Daily Archives: July 20, 2014

In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates

Rodney Durham stopped working in 1991, declared bankruptcy and lives on Social Security. Nonetheless, Wells Fargo lent him $15,197 to buy a used Mitsubishi sedan.

“I am not sure how I got the loan,” Mr. Durham, age 60, said.

Mr. Durham’s application said that he made $35,000 as a technician at Lourdes Hospital in Binghamton, N.Y., according to a copy of the loan document. But he says he told the dealer he hadn’t worked at the hospital for more than three decades. Now, after months of Wells Fargo pressing him over missed payments, the bank has repossessed his car.

This is the face of the new subprime boom. Mr. Durham is one of millions of Americans with shoddy credit who are easily obtainingauto loans from used-car dealers, including some who fabricate or ignore borrowers’ abilities to repay. The loans often come with terms that take advantage of the most desperate, least financially sophisticated customers. The surge in lending and the lack of caution resemble the frenzied subprime mortgage market before its implosion set off the 2008 financial crisis.

Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime — people with credit scoresat or below 640.

Read on.


Division of Resolutions and Receiverships Institution Numer: 10015 Insti tution Location: Henderson, NV Washington Mutual Bank Closing Book Date of Closing: September 25, 2008 Confidential Information Confidential Information Transaction Recap Washington Mutual Bank Henderson, NV In all the transactions offered by the FDIC, the Whole Bank Purchase and Assumption Agreement will be tailored to the winning bid. In all transactions, all assets are purchased by the acquirer and the preferred stock is excluded from the transaction. The legal documents will be the governing documents for this transaction. The FDIC is offering five alternative transaction structures: 1. All liabilities are assumed except the preferred stock. 2. All liabilities are assumed, except the preferred stock and the subordinated debt. 3. All liabilities are assumed except the preferred stock, the subordinated debt and the senior debt. 4. All deposits and secured liabilities are assumed by the acquirer. 5. All insured deposits and secured liabilities are assumed. The bid for alternatives 1, 2, or 3 must be at least the FDIC’s administrative costs of the closing equal to $ (amount to be provided) .

Here is the document. Click here.

UK’s Serious Fraud Office may announce FX probe by end-July – FT.com

The Serious Fraud Office, the UK’s main anti-fraud agency, could announce a formal investigation into alleged manipulation of the global foreign exchange market by the end of this month, the FT.com reported on Sunday, citing people familiar with the situation.

The UK agency has been gathering input and information for the past few month on allegations of rigging in the currency market, which has a daily volume of $5.3 trillion, according to people cited by the FT.

Any announcement by the SFO follows frequent information-sharing meetings with the UK’s Financial Conduct Authority, the same sources said.

Read on.

Argentina, struggling with the American vultures, Will it collapse?

Le Monde.fr (translated in English):

Hedge funds benefit vultures once again the weakness of government. We alreadytracking this situation when the advance made ​​in Greece in late 2012 had been partly used to pay off these vultures.

This time, it was Argentina who is the victim. These are funds that specialize in the purchase of bonds of these governments in times of crisis and use all means to be redeemed at par value of bonds. This allows them, if successful, to multiply many times their bet.

Blackmail vultures

The restructuring of Argentina’s debt ($ 95 billion) is a major problem for the country’s future. Although it is possible to have mixed opinions about how the Government of Kirchners faced its financial responsibilities, as we have seen in thecase of Repsol YPF nationalization, it is essential to reopen the country’s access to capital markets to develop infrastructure in particular has suffered from an inability to fund its maintenance and development.

92% of the external debt of Argentina is held by a group of lenders federated by the Institute of International Finance. This group recently negotiated a restructuring of Argentina’s debt: this is called a waiver of 70% of the nominal value of the debt of $ 65 billion. An agreement is in sight, but has been blocked by the U.S. courts have ordered the immediate payment of $ 1.5 miliards hedge funds. The situation is compounded by a decision of the Supreme Court of the United States refused to hear the appeal of the Argentine State.

8% represented by the vulture funds are therefore being blackmailed: 100% of nominal or nothing. This typical attitude scavengers block the payment by Argentina 900 million in interest on its debt at the end of the month.

Congressman defends payday lending industry

 Rep. Gregory Meeks


Top financial industry donor: Credit Suisse

  • Held a 2012 birthday fundraiser at the Wall Street Capital Grille, top ticket price $2,500. Previous fundraisers hosted by lobbyists for payday, card, mortgage insurance, ICBA and credit unions.
  • Defended a 2009 bill to loosen regulation of payday lenders by saying it provides options to people who in earlier times “would come back without a limb” for failing to repay.
  • Industry contributions since 2010: $1,182,022


A congressman who has been criticized for being too close to the financial industry Thursday declared that his broad support for payday lending firms is about “trying to make sure individuals have dignity and aren’t ripped off.”

Rep. Gregory Meeks, D-N.Y., spoke to a breakfast meeting at the National Press Club for Master Your Card, MasterCard’s “public education” effort to show consumers, small businesses and governments more ways to use electronic payments.

Meeks was dubbed a member of the “banking caucus” in a Center for Public Integrity investigation released in April. Just before he spoke, the group heard from Rep. Steve Stivers, R-Ohio, another “banking caucus” member and former megabank lobbyist.

Meeks told the crowd that efforts to tighten oversight of high-cost, short-term loans targeting poor people will “take options off the table,” driving consumers to neighborhood loan sharks.

“If you’re focused on that market, you’ll make money,” Meeks told the group, mostly employees of financial companies and industry-supported nonprofits focused on “financial inclusion.”

Read on.

Federal prosecutors issues subpoena in inquiry on Cuomo’s closing of Moreland Commission

Federal prosecutors investigating Gov. Andrew M. Cuomo’s shutdown of an anticorruption commission have subpoenaed the assistant to its former executive director to testify before a grand jury in Manhattan, suggesting that the criminal inquiry has moved to a new stage, people briefed on the matter said on Thursday.

Federal agents served the subpoena on the assistant, Heather Green, on Wednesday morning, appearing at her doorstep before 7 a.m., the people said. Ms. Green, who is not believed to be a target of the inquiry, worked as an executive assistant to the anticorruption panel’s former executive director, Regina Calcaterra, until Mr. Cuomo announced he was disbanding the panel, known as the Moreland Commission, on March 29.

DOJ should end secret selection process for corporate watchdogs

Thomas Perrelli just won quite a plum assignment. The former U.S. associate attorney general, who resumed his partnership at the law firm Jenner & Block in 2012, was appointed Monday to serve as Citigroup’s independent monitor as part of the bank’s $7 billion settlement with the Justice Department and five state attorneys.

Perrelli and the team of Jenner lawyers who will undoubtedly join him in watching over Citigroup will be paid by the bank, as is customary in corporate monitorships. The specifics on what Citi will pay him aren’t public, and, to be sure, Perrelli’s mandate under the settlement agreement is limited. But rest assured: He and his firm are going to earn a lot of money as Citi’s monitor. As a federal judge who has overseen a corporate monitor told my Reuters colleague Casey Sullivan, “It is a huge cash cow. These are very, very lucrative appointments.”

Perrelli also bears enormous responsibility. His charge, according to the Citi settlement agreement, is to make sure that the bank properly distributes $2.5 billion in mortgage relief to homeowners who were allegedly injured by Citi’s voracious appetite for loans to bundle into mortgage-backed securities. It’s up to Perrelli to verify that the bank follows through with promises to modify and refinance mortgages for borrowers struggling to make payments or paying mortgages on houses worth less than the loans.

How was Perrelli picked for this important and lucrative job? We don’t really know, at least not in any official way from the Justice Department or the bank. Unofficially, sources have told Reuters reporters that after the Justice Department informed Citi that the bank had to hire an independent monitor, Citi suggested Perrelli, who was then approved by his former Justice colleague Tony West. West, after all, could hardly question the integrity and credentials of the lawyer who preceded him as associate attorney general.

It’s entirely possible, even probable, that Perrelli is the best possible steward of the public’s interest in Citi’s distribution of $2.5 billion. When he was at Justice, Perrelli led negotiations of the government’s $25 billion global mortgage servicing settlement with the biggest banks in the country, including Citigroup. He also oversaw the Justice Department’s deal with BP after the Deepwater Horizon spill, in which BP agreed to set aside $20 billion for spill victims. Perrelli certainly appears to be above reproach.

But the process that led to his appointment is not. Secrecy breeds cynicism. If the Justice Department wants the public to trust the watchdogs it appoints to safeguard the public’s interest in megasettlements like the one with Citigroup, it should tell us why it selected the monitors it did and how they’ll be held accountable.

Read on.

FHFA watchdog raises concerns about nonbanks

Explosive growth of nonbank lenders comes with risks to GSEs

In the continuing aftermath of the financial crisis, the nation’s biggest banks are hemorrhaging income from their mortgage divisions. Whether it’s due to massive settlements stemming from fraudulent pre-crisis lending practices, like the one that Bank of America announced on Tuesday, or due to shrinking mortgage originations, like JPMorgan Chase announced on Wednesday, the big banks are hurting in the mortgage business.

Their losses have turned into huge growth for nonbank and smaller lenders. According to a report from theFederal Housing Finance Agency’s Office of the Inspector General, the amount of loans that Fannie Maeand Freddie Mac have purchased from nonbank and smaller lenders has exploded in the last few years.

And that may be cause for some concern among the government-sponsored enterprises, the FHFA’s watchdog says.

Read on.

Documents on Citigroup

Citigroup and the Justice Department have agreed to a $7 billion deal that will settle a federal investigation into the mortgage securities the bank sold in the run-up to the financial crisis.

‘We Should Start Praying’

In one internal email cited by prosecutors, a Citigroup trader wrote “went thru Diligence Reports and think that we should start praying … I would not be surprised if half of these loans went down.” But the bank securitized the loans anyway.

Read on.

Citigroup has $280 mln in loans in China ports at center of metals probe

(Reuters) – Citigroup Inc has about $280 million in loans tied tocommodities in two Chinese ports which are at the center of a probe into possible fraud, a senior executive said on Friday, becoming the first U.S. bank to disclose its potential exposure.

The total is a large portion of the bank’s roughly $400 million worth of so-called repo commodity financing deals in China. Short for repurchasing agreements, repo deals give customers access to short-term credit in exchange for goods.

“At this stage we believe the activities are isolated and just specific to those very specific locations,” Chief Financial Officer John Gerspach said in a conference call with analysts.

The loans are to clients that are non-Chinese subsidiaries of large multi-national corporations and the contracts are guaranteed by the parent companies, he said.

Read on.