Daily Archives: September 29, 2014

Lloyds fires eight staff over Libor investigation

Lloyds Banking Group has fired eight staff for “totally unacceptable behaviour” unearthed by a major investigation into Libor rigging that resulted in a £225m fine for the bank from US and UK authorities.

The state-backed lender added that around £3m in unpaid bonuses had been forfeited as a result of the dismissals.

Lloyds, which is 25pc owned by the taxpayer, was fined in July for its role in the attempted manipulation of the London interbank offered rate (Libor).

The penalty also included a charge for manipulating the rate payable to the Bank of England for the Special Liquidity Scheme (SLS), making Lloyds the first bank to be penalised over this issue.

Lloyds said the dismissals related to both Libor and SLS rigging.

Read on.

Big Banks Don’t Want You To Find Out What People Really Think Of Them

The nation’s largest banks and debt collectors are worried that if you learn what people are saying about them, you might like them less. And that wouldn’t be fair, they say.

The financial sector is fighting a Consumer Financial Protection Bureau proposal that would have the agency publish complaints submitted by people who feel they have been mistreated by a lender, debt collector or other financial institution. As it now stands, the agency publishes some small amount of information about the more than 290,000 complaints it has received from aggrieved consumers, but has refused to release the full narratives — essentially, the details.

Under the new policy, consumer names would be redacted and banks and other financial institutions would have a chance to publicly respond to or refute any allegations. People who file a complaint would have to opt in to having their narrative published on the CFPB’s website.

“This is what consumers want,” said Susan Grant, the director of consumer protection at the Consumer Federation of America, a nonprofit. “It gives them better ability to make decisions about what financial institution to choose.”

Yet the banks and other financial groups opposing disclosure argue that the CFPB approach would unleash a dangerous flood of misinformation that might promote the faulty sense that somehow they are not good corporate citizens. Consumers would also be confused by all the un-vetted information, they assert.

Read on.

2 Ex-Wells Fargo Employees Charged With Insider Trading

Law360, New York (September 29, 2014, 2:20 PM ET) — The U.S. Securities and Exchange Commission announced on Monday that it has charged two former Wells Fargo employees, a research analyst and a trader, with sharing information that yielded improper gains when it was traded on before the release of market-moving research reports.

Gregory T. Bolan Jr. and Joseph C. Ruggieri ran a scheme that generated $117,000 in profits when they, on at least six occasions, traded in stock before the release of reports that altered the stock’s value, the SEC said Monday.

“Instead of abiding…

Source: Law360

Bank of America : settles SEC charges over capital disclosure errors

Bank of America (>> Bank of America Corp) agreed to pay $7.65 million on Monday to settle civil charges alleging it miscalculated its regulatory capital for years, leading to an overestimate that eventually reached billions of dollars, U.S. regulators said Monday.

The bank said in April that it had discovered that it had overstated its capital levels by $4 billion, an error that caused the bank to suspend its plan to repurchase shares and raise its dividend for the first time since the financial crisis. The miscalculation stemmed from a portfolio of structured notes that the bank inherited as part of its 2009 acquisition of Merrill Lynch and went on until the bank found the error in April.

Read on.

CFPB Hits Flagstar Bank Over Failure to Follow New Servicing Rules

WASHINGTON — Michigan-based Flagstar Bank will be required to pay $37.5 million in restitution and fines over regulatory allegations it blocked struggling homeowners from receiving foreclosure relief, the Consumer Financial Protection Bureau said Monday.

Read on.

More from Housing Wire. Click here.

Fannie, Freddie Need Third-Party Tests of Compliance: Watchdog

The regulator of Fannie Mae and Freddie Mac should require that banks and mortgage lenders obtain independent, third-party tests to ensure compliance with guidelines, according to a government watchdog report.

Neither Fannie nor Freddie “have routine, independent verification of counterparty compliance,” the Federal Housing Finance Agency Office of Inspector General said in a report to be released Friday.

As a result, the government-sponsored enterprises are exposed to greater risk of fraud and the misrepresentation of facts about properties, borrowers or loans, the report said.

Read on.

The jury in a mortgage case finally strikes back at fraudulent bankers

Given the government’s failure to bring criminal cases against bankers and other Wall Street figures for collapsing the U.S. economy in 2008, it’s been left to the little guy to strike back.

To be precise, one federal jury in Sacramento, which acquitted four allegedly fraudulent mortgage borrowers of criminal charges after hearing testimony that the executives at their banks pulled out all the stops to make fraudulent loans for their personal profit.

We’re a bit late to this story–the verdict was handed up at the end of August, Salon’s Thomas Frank had a good analysis of the case a few weeks ago. But because of its potential significance for mortgage fraud prosecutions going forward, and because it happened in the federal district known for its aggressiveness in pursuing borrowers for mortgage fraud, the case is worth a closer look.

“The jury understood that these defendants were mice,” says William K. Black, a former litigation director at the Federal Home Loan Bank Board who oversaw the prosecutions of numerous savings-and-loan executives after that industry’s meltdown.

Black, who is associate professor of law and economics at the University of Missouri-Kansas City, was an expert witness for the defense in the Sacramento case. He may have delivered the key testimony blowing up the government’s contention that the defendants were the main fraudsters. His testimony was that executives at the lending institutions deliberately created a system to make fraudulent loans as a recipe for personal enrichment.

Read on.

Greenberg Team to Grill Bernanke, Geithner on AIG Bailout

The 85 names on Starr International Co.’s witness list include, among other top Wall Street regulators, Ben Bernanke, the former Federal Reserve chairman; Henry Paulson, Bush’s Treasury secretary; and Timothy Geithner, the head of the Federal Reserve Bank of New York in 2008 and later Obama’s Treasury secretary.

In Maurice “Hank” Greenberg’s telling, the $182 billion taxpayer bailout that savedAmerican International Group Inc. (AIG) and perhaps all of Wall Streetduring the 2008 financial collapse was a government rip-off.

It trampled the rights of shareholders, denying them more favorable terms offered to banks and companies that foundered during the meltdown, according to Greenberg, who built AIG into the world’s biggest insurer before leaving in 2005.

Greenberg’s Starr International Co., AIG’s largest shareholder when the financial crisis struck, sued the government, calling its assumption of 80 percent of the insurer’s stock an unconstitutional “taking” of property that requires at least $25 billion in compensation.

A trial of his claims begins today in Washington, where David Boies, Greenberg’s famed litigator, will question the architects of the bailout, including Ben Bernanke, Henry Paulson and Timothy Geithner.

“I think they’re going to lose,” Marcel Kahan, a New York University law professor who specializes in corporate finance and governance, said of Greenberg and Boies. “I think they realize they’re going to lose. But you never know what’s going to happen.”

Read on.

Defense Department Proposes Broad Ban on High-Cost Loans to Service Members

Acknowledging that a previous law did not go far enough, Defense Department proposes new rules to protect service members from high-cost lenders.

The Department of Defense released proposed rules today targeting the practices of a broad range of high-cost lenders and prohibiting them from charging service members interest rates over 36 percent.

The new rules would overhaul the Military Lending Act, which, when enacted in 2007, narrowly defined potentially abusive loans. But as ProPublica and Marketplace reported last year, high-cost lenders easily circumvented the law by offering longer-term loans. As a result, those pitching payday, auto-title, and installment loans continued to peddle credit from stores lining the streets near military bases.

The new rules would have a substantial impact. A Defense Department survey earlier this year found that 11 percent of service members reported taking out a loan with interest above 36 percent in the past year. The survey also found service members were a prime target for such lending: generally young, not financially savvy and often stretched by trying to support a family on a tight budget.

In our story last year, we focused on the case of one Marine who, in order to borrow $1,600, agreed to pay back $17,228 to an auto-title lender over two and a half years— a loan at 400 percent interest. When he could not keep up the payments, his car was repossessed. Under the new rules, it would be illegal for payday and auto-title lenders to make such longer-term loans at steep rates.

The new rules would also restrict installment lenders, who aren’t covered at all by the current law.  Because of the law’s exclusive focus on short-term credit, installment lenders have been free to charge service members interest rates far above 36 percent, as well as lard loans with nearly useless insurance products that serve mainly to boost the cost.

Installment lenders, whose loans typically extend for five months and longer, often provide loans to service members. World Finance— one of the country’s largest installment lenders and the subject of an investigation by ProPublica and Marketplace— said last year that about 5 percent of its loans, or approximately 40,000, were made to service members or their families.

Read on.

Sen. Warren Calls for Hearings on New York Fed Allegations

By Matthew Boesler and Kathleen Hunter Sep 26, 2014 9:00 PM PT

U.S. Senator Elizabeth Warren called for congressional hearings into allegations that the Federal Reserve Bank of New York has been too deferential to the firms it regulates.

A radio program about the regional Fed bank raised “disturbing issues” and “it’s our job to make sure our financial regulators are doing their jobs,” Warren, a Massachusetts Democrat and member of the Senate Banking Committee, said in a statement yesterday.

Read on.