Daily Archives: August 20, 2013


Fannie Mae Hires an Officer it Alleges Defrauded it – and Finance Cheers

Fannie Mae Hires an Officer it Alleges Defrauded it – and Finance Cheers

Three Bloomberg reporters have done the Nation a service by ferreting out a scandal of moderate magnitude but emblematic importance.  Dakin Campbell, Jody Shenn and Phil Mattingly broke the story on August 14, 2013 that Adam Glassner, recently described, but not named, in the Department of Justice’s (DOJ) fraud suit against Bank of America (B of A), and named as a defendant by Fannie Mae’s in its fraud suit against B of A and several officers, was hired by two companies (Ally and Fannie) bailed out by Treasury.


Here is DOJ’s key allegation about Glassner.

23. The “BOA-Securities Managing Director” was a Managing Director at BOASecurities and a Senior Vice President of BOA-Bank who, at all times relevant to the allegations of this Complaint, was in charge of the Mortgage Finance Group at BOA-Securities – the group that had responsibility for underwriting the BOAMS 2008-A securitization – and the Investor Relations Group at BOA-Bank – the group that had responsibility for selecting the mortgages to be securitized and determining the price at which BOA-Bank would sell those mortgages. The BOA-Securities Managing Director ultimately had responsibility for structuring the BOAMS 2008-A securitization and preparing the Offering Documents. At all times relevant to the allegations in this Complaint, the BOA-Securities Managing Director also served as President and Chief Executive Officer of BOA-Mortgage. The BOA-Securities Managing Director’s annual bonus was largely dependent on Defendants continuing to profitably securitize mortgages originated by BOA-Bank. Thus, he had a strong financial motive to withhold negative information concerning the value of the Certificates from investors.

Fannie Mae was the second of these corporate bailout recipients, purportedly run by the government, to hire Glassner.  Fannie hired Glassner after it sued him.  The suit was nominally brought by the Federal Housing Finance Administration (FHFA), the federal agency acting as conservator for Fannie, but Fannie is the real party in interest in the lawsuit.


Fannie Mae, Freddie Mac Ignoring Write-Offs, Report Says

Fannie Mae, Freddie Mac Ignoring Write-Offs, Report Says

Fannie Mae and Freddie Mac, which have reported record profits after a taxpayer bailout, are ignoring billions of dollars in potential losses on overdue loans as they take three years to adopt a new accounting system, a government auditor said in a letter made public today.

The accounting change should be made immediately and could have a material impact on the companies’ finances, according to the Aug. 5 letter to Federal Housing Finance Agency acting director Edward J. DeMarco from Steve Linick, the regulator’s inspector general.


Dutch giants APG, PGGM exploring possibility of future LIBOR claims

Dutch giants APG, PGGM exploring possibility of future LIBOR claims

NETHERLANDS – The large Dutch asset managers APG and PGGM are exploring their options for possible future legal claims against banks involved in the manipulation of the London Interbank Offered Rate (LIBOR).


Harmen Geers, spokesman for the €329bn APG, the asset manager of the €292bn civil service scheme ABP, said: “Currently, we are examining whether, when and how LIBOR-rigging might have affected our interests.”


Wells Fargo Board Wants FHA Deception Suit Dismissed

Wells Fargo Board Wants FHA Deception Suit Dismissed

Law360, New York (August 19, 2013, 1:57 PM ET) — Wells Fargo & Co.’s board of directors on Friday asked a California federal judge to toss for a second time a shareholder derivative suit accusing them of allowing the bank to falsify loan levels to wrongly obtain Federal Housing Administration insurance, saying the plaintiff still hadn’t justified the suit.

According to the board, despite plaintiff Richard Gulbrandsen’s complaint being dismissed previously over his failure to show that it would have been futile to first demand the board remedy its alleged wrongful behavior before filing suit —…


DoJ launches J.P. Morgan probe in energy markets

DoJ launches J.P. Morgan probe in energy markets

NEW YORK (MarketWatch) — J.P. Morgan Chase & Co. JPM -2.74% is under investigation by the Department of Justice for allegedly manipulating the U.S. energy markets, The Wall Street Journal reported Monday citing people familiar with the case. This is the latest probe against the biggest U.S. bank by assets which is facing mounting legal and regulatory scrutiny. The firm settled last month with theFederal Energy Regulatory Commission for $410 million after being accused of manipulating energy markets in California and the MidWest. The firm did not admit wrongdoing as part of the settlement. The Justice Department’s probe started just in the last few weeks as the regulatory settlement was being concluded. The probe is said to be in the early stages and is being handled by Preet Bharara, the U.S. attorney for the Southern District of New York. 

Judge Rakoff Rejects Sweetheart Deal Between the S.E.C and Citigroup

Jed S. Rakoff, a judge for the Federal District Court for the Southern District of Manhattan, has rejected the proposed $285 million settlement between theSecurities and Exchange Commission and Citigrouprelated to the sale of mortgage securities.

Here is the judge’s 15-page opinion, which concluded that the pact was “neither reasonable, nor fair, nor adequate, nor in the public interest.” Judge Rakoff has in the past expressed concern with the S.E.C.’s custom of not forcing a defendant to “neither admit nor deny the allegations” when settling a case. In his ruling Monday, the judge said he couldn’t approve a settlement that was based on “mere allegations.” Here are two crucial paragraphs from the ruling:

An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free-roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts — cold, hard, solid facts, established either by admissions of by trials — it serves no lawful or moral purpose and is simply an engine of oppression.

Read on.


Judge endorses US use of fraud law against Bank of America

Judge endorses US use of fraud law against Bank of America

A federal judge has endorsed a broad interpretation of a savings-and-loan era law that the U.S. Justice Department is trying to use in cases against Wall Street banks.

U.S. District Judge Jed Rakoff in Manhattan said Monday that a “straightforward application of the plain words” of the Financial Institutional Reform, Recovery and Enforcement Act (FIRREA) allowed the interpretation sought by the government.

The law has a low burden of proof, strong subpoena power and a 10-year statute of limitations, twice as long as the typical limit for fraud cases.


Fed raises the bar for US banks

Fed raises the bar for US banks

Executives at many big banks have made progress in preparing for major financial shocks, but other firms are still falling behind, Michael Crittenden with the Wall Street Journal reports.

As a result, he says, the Federal Reserve is raising the bar:

Regulators want executives to be able to better identify the specific risks their bank faces and be able to explain how those dangers are being accounted for when deciding how much capital to hold or distribute to shareholders through dividends or buybacks.