Daily Archives: October 7, 2014

Company That Sues Soldiers Pledges Reform, Changes Name

USA Discounters has undergone a makeover.

The Virginia-based retailer was the focus of a ProPublica investigation in July into its lending practices to service members. The company still sells high-priced furniture, electronics and appliances outside military bases across the country, but it has adopted a new name for its stores, USA Living, and says it has made reforms to its collections processes.

As before, USA Living advertises that active military customers, regardless of their financial histories, are “always approved” for credit. But it has traded in the USA Discounters’ tagline, “Your incredible credit store,” for a new USA Living tagline, “Credit for the life you want.”

Hannah Arnold, a company spokeswoman, said the name change was made to avoid confusion. “[T]he company is not a discount store,” she wrote in an email.

Despite the name change, USA Living continues to make loans much the same way it did as USA Discounters.
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Goldman Sachs ordered to pay Libyan legal costs

Goldman Sachs has been ordered to pay Libya’s sovereign wealth fund legal costs worth hundreds of thousands of pounds after making a U-turn on its efforts to throw out a $1.2bn lawsuit.

In an early victory for the Libyan Investment Authority (LIA), the UK’s High Court on Tuesday ordered that the Wall Street bank pay indemnity costs of at least £200,000 within 14 days.

The LIA is suing Goldman Sachs in London, claiming that executives at the bank fooled Libyan officials into making investments that they did not understand during the Gaddafi era, while making huge profits along the way.

Banker Pleads Guilty Over Libor Manipulation

A senior banker from a British bank has admitted conspiracy to defraud over the Libor manipulation.

The banker is the first person in Britain to plead guilty to the offence.

The person cannot be named for legal reasons.

The Serious Fraud Office (SFO) said in a statement: “A senior banker from a leading British bank pleaded guilty at Southwark Crown Court on 3 October 2014 to conspiracy to defraud in connection with manipulating Libor.

“This arises out of the Serious Fraud Office investigations into Libor manipulation. Further details cannot be given at this time for legal reasons.

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HSBC Directors Quit In Protest At Jail Threat

Two directors of HSBC’s UK arm are poised to quit in protest at new Bank of England rules that pave the way for lengthy jail sentences to be imposed on senior managers of failed lenders.

Sky News can exclusively reveal that Alan Thomson, a member of the audit and risk committees of HSBC Bank plc, has tendered his resignation and will leave the board at the end of October.

John Trueman, the deputy chairman of the legal entity that manages the UK high street and commercial bank, is also understood to be on the verge of resigning, despite having only taken on that role in December last year.

Sources close to the situation said that the likely departures of both men were a direct consequence of Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) proposals to strengthen accountability for senior bankers.
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Selling Hope: Foreclosure scam results in charges

To his clients and business partners, Paul Pysczynski was a hard-working lawyer with a penchant for helping struggling homeowners to avoid foreclosure and bankruptcy.

But police reports now contend that the 46-year-old attorney was embezzling funds from those he was hired to help.

Pysczynski is accused of stealing from nearly a dozen clients in the greater Tampa Bay area through a scheme that mirrors those surfacing nationwide.

In May, he was arrested in St. Louis for practicing law with a suspended license. He also faces more than a half dozen felony charges tied to his Southwest Florida foreclosure and loan rescue efforts.

“It appears he was operating an illegal foreclosure rescue and bankruptcy scheme,” Assistant State Attorney Daniel Yuter said. “It’s a relatively complex and unique case.”

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Wells Fargo CEO Stumpf: Putbacks Are Hurting Housing

WASHINGTON — Credit availability is being stifled in part by a fear that lenders will be forced to buy back loans they sell into the secondary market, according to John Stumpf, the chief executive of Wells Fargo.

Speaking at a National Press Club event on Wednesday, Stumpf discussed a range of issues, including the economic outlook and the current strict regulatory environment.

But he spent a considerable chunk of his remarks focused on why housing has not picked up despite a prolonged period of low interest rates. In addition to citing factors including high student loan debt and a tough job market, Stumpf pointed to credit availability as the main culprit.

He said putbacks by Fannie Mae, Freddie Mac and the Federal Housing Administration, in which lenders are forced to buy back loans after they are determined not to meet those agencies’ standards, are hampering lending.

“There are certain parts of the market where you that can’t get a conforming mortgage because we know what happens” when loans go into default, Stumpf said.

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Ex-U.S. Treasury Secretary Timothy Geithner defends AIG bailout

Former U.S. Treasury Secretary Timothy Geithner on Tuesday defended the government’s rescue of American International Group Inc (>> American International Group Inc)in September 2008, saying the action was necessary to prevent the country from plunging into a possible second Great Depression.

Geithner’s comments came in testimony he provided in the trial of a lawsuit brought by Hank Greenberg, AIG’s top executive from 1968 to 2005, who contends the terms of the government $85 billion loan to AIG cheated its shareholders.

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Holder is preparing to file charges against at least one bank for colluding to rig the price of currencies

The Justice Department is preparing a fresh round of attacks on the world’s biggest banks, again questioning Wall Street’s role in a broad array of financial markets.

With evidence mounting that a number of foreign and American banks colluded to alter the price of foreign currencies, the largest and least regulated financial market, prosecutors are aiming to file charges against at least one bank by the end of the year, according to interviews with lawyers briefed on the matter. Ultimately, several banks are expected to plead guilty.

Interviews with more than a dozen lawyers who spoke on the condition of anonymity to discuss private negotiations open a window onto previously undisclosed aspects of an investigation that is unnerving Wall Street and the defense bar. While cases stemming from the financial crisis were aimed at institutions, prosecutors are planning to eventually indict individual bank employees over currency manipulation, using their instant messages as incriminating evidence.

The charges will most likely focus on traders and their bosses rather than chief executives. As a result, critics of the Justice Department might view the cases as little more than an exercise in public relations, a final push to shape the legacy of Attorney General Eric H. Holder Jr., who was blamed for a lack of criminal cases against Wall Street executives.

Yet the breadth of the suspected wrongdoing in the currency inquiry — Deutsche Bank, Citigroup, JPMorgan Chase, Barclaysand UBS are among the dozen or so banks under investigation — might distinguish it from the piecemeal nature of the crisis-era investigations.

And prosecutors are testing a new negotiating tactic, two lawyers said, using the currency investigation as a cudgel to potentially reopen other cases. Arguing that the misconduct would violate earlier settlements involving interest rate manipulation, prosecutors have threatened to impose new penalties in the interest rate cases.

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AIG isn’t only megabucks case uncovering new facts about 2008 bailouts

Great article by Alison Frankel…

Former AIG honcho Maurice “Hank” Greenberg’s $50 billion Fifth Amendment claims against the U.S. government may be, as New Yorker writer John Cassidy recently said, more of a comic extravaganza than a legitimate case, but there’s no doubt that the Greenberg trial underway in the U.S. Court of Federal Claims will contribute to the historical record of the government’s response to the 2008 economic crisis. Former U.S. Treasury Secretary Hank Paulson testified Monday, and his successor, Tim Geithner, and former U.S. Federal Reserve Chairman Ben Bernanke are also on Greenberg’s witness list. We can all thank Greenberg for muscling their sworn testimony into public, regardless of the crotchety old rich guy’s gall and his long odds of actually winning.

Meanwhile, there’s a much less celebrated case over the 2008 economic crisis underway in federal district court in Washington, D.C. It doesn’t have the glamour of David Boies of Boies, Schiller & Flexner (Hank Greenberg’s lawyer) grilling former Cabinet officials over the AIG bailout, but it involves between $6 billion and $10 billion in real money — and it’s also contributing real facts to what we know about how government officials in the thick of bailout frenzy implemented policies set at the highest levels.

I’m talking about litigation between JPMorgan Chase and the Federal Deposit Insurance Corporation over which of them was left holding the scorching hot potato of liability for Washington Mutual’s misrepresented mortgage-backed securities. As you may recall, as WaMu was collapsing in 2008, the federal government pushed JPMorgan to acquire the Seattle-based bank. One of the many branches of subsequent litigation over WaMu’s failure was a suit by Deutsche Bank, as the trustee overseeing many WaMu MBS, against JPMorgan, asserting that JPMorgan was on the hook to MBS investors for breaches in contractual representations and warranties about the securities. Deutsche Bank said JPMorgan owed WaMu MBS investors as much as $10 billion for their put-back claims.

JPMorgan and its lawyers at Sullivan & Cromwell countered that the FDIC – and not the bank – was liable for put-backs on private-label mortgage-backed securities. It sued in Washington federal district court for a declaration that when the bank paid $1.89 billion to take WaMu off of the FDIC’s hands in late September 2008, liability for MBS representations and warranties was not part of the deal. Those obligations, according to JPMorgan, stayed with the FDIC.

Last Friday, the two sides filed mostly unredacted summary judgment briefs with U.S. District JudgeRosemary Collyer, adding layers of detail to what was previously known about JPMorgan’s WaMu acquisition. Obviously, the briefs center on the limited contractual question of whether the FDIC ditched put-back liability in the WaMu sale, but the hundreds of pages JPMorgan and the FDIC’s lawyers at Hughes Hubbard & Reed have generated on this seemingly straightforward contract interpretation show the loopholes that open when economic chaos looms, as it did when the WaMu deal was being negotiated.

Three of the most interesting revelations involve emails within the FDIC about whether put-back obligations would transfer to JPMorgan, a seemingly contradictory email from the FDIC to the bank, and evidence about the pressure Fannie Mae and Freddie Mac exerted on JPMorgan as the bank tried to make its investment in WaMu begin to pay off.

Read on.

‘Condo Takeover Schemes’ Can Pose New Foreclosure Threat

Wow, now this is new scheme that I am hearing…


en Marilyn Mack received an email from a company she’d never heard of before asking her to send money, she assumed it was a scam.

The December 2012 email from A Sweet Lemonade LLC told her to “please provide the amount of the condo fee and bank instructions,” according to legal documents Mack’s lawyer submitted in court. Mack at first dismissed the message, but a year later, the 59-year-old transit authority worker was facing a court battle against A Sweet Lemonade and the threat of foreclosure and eviction from the Boston condo where she’s lived for six years.

Although Mack says she has always paid her mortgage on time—and unlike her neighbors in her three-unit building, survived the foreclosure crisis of 2010—she has been subject to a questionable practice that housing advocates are calling a “condo takeover scheme.” Real estate investors first buy up foreclosed condo units in a building, then take control of the building’s condo association, which allows them to set condo fees at whatever level they choose. Advocates say that by inflating these fees beyond what occupants can afford, they place longtime condo owners like Mack at risk of being priced out of their homes.

It’s not clear how widespread the condo takeover tactic is, but stories like Mack’s have emerged occasionally in other parts of the country in the wake of the foreclosure crisis. In 2012, condo owners in a Reading, Pennsylvania, subdivision were pushed out of their homes after a real estate development company bought up foreclosed units in the complex and then took control of the association. Using a Pennsylvania law, the investor then dissolved the condo association, allowing it to place the nearly 100 units in the complex for sale. The attorney who represented many of these condo owners told NBC that the developer offered the remaining owners buyouts valued at just one third of their mortgages. Finding themselves suddenly underwater, the owners lost their homes.

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