Daily Archives: November 12, 2012

UK Investigating A Claim Of ‘Libor-Like’ Manipulation Of Gas Prices

The City watchdog, the Financial Services Authority, is investigating claims by a whistleblower that Britain’s £300bn wholesale gas market has been “regularly” manipulated by some of the big power companies, exploiting weaknesses that echo the recent Libor scandal.

Separately, the energy regulator Ofgem has been warned by a company responsible for setting so-called benchmark prices, ICIS Heren, that it had seen evidence of suspect trading on 28 September, a key date as it marks the end of the gas financial year and can have an important influence on future prices.

The whistleblower, who works for ICIS Heren, raised the alarm after identifying what he believed to be attempts to distort the prices reported by the company. These benchmark prices are critically important because many wholesale gas contracts are based on them and small changes in the price can cost or save companies millions.

The revelations come at a highly charged time for Britain’s energy sector, with many of the big six suppliers under public fire for alleged profiteering on household energy bills and mis-selling on the doorstep.

In a statement, the FSA said: “We can confirm that we have received information in relation to the physical gas market. We take market misconduct seriously and will be analyzing the material.”

Read on.

Unpaid Water Bills Leading to Foreclosed Homes

Actor and musician Richard Burton is facing foreclosure on his Baltimore home, but not because he didn’t pay his mortgage on time. In his case, he says it all began with an overdue $1,037.42 water bill.

Burton lost his job playing “Shamrock” McGinty on HBO’s “The Wire” when the show went off the air. He couldn’t afford the bill and claims it was incorrectly inflated to begin with.

However, the cash-strapped city of Baltimore turned to a controversial way to collect. The city sold his unpaid debt to a private company that also inherited a lien on Burton’s home. Then, the company tacked on 18 percent interest and more than $2,000 in legal charges.

“You have no choice but to pay or you lose your home, that can’t be right,” Burton said.

Read on.

The fourth bank lawsuit dismissal goes down in flames. Deutsche Bank loses bid to end FHFA mortgage lawsuit

Deutsche Bank joins Bank of America, UBS and JP Morgan Chase in losing their bid to seek dismissal in the FHFA mortgage lawsuit.

A U.S. judge on Monday rejected Deutsche Bank AG’s (DBKGn.DE) bid to dismiss a federal regulator’s lawsuit accusing it of misleading Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) into buying billions of dollars of risky mortgage debt.

U.S. District Judge Denise Cote in Manhattan said the Federal Housing Finance Agency may pursue fraud claims over some of the German bank’s representations in offering materials regarding mortgage underwriting standards.

The FHFA had sued over roughly $14.2 billion of certificates that Fannie Mae and Freddie Mac, known as government-sponsored enterprises, had bought between September 2005 and October 2007.

Though the offering materials said that the representations were “preliminary” and “subject to change,” Cote said their use “suggests that defendants fully intended the GSEs to rely on the representations they contained.”

She dismissed some claims over representations concerning owner-occupied homes and loan values.

Deutsche Bank spokeswoman Renee Calabro declined to comment.

Read on.

No Individual Charges In SEC Probe of J.P. Morgan

The top U.S. securities regulator doesn’t intend to charge any individuals in its planned enforcement action against J.P. Morgan Chase JPM +0.10% & Co. for the allegedly fraudulent sale of mortgage bonds, according to people close to the investigation.

The largest U.S. bank by assets will pay a significant financial penalty under the proposed deal, which has been approved by Securities and Exchange Commission staff but not by the agency’s five commissioners, said the people close to the probe.

Read on.

S&P and Fitch accused of market manipulation in Italy

Italian prosecutors have filed charges against Deven Sharma, the former president of Standard & Poor’s, and six other credit rating officials for issuing downgrades that destablised the country and fuelled the debt crisis.

Prosecutor Michele Ruggiero has asked a court in Trani, Italy to indict five S&P employees and two from Fitch Ratings for market manipulation, in a move that could trigger a raft of similar claims against rating setters around the world.

Mr Ruggiero, who has pursued the agencies since they placed Italy on negative watch last summer, accused them of “aggravated and continuous…market abuse”. He claimed they leaked “biased and distorted information” about Italy’s financial stability to traders.

In a statement, he said the rating agencies had tried to “destabilise Italy’s image, prestige and credit confidence on the financial markets, alter the value of Italian bonds by depreciating them [and] weaken the euro”.

As well as Mr Sharma, president of S&P from 2007 and 2011, the operational director for Fitch, David Riley, was also named in the legal filings.

Claims against Moody’s Investor Services were dropped. Fitch failed to return calls for comment.

Read on.

The Simpsons pokes fun at Karl Rove

I saw this on The Simpsons last night. Hilarious.

US Students Detected Libor-Fixing Years Before Banking Scandal

In April 2010, University of Minnesota graduate students Connan Snider and Thomas Youle released a paper suggesting that leading global banks were manipulating the Libor—the world’s most important lending rate—to benefit their own trading positions.

The two economists shopped the paper to academic finance journals but were repeatedly rebuffed, according to Snider, now an assistant professor of economics at UCLA.

“We were told that what we were doing was not interesting or important,” Snider said in a recent interview.

Two years later, however, their research is more relevant than ever.

Read on.