Daily Archives: August 5, 2014

FDIC: Big banks’ living wills not credible and need to be revised

So-called living wills submitted by big banks are “not credible” and have to be revised by next July, federal regulators said on Tuesday.

The Dodd-Frank financial reforms require certain big banks to submit plans detailing how they would wind themselves down in the event of a crisis. The 11 institutions subject to the rule submitted first-round plans in 2012 and revisions in 2013.

The Federal Deposit Insurance Corp. said each bank had specific shortcomings, and that all banks had a few in common—among them unrealistic assumptions and a failure to identify necessary changes in their structures.

Based on its review, the FDIC said “the plans submitted by the first-wave filers are not credible and do not facilitate an orderly resolution under the U.S. Bankruptcy Code.”

The regulator gave the banks til July 1, 2015 to file plans that “demonstrate that the firms are making significant progress to address all the shortcomings identified in the letters,” among other requirements.

Read on.

Rep. Steve King Has Heated Confrontation With Dreamers

Rep. Steve King (R-Iowa) had a tense confrontation with two Dreamers in Iowa that was captured on video and posted to YouTube on Monday.

The video’s description identifies the pair as Erika Andiola and Cesar Vargas. In the video, Andiola approaches King and Sen. Rand Paul (R-Ky.), telling them she’s a Dreamer who’s originally from Mexico but was raised in the United States and is a graduate of Arizona State University. (Paul quickly got up and left.)

“I know you want to get rid of DACA, so I want to give you the opportunity ’cause you really want to get rid of it, just rip mine,” Andiola tells King as she hands him her identification card. “Go ahead and do that.”

Here is the video:

 

 

And here is Erika and Cesar followup:

 

$100 million for firm without offices, 1 agent?

WASHINGTON — Companies overseeing millions of mortgage loans appear to be skirting new federal regulations and legal settlements intended to stop them profiteering at the expense of troubled homeowners.

They are selling or have sold nearly nonexistent insurance agencies — in some cases with no offices, no websites and only a single registered agent — in multi-million dollar deals, as new rules prohibit them from collecting commissions on insurance they force homeowners to buy.

The deals illustrate how regulators are still wrestling with messy banking practices more than six years after the housing market’s collapse. They also mean that newly sold insurance agencies have an incentive to compel struggling homeowners to buy costly policies, to justify the high sales prices commanded when the insurance agencies were sold.

The deals involve “force-placed insurance,” a type of backup property insurance meant to protect mortgage investors’ stake in uninsured properties. Standard mortgages require borrowers to maintain homeowners insurance and authorize the loan’s servicer to buy coverage when borrowers don’t. If the borrowers don’t pay for the new insurance, servicers foreclose on their properties and stick the bill to mortgage investors.

………

The country’s second largest non-bank mortgage servicer, Nationstar Mortgage Holdings Inc., has been trying to sell an insurance agency for roughly $100 million, according to people familiar with the deal who spoke on condition of anonymity because they were not authorized to discuss the sale.

Nationstar’s insurance agency, Harwood Service Co., has no website and no independent offices. The switchboard operators at Nationstar’s headquarters in Lewisville, Texas, said they haven’t heard of it. Employees of Assurant Inc., the insurance carrier whose policies Harwood sells, say the company is “just the name used when Nationstar refers us business.”

Harwood’s only registered insurance agent, a Nationstar consultant named Dennis DiMaggio, initially told The Associated Press he was semi-retired. Asked how he could run a $100 million business in semi-retirement, DiMaggio ended the call then later said he had been joking.

 

Nationstar’s first attempt to sell its affiliated insurance agency fell through early this month after the AP raised questions about the deal, prompting New York’s Department of Financial Services to look into the deal.

Read on.

Crooked former Fannie Mae employee gets 15 months for soliciting kickbacks

SANTA ANA, Calif. (CN) – A former Fannie Mae employee was sentenced Monday to 15 months in federal prison for taking kickbacks from a real estate broker who sold properties on behalf of the mortgage agency.
Armando Granillo, 45, of Huntington Beach, worked in Fannie Mae’s Irvine office. He was convicted at trial in March of three counts of honest-services wire fraud for soliciting kickbacks, the U.S. Attorney’s Office said.
As a “real estate owned foreclosure specialist” for Fannie Mae, Granillo had the power to approve sales offers from brokers who wanted to sell Fannie Mae foreclosures. He asked a Tucson real estate broker for kickbacks, and the broker reported him to law enforcement, prosecutors said in a statement.

Read on.

NY Fed Announces New Test Program for Trading in Mortgage Securities

The Federal Reserve Bank of New York said Tuesday it is launching a test program to find small financial firms with whom it can trade mortgage bonds.

The new effort, known as the Mortgage Operations Counterparty Pilot Program, is another chapter in the Fed’s long-running effort to broaden the universe of firms it can trade with. It follows in the footsteps of a recently completed test effort that employed similarly small firms to trade Treasury bonds with the central bank.

Firms eligible to participate in the mortgage program are smaller than the Wall Street giants that comprise the Fed’s primary dealer roster. The Fed has long relied on these mega-banks to serve as its main trading partners when it buys, borrows and sells Treasury and mortgage bonds. The securities purchases affect borrowing costs in the U.S. economy, and are the primary way in which the central bank influences the economy’s trajectory.

The Fed says it is looking for a “small number” of participants for the mortgage program. Eligible firms must be a registered U.S. broker-dealer or chartered bank with capital levels between $1 million and $150 million. The firm must stand ready to buy and sell mortgage bonds. The New York Fed said it expects to announce the names of the firms no later than the first quarter of 2015.

The Fed is looking beyond the 22 primary dealers largely due to the radical changes seen in monetary policy over the course of the financial crisis. Waves of Treasury and mortgage bond buying have lifted the size of the central bank’s securities holdings from just over $800 billion in late 2007 to the current near-$4.5 trillion mark. Some $1.7 trillion of those securities are mortgage bonds.

Read on.

U.S. judge reluctantly approves SEC-Citigroup $285 million deal

A U.S. judge on Tuesday reluctantly approved a $285 million fraud settlement between Citigroup Inc (>> Citigroup Inc) and the U.S. Securities and Exchange Commission, two months after an appeals court voided his decision to reject it as inadequate.

U.S. District Judge Jed Rakoff said he had little choice but to approve the deal, which did not require the bank to admit to any wrongdoing. But he said he feared the 2nd U.S. Circuit Court of Appeals’ decision would rob such settlements of any “meaningful oversight.”

“That court has now fixed the menu, leaving this court with nothing but sour grapes,” he wrote in a brief opinion outlining his disappointment.

Rakoff had objected to the SEC’s decades-old practice of letting some corporate defendants settle allegations without admitting or denying the charges, a decision that is credited with altering the public debate over such deals.

Read on.

Another Settlement – JP Morgan Receives Slap On The Wrist Despite Years Of Fraudulent CFTC Data

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

The Commodities Futures Trading Commission (CFTC) has been long viewed as one of the most corrupt of American institutions – and that’s saying a lot. Putting aside all the accusations with regard to silver manipulation in recent years, the most stunning controversy occurred back in 2010 when a retiring judge accused the other remaining judge of being a total bought and paid for Wall Street crony.

The retiring judge was George Painter, who accused fellow judge Bruce Levine of not once ever ruling in favor of an investor in his 20 years on the bench. Not only that, but he claimed this was the result of a promise Levine made to Wendy Gramm, the former head of the CFTC and the wife of Phil Gramm. Phil Gramm was the Congressman who spearheaded the repeal of Glass-Steagall in 1999, which is seen by many (including myself) as one of the most catastrophic pieces of legislation in American history since it laid the groundwork for the financial crisis of 2008, as well as the continued cancerous permanence and power of TBTF banks. FiredogLake covered the CFTC controversy in 2010:

An Administrative Law Judge at the CFTC (Commodity Futures Trading Commission), George Painter, revealed in his retirement letter that a colleague of his, Judge Bruce Levine, has never awarded a case in favor of a plaintiff in 20 years on the bench. He traces this back to a deal Levine made with Wendy Gramm, the former head of the CFTC and the wife of Phil Gramm (R-Enron and UBS). Indeed, the numbers check out, at least for the time period we know about; Judge Levine has never decided in favor of a plaintiff, i.e. never decided in favor of an investor crying mistreatment or fraud by a commodity dealer or major broker in commodity futures and derivatives trading.

Here’s why Painter accused Levine of this misconduct: there are only two Administrative Law judges at the CFTC. “If I simply announced my intention to retire,” Judge Painter says in his letter, “the seven reparation cases on my docket would be reassigned to the only other administrative law judge at the commission, Judge Levine. This I cannot do in good conscience.” He wanted his docket to transfer to an admin law judge at the SEC or FERC instead.

Well it appears nothing has changed at the CFTC. Less than two weeks ago we learned that former CFTC commissioner Scott O’Malia, who had fought hard against any new rules intended to reign in Wall Street practices, was leaving the CFTC to head one the biggest bank lobbying groups in the world, the International Swaps and Derivatives Association (ISDA). This is the exact lobbying group that had been pressing against new CFTC rules. Reutersreported that:

The International Swaps and Derivatives Association said on Wednesday that Scott O’Malia, a Republican who often voted against new CFTC policy in the wake of the financial crisis, will become the trade group’s next chief executive. O’Malia will start his new job as of Aug. 18, ISDA said. The news came only days after O’Malia said he planned to leave the CFTC as of Aug. 8.

There is just zero shame at this point.

A staffer for Republican Senator Mitch McConnell – now the Senate Minority leader – from 1992 to 2001, O’Malia focused on energy policy during much of his career.

Links to Mitch McConnell. No surprise there.

ISDA is a global lobby group for non-listed derivatives, counting the world’s largest investment banks among its members, and has frequently fought regulatory efforts to reform the market after the financial crisis.

Moving along to today’s story, we learn that the CFTC will impose a meager $650,000 fine on JP Morgan, despite years of warnings about fraudulent data reports. The CFTC announced that:

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against J.P. Morgan Securities LLC (JPMS), a wholly-owned subsidiary of JPMorgan Chase & Co. and a CFTC-registered Futures Commission Merchant (FCM), for submitting inaccurate reports to the CFTC relating to the required reporting of positions held by certain large traders whose accounts are carried by JPMS. The reporting violations occurred despite the CFTC notifying JPMS of numerous errors in its reports. The CFTC Order requires JPMS to pay a $650,000 civil monetary penalty to address its unlawful conduct. The reports are known as the “large trader” reports and are used by the CFTC in order to evaluate potential market risks and monitor compliance with CFTC requirements.