Daily Archives: July 14, 2014

DOJ warns Citi settlement “will certainly not be the last”

AG Holder says cases coming soon against additional banks.

The U.S. Department of Justice isn’t prepared to rest on its laurels after reaching a $7 billion settlement againstCitigroup (C) over the bank’s residential mortgage-backed securities’ practices. According to Attorney General Eric Holder, Citi “will certainly not be the last” financial institution that will be “held accountable” by the DOJ.

Holder made the proclamation during a press conference announcing the settlement with Citi. In his prepared remarks, he called Citi’s misconduct egregious. “Under the terms of this settlement, the bank has admitted to its misdeeds in great detail,” Holder said. “The bank’s activities shattered lives and livelihoods throughout the country and around the world.”

Holder also said that despite reaching a settlement with Citi, the agreement does not prevent the DOJ from seeking criminal charges against Citi and its employees in the future.

“We have not ruled out holding these organizations or individuals criminally responsible,” Holder said. “The agreement does not preclude the ability to bring criminal charges.”

Read on.


It’s official: Citi reaches $7B RMBS settlement

Citigroup (C) officially announced a $7 billion dollar settlement with the U.S. Department of Justice, several state attorneys general, and the Federal Deposit Insurance Corporation to settle residential mortgage-backed securities and collateralized debt obligations afterindustry whispers that the bank was nearing a resolution.

Under the settlement, Citigroup will pay a total of $4.5 billion in cash and provide $2.5 billion in consumer relief.

From that amount, the cash portion consists of a $4 billion civil monetary payment to the DOJ and $500 million in compensatory payments to the State AGs and the FDIC.

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PennyMac sells $550 million in mortgages to Bank of America

PennyMac (PMT) is entering into a loan repo facility withBank of America (BAC) to help fund newly originated mortgages.

The $550 million facility sells the mortgages to BofA, for PennyMac to potentially later repurchase, in a deal fully guaranteed by PennyMac.

PennyMac purchased the loans from correspondent lenders and were pledged for sale and/or securitization, according to documents filed with the SEC.

The principal amount paid by Bank of America for each eligible mortgage loan is based upon a percentage of the lesser of the market value, unpaid principal balance, purchase price or takeout price of such mortgage loan, the document states.

When PennyMac repurchases the mortgages it is required to repay BofA the principal plus accrued interest, as well as a “commitment fee,” and other servicing costs.

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Exclusive: Prosecutors’ case against GM focuses on misleading statements

Federal prosecutors are developing a criminal fraud case hinged on whether General Motors made misleading statements about a deadly ignition switch flaw, and are examining activity dating back a decade, before GM’s 2009 bankruptcy, according to multiple sources familiar with the investigation.

At the same time, at least a dozen states are investigating the automaker. Two state officials said that effort is likely to focus on whether GM broke consumer protection laws.

Both federal and state investigations into the switch, which is linked to at least 13 deaths and 54 crashes, are at early stages, and it is possible that cases may not be brought.

Sources said federal criminal prosecutors are working on a set of mail and wire fraud charges, similar to the criminal case Toyota Motor Corp settled earlier this year over misleading statements it made to American consumers and regulators about two different problems that caused cars to accelerate even as drivers tried to slow down.

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US Offers Immunity To Junior FX Manipulators In Exchange For Ratting Out Their Seniors

From the FT:


Such “proffer agreements” allow individuals to give authorities information about crimes with some assurances they will be protected against prosecution, as long as they do not lie.


The move marks another step in the global investigation into collusion and market-rigging in the $5.3tn a day currency market by at least 15 regulators and prosecutors. They are investigating allegations that bank traders and sales staff used chat rooms and other means of communication to share client information and manipulate daily currency benchmarks.


Most authorities initially gave banks free rein to conduct their own probes, prompting the suspension, placing on leave or firing of so far almost three dozen staff at 10 banks and the Bank of England, where one official has been suspended.


One senior lawyer said the DoJ probe was well-advanced. The DoJ declined to comment. Referring to general criminal activity, Leslie Caldwell, its criminal division chief since May, told the FT last week that the authority would be “appropriately aggressive” and seek to bring “timely” cases against financial institutions.

Former CalPERS CEO Pleads Guilty to Bribery, Fraud, Including Taking Cash in Paper Bags, Shoe Box

The first two payments were made in paper bags. The last installment came in a shoebox. The handoffs all came at a Sacramento hotel near the Capitol.

In a stunning admission covering years of corruption, the former chief executive of CalPERS said Friday he accepted $200,000 in cash, along with a series of other bribes, from a Lake Tahoe businessman who was attempting to influence billions of dollars in pension fund investment decisions.

Fred Buenrostro, who ran the nation’s largest public pension fund from 2002 to 2008, pleaded guilty in U.S. District Court to a charge of conspiracy to commit bribery and fraud. He has agreed to cooperate with federal prosecutors as they pursue charges against his longtime friend, Nevada businessman Alfred Villalobos, a former CalPERS board member.

Buenrostro, 64, said that Villalobos plied him with casino chips and a trip around the world, plus a high-paying job with his investment firm after leaving CalPERS. He also admitted working with Villalobos to create phony documents to ensure that Villalobos earned his multimillion-dollar fees representing a Wall Street private equity firm seeking CalPERS investments.

Most of those allegations had been aired publicly already. What was new Friday was the blockbuster admission that Buenrostro took $200,000 in cash from Villalobos. In his written plea agreement, Buenrostro said Villalobos paid him in three installments in 2007, “all of which was delivered directly to me in the Hyatt hotel in downtown Sacramento across from the Capitol.”

Read more here: Read on.


Opinion: Punish bankers not banks for crimes

Editor’s note: Yves Smith is the creator of the influential financial and economics website Naked Capitalism and author of the bookECONNED: How Unenlightened Self-Interest Undermined Democracy and Corrupted Capitalism. The opinions expressed in this commentary are solely her.

(CNN) — French officials exploded in outrage after BNP Paribas agreed to plea guilty to criminal charges, pay nearly $9 billion in fines, and have access to dollar clearing suspended for a year for its persistent violations of US economic sanctions against Iran, Cuba and Sudan.

The international bank fell under US jurisdiction by virtue of facilitating transactions in dollars which passed through the US.

Most financial commentators had little sympathy with the French position, since the giant bank’s conduct was egregious. It included ongoing records-doctoring to hide the true identity of customers and stymieing the US investigation.

But the French argument was essentially political: that the US had no right to impose its will on a foreign bank, and these transactions were legal under European law.

Yet this is far from the first time the US has used its position as issuer of the world’s reserve currency to advance its foreign policy agenda.

Read on.