Daily Archives: August 6, 2014

Bank of America nears record RMBS settlement

According to The Wall Street Journal the much rumored and anticipated Bank of America settlement is near completion. If so, it is by far the largest deal of its kind yet seen.

According to the article:

“Bank of America Corp. and the Justice Department are close to a deal in which the bank will pay between $16 billion and $17 billion to resolve allegations of mortgage-related misconduct in the run-up to the financial crisis, according to people familiar with the matter.”

In November, JPMorgan Chase (JPM) agreed to pay $13 billion to settle claims of mortgage-backed securities fraud brought against the bank by the U.S. government.

The U.S. Department of Justice then used some of that money to speed up its cases against other big banks, likeBank of America (BAC) and Citigroup (C).

Last month, Citi 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.

BofA took a little longer, as the New York Times said the bank was at an impasse in negotiating a multi-billion dollar settlement deal related to the bank’s involvement in the mortgage crisis.

Source: WSJ

A Kentucky University President took a $90,000 pay cut so he could pay lowest-paid campus employees

Raymond Burse, interim president of Kentucky State University, has given up more than $90,000 of his salary so university workers earning minimum wage could have their earnings increased to $10.25 an hour.

“My whole thing is I don’t need to work,” Burse said. “This is not a hobby, but in terms of the people who do the hard work and heavy lifting, they are at the lower pay scale.”

Burse’s annual salary had been set at $349,869. He had been KSU’s president from 1982 to 1989 and later became an executive at General Electric Co. for 17 years, including 10 as a senior executive. He retired in 2012 with good benefits, he said.

Burse started talking with members of the KSU Board of Regents about the gesture more than two weeks before the board met to approve his contract on July 25, he said.

Burse asked how many university employees earn less than $10.25 an hour, an amount some say is a living wage. The current minimum wage is $7.25.

“This is not a publicity stunt,” he said. “You don’t give up $90,000 for publicity. I did this for the people. This is something I’ve been thinking about from the very beginning.”

The raise in pay for those employees will stay in place even after a new president is selected, he said. It will be the rate for all new hires as well. The change is immediate.

Burse’s salary is now set at $259,745.

Lloyds Said to Suspend Employee in Libor-Manipulation Probe

Lloyds Banking Group Plc (LLOY) suspended a female trader following the lender’s fine forinterest-rate manipulation, two people with knowledge of the matter said.

Emma Koops was suspended by the London-based lender after it reached a 226 million-pound ($380 million) settlement with global regulators over allegations it rigged the London interbank offered rate and related benchmarks, said the people, who asked not to be identified because the matter is private.

Koops is the first woman reported to be suspended amid the six-year-old probe into allegations traders sought to profit by manipulating Libor, the benchmark interest rate for more than $300 trillion of securities ranging from mortgages to student loans. At least ten firms have been fined almost $6.5 billion in total for rigging Libor and related rates.

She worked on the international money markets desk at the bank, according to a LinkedIn profile matching her name. Koops has worked at Lloyds since 2002, the U.K. Financial Conduct Authority’s register shows. She didn’t immediately respond to e-mails sent to her work and LinkedIn accounts. A colleague who answered her office telephone declined to comment. Lloyds said in a statement it won’t comment on individuals.

Read on.

Michigan GOP Primary Results: “Foreclosure King” Beats Santa Impersonator

The War on Christmas seems to comes earlier every year: Rep. Kerry Bentivolio (R-Mich.), a Santa impersonator who was elected to Congress by accident in 2012, was defeated in a 30-point landslide on Tuesday, becoming this year’s first (and probably only) victim of the Republican establishment’s dissatisfaction with congressional tea partiers.

Bentivolio won his party’s nomination two years ago in a fluke after the incumbent, Rep. Thad McCotter, failed to qualify for the ballot and abruptly resigned. (A high school teacher and reindeer rancher, Bentivolio was the only Republican left on the ballot.) Bentivolio never fully sold himself as a serious congressman—he once promised to hold a hearing on chemtrails, the conspiracy theory that airplanes are brainwashing Americans with poison—making him an obvious target, despite winning the backing of Speaker of the House John Boehner.

More interesting than Bentivolio, who always had a placeholder feel to him, is the man who trounced him the primary—David Trott, a high-powered Republican donor whose law firm happens to process most of Michigan’s foreclosures. As one registrar of deeds in southeast Michigan put it in December, Trott & Trott “made a living off of monetizing human misery.” A big donor to the pro-Romney super-PAC Restore Our Future, and a member of the 2012 GOP presidential nominee’s Michigan finance committee, Trott is an archetypal establishment Republican.

Read on.

Federal Reserve OKs BofA’s Resubmitted Capital Plan

Law360, Washington (August 06, 2014, 12:09 PM ET) — The Federal Reserve has tacitly approved Bank of America Corp.’s revised capital plan, resubmitted in May after an accounting error had forced the bank to suspend its planned dividend payments and share buybacks, the regulator announced Wednesday.

In a brief statement, the Fed said that it “has not objected” to the banking giant’s revised capital plan after it had in April required the bank to resubmit its plan, following BofA’s disclosure that it had incorrectly reported some data, originally publicly unveiled in March.

Source: Law360

A New Report Argues Inequality Is Causing Slower Growth. Here’s Why It Matters

The topic of income inequality and its effects has been the subject of countless analysis stretching back generations and crossing geopolitical boundaries. Despite the tendency to speak about this issue in moral terms, the central questions are economic ones: Would the U.S. economy be better off with a narrower income gap? And, if an unequal distribution of income hinders growth, which solutions could do more harm than good, and which could make the economic pie bigger for all?

Given the decades–indeed, centuries–of debate on this subject, it comes as no surprise that the answers are complex. A degree of inequality is to be expected in any market economy. It can keep the economy functioning effectively, incentivizing investment and expansion–but too much inequality can undermine growth.

Higher levels of income inequality increase political pressures, discouraging trade, investment, and hiring. Keynes first showed that income inequality can lead affluent households (Americans included) to increase savings and decrease consumption (1), while those with less means increase consumer borrowing to sustain consumption…until those options run out. When these imbalances can no longer be sustained, we see a boom/bust cycle such as the one that culminated in the Great Recession (2).

Aside from the extreme economic swings, such income imbalances tend to dampen social mobility and produce a less-educated workforce that can’t compete in a changing global economy. This diminishes future income prospects and potential long-term growth, becoming entrenched as political repercussions extend the problems.

Alternatively, if we added another year of education to the American workforce from 2014 to 2019, in line with education levels increasing at the rate of educational achievement seen from 1960 to 1965, U.S. potential GDP would likely be $525 billion, or 2.4% higher in five years, than in the baseline. If education levels were increasing at the rate they were 15 years ago, the level of potential GDP would be 1%, or $185 billion higher in five years.

Our review of the data, as well as a wealth of research on this matter, leads us to conclude that the current level of income inequality in the U.S. is dampening GDP growth, at a time when the world’s biggest economy is struggling to recover from the Great Recession and the government is in need of funds to support an aging population.

The dine and dash story: Senator Paul takes bite of burger, hears questioner is a DREAMer, flees while still chewing


This story has gone viral. Hilarious with Paul. Sen. Paul was at an Iowa event with Rep. Steve King. Wow, Rand Paul couldn’t get out of that restaurant fast enough… Rand Paul, the Roadrunner in this clip. Meep meep, byeeeee! Anyway, the two DREAMers had an intense exchange about the immigration problems with Rep. King.

Consumers FIGHT BACK! Bankruptcy Discharge Violation- Failing to Correct A Credit Report!

“The failure to update a credit report to
17 show that a debt has been discharged is also a
18 violation of the discharge injunction if shown to be
19 an attempt to collect the debt. Because debtors
20 often feel compelled to pay debts listed in credit
21 reports when entering into large transactions, such
22 as a home purchase, it should not be difficult to
23 show that the creditor, by leaving discharged debts
24 on a credit report, despite failed attempts to have
25 the creditor update the report, is attempting to
1 collect the debt.”

Furthermore, by failing on a systematic basis to
12 correct the credit reports, as alleged in the complaint,
13 Chase is enhancing its purchasers’ ability to collect on
14 the debt, which is, after all, charged-off debt when
15 purchased, with a relatively high, I can infer, prospect
16 of the borrower going into bankruptcy. Chase profits, I
17 can infer and as the complaint states, from that practice
18 by getting a higher purchase price from its buyers, even
19 if those buyers buy the debt before the bankruptcy has
20 occurred. The buyers know, that is, that post-sale Chase
21 will refuse to correct the credit report to reflect the
22 obligor’s bankruptcy discharge, which means that the
23 debtor will feel significant added pressure to obtain a
24 “clean” report by paying the debt. Separate and apart
25 from Chase seemingly having a duty to correct the report
under the FCRA, as discussed above, no one has pointed to
2 any provision of applicable law that prohibits Chase from
3 correcting the credit reports. And, in fact, Chase
4 eventually did so in respect of Mr. Haynes’ credit report.
5 Therefore, I believe the complaint sets forth a cause of
6 action that Chase is using the inaccuracy of its credit
7 reporting on a systematic basis to further its business of
8 selling debt and its buyer’s collection of such debt.
9 How the sale of the debt is reported supports
10 this conclusion. In other words, such disclosure, or,
11 more aptly, its limited nature, also puts Chase’s refusal
12 to correct the credit reports in context. Mr. Haynes’
13 credit reports have been referred to repeatedly in the
14 complaint, as well as at oral argument; obviously, they
15 are front and center in this litigation and may be
16 considered in connection with Chase’s 12(b)(6) motion. It
17 is acknowledged that although those credit reports list
18 the debt as “sold,” they do not identify the purchaser.
19 Therefore, as far as the debtor is concerned, the only
20 creditor to approach to correct the credit reports is
21 Chase, which, though it appears to be the only game in
22 town, as a matter of policy refuses to correct them (while,
23 in addition, retaining a percentage of payments sent to
24 Chase by the debtor, as opposed to Chase’s — undisclosed
25 — buyer), highlighting further the perniciousness of
Chase’s allegedly systematic approach in refusing to
2 correct such reports.

Here is the court document by Matt Weidner law blog. Click here.

Small US Bank Helps Unemployed Borrowers Find Jobs, Avoid Foreclosure

Since 2007, more than five million American families have lost their homes to foreclosure.

Marketing manager Katrina Holmes almost became one of them.  Just weeks after buying a new home for her family, she lost her job.  With her options running out, Holmes contacted her mortgage lender.  She expected the bank to tell her she had to give up her dream of home ownership.

“Fifth Third Bank could have said to me: ‘you got to go.’  And they didn’t.  And that would have been worse but I have not had to deal with worse,” said Holmes.

Holmes is just one of the success stories from Fifth Third Bank’s decision this year to use part of its advertising budget to hire a career-coaching firm to help unemployed borrowers.  Holmes landed a job in the health industry – and the bank earned a loyal customer.  Bank spokesperson Larry Magnesen calls that a good  business decision.”

“A foreclosure is a disaster for all concerned.  It’s a tragedy for the family.  It’s not a good thing for the community and in many cases, the bank will lose a substantial amount of money on that process.  So no bank wants to take back a home.  So this is a really great solution for all concerned,” said Magnesen.

Randall Jackson faced losing his Chicago home after being unemployed for nine months.  The last thing he expected from his bank – was career coaching.

“I was just absolutely shocked that Fifth Third was offering such a program to me and so I signed up and it turned out to be one of the best things I’d ever done,” said Jackson.

Besides helping build effective resumes, the 16-week program relies heavily on one-on-one career guidance.  That’s important says NextJob CEO John Courtney, who says unemployment can take a heavy toll on job seekers.

“The first part is to help build their confidence and with their accomplishments-based resume that doesn’t just list their work history but goes through all of their accomplishments – they begin to stand up a little straighter, begin to approach the job market with more hope and more confidence to go into an interview and land that job,” said Courtney.

Read on.

Report: Foreclosure-related suicide up 250 percent

According NBC News, the number of people who make that grim decision jumped 253 percent between 2005 and 2010.

“Foreclosure may be exceptionally stressful, because it is very protracted and consists of multiple negative events,” said Katherine A. Fowler, a CDC researcher and lead author. “… Other studies show that people tend to become more depressed about negative life events for which they feel personally responsible, and for which they can’t control the outcome.”