Fed ‘stress test’: banks would lose $460bn if crisis struck again
America’s biggest banks would face losses of almost half a trillion dollars should a deep financial crisis and recession hit the US again, regulators said.
The losses of $462bn (£308bn) for the country’s biggest 18 banks were projected by the Federal Reserve’s ‘stress test’, an annual exercise the central bank now conducts to monitor the resilience of the financial system.
The losses would be racked up under the Fed’s most extreme scenario in which unemployment climbs to 12pc, house prices tumble 21pc and stock markets halve in value over the next two years. Overall, the Fed said that just one of the banks it tested, Ally Financial, failed to maintain a 5pc Tier 1 common equity ratio – a key measure of a lender’s health – under the most extreme scenario.
Banks “have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are collectively in a much stronger capital position than before the financial crisis,” the Fed said last night.
Big Banks Face Investigation Into Whether They Helped Debt Collectors Pursue Faulty Judgments
The largest U.S. banks face a multi-state investigation into whether they helped debt collectors pursue faulty judgments against credit card customers, according to people familiar with the matter.
At issue is whether weak record-keeping by banks or a failure to pass accurate information to collection agencies harmed consumers.
The allegations against the banks echo those central to last year’s $25 billion federal-state mortgage settlement to resolve charges that the banks “robo-signed” documents and pursued foreclosures with faulty information.
This latest probe targets the same banks, including Bank of America, JPMorgan Chase, Citigroup and Wells Fargo, said the sources who spoke on condition of anonymity because the investigations are continuing.
As with the mortgage cases, the investigation focuses on the banks’ poor paperwork and their weak tracking of the debts.
Over the last two and a half years, Wells Fargo, like most of the major mortgage servicers, claimed that it had a “rigorous system” to insure that mortgage documents were accurate and complete. The reason this mattered was that there was significant evidence to the contrary. Foreclosure defense attorneys found repeatedly that, for securitized mortgages, the servicer or foreclosure mill attorney would present documents to the court that failed to show the borrower’s note (a promissory note) had been transferred properly to the trust. This mattered not only on a borrower level, but indicated that originators of the mortgage securitizations hadn’t bothered transferring the notes properly to the trusts that were to hold them. This raised the ugly specter of what was called “securitization fail,” that investors had been sold securities that they had been told were mortgage backed when they might in practice not be.
The robosiging scandal was merely the tip of the iceberg of mortgage and foreclosure problems that resulted from the failure to adhere to the requirements of well-settled state real estate law. The banks maintained that there was nothing wrong with mortgage ownership or with the records. All they had were occasional errors and some unfortunate corners-cutting with affidavits. If they merely re-executed all those robosigned documents, all would be well.
Wells Fargo’s own actions say the reverse. It has been doctoring documents in house for over fifteen months for borrowers who are targeted for foreclosure. It was having this sort of work done outside the bank for an unknown period of time prior to that.
A contractor who worked at a Wells Fargo facility in Minnesota reports that the bank engaged in systematic, large scale alteration of mortgage notes and fabrication of related documents in preparation for foreclosure. The procedures the bank used are questionable for a large portion of the mortgages.
Read more at http://www.nakedcapitalism.com/2013/03/whistleblower-wells-fargo-fabricated-mortgage-documents-on-a-mass-basis.html#A7jparyPTvJzqRBM.99