Daily Archives: March 2, 2013

Link

Indian firm tries to bring Libor into dispute with Deutsche Bank

Indian firm tries to bring Libor into dispute with Deutsche Bank

LONDON, March 1 (Reuters) – Indian real estate developer Unitech wants to add allegations linked to the manipulation of Libor to an existing dispute with Deutsche Bank, in a move that could set a precedent for cases against other banks.

Unitech is involved in a legal dispute with Deutsche Bank over a $150 million loan and related interest rate swap agreed in 2007 and which Deutsche Bank alleges it did not pay back.

It has tried to amend its counter-claims against Deutsche’s allegation in light of revelations about Libor rigging since the suit was launched in March 2012, legal documents show.

Unitech has sought to argue that the loan and swap agreements were invalid because they were tied to Libor when it was being manipulated, although so far the court has not allowed it to add that argument to its counter-claim.

Link

Jamie Dimon Claims He Tried To Save Lehman Brothers In 2008

Jamie Dimon Claims He Tried To Save Lehman Brothers In 2008

Jamie Dimon now claims that he and his bank, JPMorgan Chase, labored to prevent the 2008 collapse of Lehman Brothers, according to documents filed in federal court this week. That assertion directly contradicts the conventional understanding that the bank effectively exploited Lehman’s vulnerabilities for its own gain.

“We took huge exposures to keep Lehman alive,” Dimon said during a Feb. 23 deposition conducted as part of a lawsuit filed against JPMorgan by the Lehman Brothers estate, which is seeking $8.6 billion in damages.

Dimon’s characterization during the deposition stands in stark contrast to accounts of executives at other financial institutions, who assert that JPMorgan’s threats to cut off Lehman’s financing sent the bank into a death spiral.

Link

Citigroup Says Credit-Card Abuse Probes Fuel $266 Million Cost

Citigroup Says Credit-Card Abuse Probes Fuel $266 Million Cost

Citigroup Inc. (C), the world’s biggest credit-card lender, is facing rising costs from the misselling of so-called add-on card products in the U.K. and U.S.

Citigroup boosted reserves by $266 million last year to compensate U.K. customers wrongly sold payment protection insurance, or PPI, according to a regulatory filing today by the New York-based lender. The bank may also face penalties from U.S. regulators amid an industrywide probe into the sale of payment protection and identity monitoring products, according to the filing.

Link

Zombie love, true sales and why “Too Big To Fail” is really dead

Zombie love, true sales and why “Too Big To Fail” is really dead

A must read…

Simply stated, the largest commercial banks became “too big to fail” in large part because they used non-bank vehicles to increase leverage without disclosure or capital backing.  Their intent was to reduce the apparent capital needs of banks.  Banks’ abuse of non-bank vehicles to issue subprime securities and hide capital deficits was facilitated by legal counsel, auditors, rating agencies and regulators, who all pretended that four centuries of legal precedent regarding financial fraud had somehow never occurred.  Until 2011, FDIC rules did not preclude that abuse and even sheltered banks from need to disclose it to auditors and investors.

The failure of Lehman Brothers, Bear Stearns and most notably Citigroup all were attributable to deliberate acts of securities fraud whereby assets were “sold” to investors via non-bank financial vehicles.  These transactions were styled as “sales” in an effort to meet applicable accounting rules, but were in fact frauds that must, by GAAP and law applicable to non-banks since 1997, be reported as secured borrowings. 

Under legal tests stretching from 16th Century UK law to the Uniform Fraudulent Transfer Act of the 1980s, virtually none of the mortgage backed securities deals of the 2000s met the test of a true sale.  Under the UFTA standard, for example, any transfer which is intended to leave the transferor with insufficient capital is a fraud which converts a “sale” into a “secured borrowing” by the transferor.

Since the purpose of most bank asset “sales” via securitization was always “capital relief,” no honest lawyer could say that the transfers met the UFTA standard applied to non-banks.  Banks avoided balance sheet treatment for securitizations merely by “purporting to sell” loans to trusts. 

Bank regulators allowed theses “off-balance sheet” vehicles to be excluded for the purposes of determining regulatory capital requirements.  When the crisis hit, it suddenly became clear that the banks’ capital was insufficient. 

Today much of the “shadow banking” system with respect to residential real estate has run off or is in the process of doing so, but hundreds of billions in claims against banks arising from these purported “sales” of assets remain pending before the courts. 

Link

Judge revives multi-billion dollar MBS dispute against banks

Judge revives multi-billion dollar MBS dispute against banks

The Second Circuit Court of Appeals overturned a lower court’s dismissal of a major residential mortgage-backed securities lawsuit filed against U.S. investment banks.

The court’s ruling revived claims from an investor group that alleged several securities law violations stemming from the defendants’ packaging and sale of mortgage securities supported by risky loans.

The defendants include Novastar MortgageRoyal Bank of Scotland Group  ($9.49 -0.37%)Wachovia Capital — now Wells Fargo ($35.39 0.31%) — Greenwich Capital Markets and Deutsche Bank Securities ($48.78 -0.0022%).

– See more at: http://www.housingwire.com/news/2013/03/01/judge-revives-multi-billion-dollar-mbs-dispute-against-banks#sthash.GRGsPozO.dpuf