally authorised by financial regulators and subjected to tough new sanctions for malpractice, according to a Government-commissioned review of the rate-rigging scandal.

I can reveal that Martin Wheatley, whose three-month probe into the Libor-setting framework will be published on Friday, is to order urgent reform that will involve the Financial Services Authority (FSA) approving hundreds of City executives to undertake their work.

The recommendation will be one of dozens outlined in Mr Wheatley’s report, which comes as regulators around the world continue to investigate some of the world’s largest banks for their roles in one of its biggest-ever trading scandals.

I also understand that Mr Wheatley will outline a series of tough new sanctions for those found guilty of attempting to manipulate benchmark interest rates, and that the Libor name and framework will not be scrapped, as some had suggested.

The requirement for managers of Libor-setters to be formally authorised by the FSA and its successor body is designed to underline the need for accountability in the rate-setting process. Mr Wheatley is understood to have held discussions about the reform with a number of other regulators around the world.

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Former FDIC head Sheila Bair: ‘Covering up for Citigroup’s problems’ drove much of the bailout (video)

Sheila Bair, former chairwoman of the Federal Deposit Insurance Corporation, talks to “Viewpoint” host Eliot Spitzer about why the financial collapse happened and whether the government should have done more. Bair has written a new book about her experiences during the financial crisis, “Bull by the Horns.”

The former FDIC head criticizes the way the bailout was handled by the Treasury Department. “A lot of this was being driven by covering up for Citigroup’s problems.” Bair goes on to say that the Treasury Department didn’t implement harsher restrictions when it came to the bailout — such as forcing banks to allow the government to restructure mortgages en masse — because “they were afraid that if they put too many conditions or restrictions, the healthy banks wouldn’t take [the bailout]. And they wanted to make it look like everybody was the same. … They wanted everybody to take it so Citi didn’t look like an outlier.”

Check out Bair’s interview with Spitzer.

SEC CHARGES GOLDMAN SACHS AND FORMER VICE PRESIDENT IN PAY-TO-PLAY PROBE INVOLVING CONTRIBUTIONS TO FORMER MASSACHUSETTS STATE TREASURER

FOR IMMEDIATE RELEASE
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Washington, D.C., Sept. 27, 2012 – The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its former investment bankers with “pay-to-play” violations involving undisclosed campaign contributions to then-Massachusetts state treasurer Timothy P. Cahill while he was a candidate for governor.

Pay-to-play schemes involve campaign contributions or other payments made in an attempt to influence the awarding of lucrative public contracts for securities underwriting business. This marks the first SEC enforcement action for pay-to-play violations involving “in-kind” non-cash contributions to a political campaign.

According to the SEC’s order against Goldman Sachs, Neil M.M. Morrison was a vice president in the firm’s Boston office and solicited underwriting business from the Massachusetts treasurer’s office beginning in July 2008. Morrison also was substantially engaged in working on Cahill’s political campaigns from November 2008 to October 2010. Morrison at times conducted campaign activities from the Goldman Sachs office during work hours and using the firm’s phones and e-mail. Morrison’s use of Goldman Sachs work time and resources for campaign activities constituted valuable in-kind campaign contributions to Cahill that were attributable to Goldman Sachs and disqualified the firm from engaging in municipal underwriting business with certain Massachusetts municipal issuers for two years after the contributions. Nevertheless, Goldman Sachs subsequently participated in 30 prohibited underwritings with Massachusetts issuers and earned more than $7.5 million in underwriting fees.

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Update: Goldman Sachs Pays $12 Million to Settle SEC ‘Pay-to-Play’ Probe Read more.

Sixth Circuit revives Cleveland’s case against Chase Bank

CINCINNATI (Legal Newsline) – A lower court was wrong to dismiss Chase Bank’s challenge of litigation filed against it by the city of Cleveland over subprime mortgages, the U.S. Court of Appeals for the Sixth Circuit has ruled.

However, since the U.S. Supreme Court has refused an appeal in Cleveland’s first lawsuit against Chase and the bank was dropped as a defendant in the second lawsuit in July, the ruling is essentially moot, wrote Judge Karen Nelson Moore.

Cleveland sued 21 financial institutions in 2008, alleging they created a public nuisance by securitizing subprime mortgages. The financial collapse hit Cleveland especially hard, and the city recently used funds from a national settlement to knock down vacant and dilapidated homes, the Huffington Post reported.

The lawsuit was filed by the city through attorney Joshua Cohen of Cohen Rosenthal & Kramer. It was the subject of a 2010 documentary titled “Cleveland vs. Wall Street.”

“Cleveland’s decision to address the issue of subprime-mortgage securitization through litigation arguably reflects an otherwise frustrated regulatory intent, as the city likely could not regulate such activity directly,” Moore wrote.

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NY judge dismisses MBS class action lawsuit against Freddie Mac

Freddie Mac announced the dismissal of a class action alleging securities fraud.

The lawsuit was filed against the company in federal court in August 2008.

Judge John Keenan of the U.S. District Court for the Southern District of New York ruled that Freddie disclosures on the securities, sold in 2007 and 2008, were not false or misleading.

Judge Keenan also denied plaintiff motion to file a Third Amended Complaint. The plaintiffs were primarily the National Elevator Industry Pension Plan, and others.

“Freddie Mac’s broad disclosure of all of its loan characteristics was an accurate way to relay information to investors, given the confusion surrounding the term ‘subprime,’” which “made it possible for a reasonable investor to, with little effort, take his own measure of risk in Freddie Mac’s loan portfolio,” said Keenan in his ruling.

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Ex-Credit Suisse exec faces charges for inflating mortgage values

A former Credit Suisse Group AG executive is facing charges after being accused of inflating the value of mortgages linked to bonds backed by home loans to cover losses after the subprime market fell apart, according to the BBC.

The news agency says Kareem Serageldin, the former leader of Credit Suisse’s Structured Credit Group was arrested and is schedule to appear in front of a court in the U.K.

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Former head of JP Morgan’s international business line Heidi Miller: Women on Wall Street need to ask for more, credit for their work, better salary, better title

When it comes to getting ahead in their careers on Wall Street, women need to make sure they get credit for their work, says Heidi Miller, the former head of JP Morgan’s international business line.

When Miller was just starting to work for current JP Morgan chief executive Jamie Dimon 20 years ago, she was crafting a presentation to submit to the board. Dimon said he would cover it and she let him handle it. But when she arrived into work on Monday, she discovered to her fury that a colleague who hadn’t done the same work as she had had instead given the presentation.

“I went to Jamie and asked how this could have happened,” she said. “He said he didn’t think I would want to come in on a weekend” to present to the board.

Miller was recounting the anecdote on a recent panel hosted by the New America Foundation. In addition to getting credit for their ideas, women need to simply ask for more – whether it’s a higher salary, better title or more flexibility.

She should know. A longtime Jamie Dimon lieutenant, Miller, who retired in January, served as the head of JP Morgan’s Treasury & Security Services from 2004 through 2010 before her most recent appointment to international business chief. Earlier in her career, she had been chief financial officer of Bank One and Citigroup. She also regularly made an appearance on the yearly most powerful women in finance lists.

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Senate panel to unveil JPMorgan investigation findings in Volcker Rule hearing

A U.S. Senate panel investigating the multi-billion trading loss by JPMorgan Chase that occurred several months ago will unveil its findings at a hearing to pressure regulators to shore up the controversial Volcker Rule.

The Permanent Subcommittee on Investigations, headed by Sen. Carl Levin (D-Mich.), interviewed JPMorgan officials and examiners at the Office of the Comptroller of the Currency, the agency responsible for oversight of JPMorgan, Bloomberg reports.

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