Bankers Should Face Jail Terms, Report Says
The Parliamentary Commission on Banking Standards (PCBS), which was set up after last summer’s Libor-manipulation scandal led to Barclays being fined £290m, said in its final report that all areas of British banking required urgent change.
Citing “a profound loss of trust born of profound lapses in banking standards”, the commission said a string of measures were needed to repair the industry’s reputation.
In its 553-page report called Changing Banking For Good, the PCBS argued that individual accountability among senior bankers was lamentable, that industry pay schemes required a radical overhaul, and that executives should face a new sanctions regime that would dish out appropriate penalties, replacing a system that “looked good but achieved little”.
It also said, as expected, that the Treasury’s strategy for managing its 82% stake in Royal Bank of Scotland (RBS) was not working adequately and that options, including analysis of a break-up of the bank, should be conducted in the coming months.
National Mortgage Settlement Monitor Finds Few Flaws As Consumer Advocates Cry Foul
The government-appointed monitor overseeing mortgage practices as part of last year’s robo-signing settlement between five big U.S. banks and dozens of government agencies found few violations after grading the banks’ compliance with ambitious new standards, according to court documents filed Tuesday.
The finding of just three audited failures by Joseph Smith, the government-appointed watchdog heading the Office of Mortgage Settlement Oversight, may prompt criticism by borrower advocates, consumer attorneys, and members of Congress after numerous reports by state attorneys general and housing advocates of pervasive noncompliance with the new mortgage servicing rules the banks agreed to implement as part of the 2012 settlement.
Smith plans to point out five additional unaudited violations that were self-reported by the banks, according to people who have reviewed a report he plans to release on Wednesday. His office has yet to double-check the findings.
The deal, struck in February 2012, was supposed to reform how Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial (formerly GMAC) treat troubled borrowers who fall behind on their monthly payments, in part to ensure that practices such as robo-signing don’t recur.
Deutsche Bank Settles Los Angeles Suit Over ‘Slumlord’ Claims
Deutsche Bank AG (DBK) reached a settlement with the city of Los Angeles to resolve a lawsuit claiming the bank acted like a “slumlord” and let foreclosed homes in low-income neighborhoods fall into disrepair.
The bank and the Los Angeles city attorney filed a joint notice of settlement June 17 in California state court. The two sides reached an agreement in principle and are in the process of completing the documentation, according to the filing.
Terms of the settlement of the two-year-old lawsuit, which also accused Deutsche Bank of illegally evicting tenants, weren’t disclosed in the filing.
In Countrywide Case, Watchdogs Without Any Bark
FOR the last two weeks, a justice in New York State Supreme Court has heard testimony in one of the most pivotal cases of the financial crisis. The hearings will tell whether Bank of America can extinguish legal liability for more than a million Countrywide Financial loans by paying $8.5 billion in cash and agreeing to loan servicing improvements in a settlement struck with 22 investors in 2011.
But the case, being heard by Justice Barbara R. Kapnick, extends far beyond the impact of the settlement on Bank of America’s balance sheet. It is also laying bare an industry practice that has put investors in mortgagesecurities at a disadvantage and reduced their financial recoveries in the aftermath of the home loan mania.
The practice at issue involves trustee banks overseeing the vast and complex mortgage pools bought by pension funds, mutual funds and others. Trustees like Bank of New York Mellon were paid by investors to make sure that the servicers administering these mortgage deals, known as trusts, treated them properly. Trustees receive nominal fees — less than a penny on each dollar of assets — for the work.
But when mortgages soured, trustees declined to pursue available remedies for investors, such as pushing a servicer to buy back loans that did not meet quality standards promised when the securities were sold.
In other words, this case highlights a problem with trustees: they are a dog that could have barked but didn’t.
Before mortgage securities were undone by troubled loans, trustee inaction was not an issue. Trustees collected their fees at minimal effort and investors were satisfied.
Rep. Waters pushes for probe of BofA’s HAMP practices
Congresswoman Maxine Waters, D-Calif., sent a letter Tuesday to Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP), calling for an investigation of Bank of America’shandling of borrowers who applied for modifications through the government’s Home Affordable Modification Program.
Waters’ letter comes after the mega bank was forced to address allegations from former employees who claim the company routinely stalled the application process for the government’s HAMP program and wrongfully informed homewoners about the status of documents already on file.
News of HAMP issues prompted Waters to fire off a letter to Romero about BofA’s status as one of the largest beneficiaries of incentive payments associated with HAMP.