Daily Archives: October 2, 2014

Blankfein, Dimon Pursued Private AIG Bailout, Lawyer Says

The heads of Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM) told federal regulators days ahead of the 2008 government bailout ofAmerican International Group Inc. (AIG) that they were putting together a private rescue of the insurance giant, aNew York Fed lawyer testified.

When AIG’s name came up in a Sept. 12 meeting of financial regulators and creditors of Lehman Brothers Holdings Inc., which was teetering toward bankruptcy, Goldman Sachs Chief Executive Officer Lloyd Blankfein and JPMorgan CEO Jamie Dimon said, “That’s another problem we’re taking care of,” said Thomas Baxter, general counsel of the New York Federal Reserve Bank.

“I took careful note of that colloquy and it led me to believe that we had another issue in AIG but it was being addressed by the private sector,” Baxter told a judge in Washington yesterday in a trial over the terms of the U.S. bailout.

Read on.

You Know It’s a Tough Market When Ben Bernanke Can’t Refinance His Home

Ben S. Bernanke said the mortgage market is still so tight that he’s having a hard time refinancing his own home loan.

The former Federal Reserve chairman, speaking at a conference in Chicago, told moderator Mark Zandi of Moody’s Analytics Inc. — “just between the two of us” — that “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

When the audience laughed, Bernanke said, “I’m not making that up.”

“I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions,” he said.

Bernanke, addressing a conference of the National Investment Center for Seniors Housing and Care in Chicago, said that the first-time homebuyer market is “not what it should be” as the economy in general strengthens.

Read on.

Bernanke’s income??— pulling down an estimated $250,000 per speech.

JPMorgan Says Data Breach Hit 76 Million Households

JPMorgan says a data breach first discovered this summer affected 76 million households and 7 million businesses.

That’s more than half of all households in America.

In a regulatory filing, the bank said that the information leaked included names, email addresses, phone numbers and addresses.

The bank said that there’s no evidence account information was taken.

Read on.

SCOTUS agrees to hear challenge to disparate impact in housing

For the third time, the U.S. Supreme Court has assented to hear a case that could overturn the Obama administration’s heavy-handed use of a theory that says even if there’s no evidence of discrimination in housing, unequal outcomes prove there’s discrimination.

This could have a major impact on housing and mortgage financing, attorneys with Ballard Spahr in New York tell HousingWire.

“This marks the third time in successive terms that the Supreme Court has agreed to hear a case presenting the question of whether disparate impact claims are permitted under the Fair Housing Act,” attorney Peter Cubita said. “In its two prior terms, the Court was poised to decide the question but the cases presenting it were settled shortly before oral argument. Although this case involves the allocation of tax credits for low-income housing projects, the issue presented is of great interest to housing creditors because of the history and magnitude of governmental fair lending settlements based upon the disparate impact doctrine.”

Justices on Thursday granted certiorari to a challenge to the so-called disparate impact theory in the case of Texas Dept. of Housing vs. Inclusive Communities.

Read on.

Court’s HOA foreclosure ruling ‘a win for Nevada,’ Las Vegas investor says

The recent Nevada Supreme Court decision that allows homeowners associations to trump mortgage lenders in foreclosing on homes sent a shot from Carson City across the state and through the Nevada real estate community. The ruling has the potential to affect the delicate relationships among homeowners, HOAs and lenders covering more than 500,000 properties in nearly 3,000 HOAs in Nevada.

Kolleen Kelley, president of the Nevada Association of Realtors, referred to it as “Armageddon” on the day the decision was announced. She said banks would further restrict mortgage lending if their loans couldnt be protected. Other industry observers agreed.

The case centered on an $885,000 home in Southern Highlands sold at auction for $6,000 by an HOA.

Read on.

Megabanks have prison financial services market locked up, government gives no-bid contracts to Bank of America, JP Morgan

Editor’s note: This is the second in a two-part series examining how financial companies impose high costs on the families of prison inmates. Part One,which ran on Tuesday, focused on the explosive growth of JPay Inc., a private company that performs money transfers for 70 percent of U.S. offenders.

On Wall Street, Bank of America plays a perpetual second fiddle to JPMorgan Chase & Co., the only U.S. bank that holds more assets.

A few blocks north, however, at the New York Metropolitan Correctional Center, there exists a market that Bank of America has locked down, literally. For the 790 federal prisoners incarcerated at MCC, Bank of America controls the provision of money transfers, e-messaging and some telephone services.

The bank’s monopoly extends across the federal Bureau of Prisons system — 121 institutions housing 214,365 inmates. Since 2000, Bank of America has collected at least $76.3 million for its work on the program.

When inmates are released, JPMorgan steps in, issuing high-fee payment cards to distribute money from their prison accounts, which include earnings from jobs and money their families send them.

The banks’ exclusive deals came not from the Bureau of Prisons, but from the U.S. Treasury.

The agency awarded the contracts using a 150-year-old authority that allows it to sidestep the oversight, transparency and competition typically required for federal contracting. That means that for 14 years, Bank of America has never been required to compete with other vendors who might do the work better or for less money, according to Treasury documents obtained under the Freedom of Information Act.

JPMorgan’s no-bid deal to issue debit cards for various federal agencies began in 1998, was extended in 2008 and eventually expanded to include cards for federal prisons. Fees from former inmates make up most of the bank’s compensation for these cards, documents show. A separate Treasury document from 2013 said that about 50,000 released prisoners had been issued cards and listed fees of $2 for withdrawing money from an ATM and $1.50 for leaving an account inactive for three months.

JPMorgan, Treasury and the Bureau of Prisons declined to provide a current fee schedule for the cards. Bank of America, JPMorgan and the Bureau of Prisons all declined numerous requests to discuss the banks’ deals inside U.S. prisons.

The documents show how Treasury has expanded the scope of Bank of America’s contract — originally focused on managing accounts for inmates and tracking inventory at prison stores — to include an array of services for the nation’s largest prison system, from providing e-messaging to supplying the prison system with handheld scanners. The deal allows Bank of America to subcontract with other prison vendors, positioning it as a hub of prison services that are procured outside any government bidding process.

The contract has been amended 22 times in the past 14 years.

Read on.

“I Lied To Get A Loan, And Now It Is Forgiven” – UK’s Largest Payday Lender Just Wrote Off 330,000 Loans

Here is his story:

When Elliot Gomme needed money for a holiday, like many people he turned to payday lender Wonga. He needed £120 and says he didn’t have a problem convincing them to lend him cash saying he was in full-time work.

But the 20-year-old admitted lying on his application and told Newsbeat it was “too easy” to be accepted.

He’s now likely to be one of 330,000 people whose debts will be written off after a ruling that Wonga lent money to people who couldn’t repay it.

“My bank couldn’t give me an overdraft or anything, and so I went to them [Wonga],”he says.

He received his money and went on holiday, but a few weeks later he says the firm started calling him and he says they were “constant”. “They were ringing me every day,” he says.“They were telling me how much I owe and that there was added interest.”

Elliot says that a few months later he was being told his debt had risen to more then £800 and it began to affect his day-to-day life. The longer it went on, the more he says he worried he would get about his situation getting out of control.

* * * 

Elliot is likely to be one of those to have his loan cancelled and says it’s come as a relief. He says the amount of the debt was making him feel depressed and that he had “no idea” what he would have done if this ruling hadn’t come.

Bloomberg explains the Wonga agreement applies to loans that wouldn’t have been made under new tightened lending criteria and that have been in arrears for more than 30 days, the London-based company said in a statement today. The company is writing off 220 million pounds ($356 million) in loans, according to a person with knowledge of the matter, who asked not to be identified because the information in private.

“The need for change at Wonga is real and urgent,” Wonga Chairman Andy Haste said in the statement. “Our regulator is determined to improve standards in consumer credit, and I share that determination. There is much to do in order to make Wonga a sustainable and accepted business, and today’s announcement is a significant step forward in that process.”

The U.K. payday loan market is being reviewed by the Financial Conduct Authority after a government survey found providers weren’t fully compliant with standards designed to protect consumers. Wonga, CashEuroNet UK LLC and Dollar Financial U.K. Ltd. are the three largest U.K. payday lenders, according to Bloomberg Intelligence.

Wonga also said today that about 45,000 customers who are less than 30 days in arrears are being given as much as four months to repay their loans without interest and charges.