Daily Archives: January 28, 2013

Billionaire Banker Beal’s Latest Bet: Teamwork on Bonds


Mr. Beal’s CXA Corp. ran a pair of advertisements late last year, one appearing in The Wall Street Journal. The ads listed an alphabet soup of residential mortgage-backed securities held by CXA and asked those with positions in the same securities to join the company in investigating possible infractions by banks that sold the debt.

If the groups can prove the mortgages that underlie the bonds were approved through shoddy underwriting, they could be entitled to compensation—CXA’s payday alone could be tens of millions of dollars.

To have a chance at prying money from the banks, CXA needs to gather investors holding 25% of the voting rights in an outstanding issue. The investors can then try to get banks to buy back any loans they say are faulty, for example for misrepresenting the quality of the borrowers.

Mr. Costas says the firm has signed on enough investors in seven of the 93 mortgage-backed securities held by its CXA Corp. unit to take action. He declined to identify those investors who had joined the group.
Sellers of the bonds include units of Bank of America Corp., BAC -1.25% Deutsche Bank AG, DBK.XE +0.93% Citigroup Inc., C -1.10% Goldman Sachs Group Inc.,GS -0.05% Morgan Stanley MS -1.32% and J.P. Morgan Chase JPM -0.85% & Co. Representatives at these firms declined to comment.

And here was the advertisement:

CXA Advertisement in Wall Street Journal Recruits Fellow RMBS Investors for Investigation of Rep & Warranty Breaches

By Structured Finance Litigation Team on November 8th, 2012Posted in Beal Bank, Citigroup, CXA Corporation, Goldman Sachs, Institutional Investors, Investment Banks/Deal Sponsors, Morgan Stanley, Washington Mutual

On November 8, 2012, CXA Corporation, a subsidiary of Dallas, Texas-based Beal Bank USA, placed an advertisement in the Wall Street Journal calling for other investors to join its investigation into possible breaches of representations and warranties in loans underlying RMBS in which CXA invested. According to the advertisement, the list of securities at issue includes RMBS from Citigroup, Goldman Sachs, Morgan Stanley, Washington Mutual, and others, issued between 2004 and 2007. CXA ran a similar advertisement in October in ABS Daily — a publication circulated at the ABS East conference. As noted previously by Debtwire, Lowenstein Sandler represents CXA on its RMBS portfolio, including most of the transactions listed in the advertisement.


Billionaire banker Andy Beal goes after big banks on bad loans

In 2002 billionaire banker Andy Beal had his Beal Bank sue the Federal Deposit Insurance Corp. in a lawsuit that accused the FDIC of originating faulty subprime mortgages to unqualified borrowers. For six years Beal pursued this quest against his very own regulator, until the FDIC agreed to pay $90 million in 2008 to settle the case.

Now Andy Beal has found another seemingly impossible mountain to climb: getting big banks like Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase & Co., to repurchase potentially faulty loans that were sold during the housing boom. According to Katy Burne at The Wall Street Journal, Beal is working to bring bondholders together  to investigate potential misrepresentations and contract breaches by the banks that sold residential mortgage-backed securities.

Read on.


Caught Judge Rakoff fever: Colorado judge rejects ‘neither admit nor deny’ SEC settlement

Caught Judge Rakoff fever: Colorado judge rejects ‘neither admit nor deny’ SEC settlement

It’s not exactly an epidemic, but a federal judge in Colorado appears to have caught Rakoff fever.

Two weeks before the 2nd Circuit Court of Appeals will hear oral arguments on whether U.S. Senior District Judge Jed Rakoff exceeded his authority when he rejected the Securities and Exchange Commission’s $285 million settlement with Citigroup, U.S. Senior District Judge John Kane of Denver has refused to approve the SEC’s proposed $12 million “neither admit nor deny” settlement with Bridge Premium Financial and a former Bridge executive accused of running a Ponzi scheme. In a one-paragraph order last week, Kane said he would not approve a deal in which the defendant “remains defiantly mute” about the truth of the SEC’s allegations. “A defendant’s options in this regard are binary: He may admit the allegation or he may go to trial,” Kane wrote. The judge also said he would not consent to any final judgment without an entry of findings of fact and conclusions of law. “These findings are important to inform the public and the appellate courts,” he said.

The ruling seems to represent a change of heart for Kane, who in 2011 approved the SEC’s $4 million settlement with investment advisor Neal Greenberg, even though that deal did not require Greenberg to admit or deny the agency’s allegations.

When Rakoff refused to approve the Citi deal, which involved the bank’s alleged misrepresentations to investors in a complex, mortgage-backed derivative instrument, he said the SEC’s settlement policy does not serve the public interest. “The court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance,” the judge wrote in November 2011 in a now famous 15-page opinion.


Sources: New York attorney general looking at NBPA report on union finances and governance

Sources: New York attorney general looking at NBPA report on union finances and governance

While National Basketball Players Association executive director Billy Hunter plans to continue implementing some of the recommendations made last week by the Paul, Weiss firm in its scathing, 469-page report on union finances and governance, CBSSports.com has learned that another legal challenge may be brewing.

The New York State Attorney General’s office is aware of the report’s findings and is examining whether action may be necessary regarding Hunter’s oversight of the NBPA’s charitable foundation, law enforcement sources said.

The report found the union’s foundation never held elections for board members or for an executive director and did not hold or keep records of regular meetings, in violation of its bylaws. Also, the report found the foundation often made charitable donations at Hunter’s sole discretion, and in some cases, those donations went to charities with which he was personally involved.

While Paul, Weiss investigators found no evidence that Hunter misappropriated foundation funds, the foundation is subject to New York state non-profit law and is under the jurisdiction of the state attorney general.


Iceland Wins Major Case Over Failed Bank

Iceland Wins Major Case Over Failed Bank

BRUSSELS — Iceland won a landmark case at a European court, ending an acrimonious legacy from the collapse of its banking system more than four years ago.

On Monday, the court upheld the country’s refusal to promptly cover the losses of British and Dutch depositors who put more than $10 billion in Icesave, the bankrupt online offshoot of a failed Icelandic bank.

In a judgment issued in Luxembourg, the court of the European Free Trade Association, or EFTA, cleared Iceland of complaints that it violated rules governing the protection of depositors drawn up by the European Union. While Iceland is not a member of the Union, it is bound by most of its rules, as a member of EFTA.

The case has attracted widespread attention because it touches on issues of cross-border banking that have been at the center of the European Union’s efforts to ensure the future stability of the region’s financial system. The Iceland banking collapse in 2008 — and the mayhem it caused far beyond the country’s borders — raised issues directly relevant to the 27-nation Union.


If you had been what?????

If you had been what?????

10 years ago today…

“The British government has learned that Saddam Hussein recently sought 
significant quantities of uranium from Africa. Our intelligence sources tell 
us that he has attempted to purchase high-strength aluminum tubes
suitable for nuclear weapons production. Saddam Hussein has not 
credibly explained these activities. He clearly has much to hide.” 
– George W. Bush, January 28, 2003, State of the Union Address




Homeowner advocates target FHFA chief Demarco in Obama’s first 100 days

Homeowner advocates target FHFA chief Demarco in Obama’s first 100 days

During President Obama’s final press conference of his first term, he trumped his administration’s agenda to create “new jobs, new opportunity and new security for the middle class.”
But if this agenda is to be fulfilled in his second term, he needs to take one key action: the removal of one the most important blockages to getting our economy back on track. The roadblock: the hold-over Bush appointee (yes, Bush appointee) Ed DeMarco. Many Americans have not heard of him, but his power impacts millions and influences the future of our housing market and our economy.

Exclusive: Bank probes find manipulation in Singapore’s offshore FX market – source

(Reuters) – Internal reviews by banks in Singapore have found evidence that traders colluded to manipulate rates in the offshore foreign exchange market, according to a source with knowledge of the inquiries.

The discovery widens a global lending rate scandal into new markets, as fallout from the Libor case puts banks under added scrutiny and spurs both regulators and institutions to reconsider how certain key interest and currency rates are set.

The probes found evidence showing that traders from several banks communicated with each other over electronic messaging about what rates they were going to submit for the local banking association’s fixings for non-deliverable foreign exchange forwards (NDFs), aiming to benefit their trading books.

“Traders were talking to traders, saying: ‘I need you to help me today, I need to fix low,'” said the bank source, who asked not to be identified due to the confidential nature of the reviews.

Read on.

Ex- CEO AIG’s Greenberg Thumbs Nose at U.S. Taxpayers in Book

If you’re among the U.S. taxpayers who watched in horror as $182 billion of your money made its way to the collapsing insurance giant American International Group Inc. (AIG) during the financial crisis, it might come as a surprise to learn that your forced munificence didn’t make much of a difference.

In his new book, “The AIG Story,” former chief executive Maurice “Hank” Greenberg offers his take on what kept the company alive: “It was saved only by the loyalty and tenacity of its valiant workforce,” he says.

Read on.