Citigroup breaks securities law in Jefferson County bankruptcy deal, lawsuit says
BIRMINGHAM, Alabama — The Wall Street investment bank leading Jefferson County’s pitch to exit Chapter 9 municipal bankruptcy could be violating securities law if it serves as an underwriter in the deal, a lawsuit brought by Jefferson County sewer ratepayers says.
Under the Dodd-Frank Wall Street reform and Consumer Protection Act, an investment bank may not act as both a financial advisor to a municipal issuer and as an underwriter when that debt goes to market. Serving in both roles could create a conflict of interest for the bank, and the practice was outlawed in 2011.
That appears to have been what’s happening as part of Jefferson County’s plan to exit bankruptcy.
Former BofA mortgage head Desoer joins Citigroup
Barbara Desoer, former head of the mortgage business at Bank of America Corp , has agreed to join Citigroup Inc as an executive in its banking subsidiary.
Citibank N.A. Chief Executive Gene McQuade said in an internal memo on Thursday that Desoer will serve as the unit’s chief operating officer, effective October 15. A copy of the memo was seen by Reuters.
Desoer had a 35-year career at Bank of America, leading the bank’s combined home loan business after the acquisition of Countrywide Financial in 2008. She retired in February 2012.
SunTrust to Pay More Than $1 Billion in Mortgage Settlements –Update
SunTrust Banks Inc. (>> SunTrust Banks, Inc.) is paying more than $1 billion to settle federal allegations of mortgage violations, in the latest move by a bank to put behind it costly legal issues stemming from the financial crisis.
The Atlanta-based bank said Thursday it will pay $468 million in cash and provide $500 million in relief to borrowers under agreements with the Justice Department, Department of Housing and Urban Development and Federal Reserve. It is also paying more than $200 million to resolve claims with Fannie Mae (>> Federal National Mortgage Association) and Freddie Mac (>> Federal Home Loan Mortgage Corp).
A portion of the money–$160 million–will be paid to resolve claims that SunTrust mishandled borrowers’ loans. As part of that deal, SunTrust is joining five other mortgage servicers who reached a landmark $25 billion settlement with 49 states and federal regulators last year addressing allegations of “robo-signing” foreclosure documents.
NY Fed Fired Examiner Who Took on Goldman
A version of this story was co-published with The Washington Post.
In the spring of 2012, a senior examiner with the Federal Reserve Bank of New York determined that Goldman Sachs had a problem.
Under a Fed mandate, the investment banking behemoth was expected to have a company-wide policy to address conflicts of interest in how its phalanxes of dealmakers handled clients. Although Goldman had a patchwork of policies, the examiner concluded that they fell short of the Fed’s requirements.
That finding by the examiner, Carmen Segarra, potentially had serious implications for Goldman, which was already under fire for advising clients on both sides of several multibillion-dollar deals and allegedly putting the bank’s own interests above those of its customers. It could have led to closer scrutiny of Goldman by regulators or changes to its business practices.
Before she could formalize her findings, Segarra said, the senior New York Fed official who oversees Goldman pressured her to change them. When she refused, Segarra said she was called to a meeting where her bosses told her they no longer trusted her judgment. Her phone was confiscated, and security officers marched her out of the Fed’s fortress-like building in lower Manhattan, just 7 months after being hired.
“They wanted me to falsify my findings,” Segarra said in a recent interview, “and when I wouldn’t, they fired me.”
Suit Revives Goldman Conflict Issue
Carmen Segarra worked at the New York Federal Reserve Bank after a career on Wall Street that included jobs at Citigroup and Bank of America.
At a March 2012 meeting, a group of examiners at the Federal Reserve Bank of New York agreed that Goldman Sachs had inadequate procedures to guard against conflicts of interest — guidelines aimed at stopping firms from putting their pursuit of profit ahead of their clients’ best interests.
The examiners voted to downgrade a confidential rating assigned by the New York Fed that could have spurred costly enforcement actions and other regulatory penalties. It is not known whether the vote in fact led to a rating change. The former examiner who pushed for a downgrade, Carmen M. Segarra, now contends in a lawsuit filed on Thursday that just weeks after the vote, her superiors asked her to change her findings on Goldman and fired her after she refused.
The vote to downgrade, which has not been previously reported, could have been a big blow for Goldman.