Daily Archives: October 15, 2014

SEC Charges Ex-Wells Fargo Compliance Officer With Altering Documents

The Securities and Exchanges Commission charged a former Wells Fargo WFC -2.01%& Co. compliance officer with altering her own review of an investment after investigators had deemed it insider trading.

Judy Wolf was Wells Fargo Advisors’ compliance officer tasked in 2010 with reviewing one of its broker’s investments in Burger King BKW -2.38% stock just before the fast-food chain was acquired by 3G Capital Partners Ltd.

Ms. Wolf didn’t find anything wrong with the investment. But when the SEC charged the broker with insider trading in 2012, she went back and reworked the document to make it look like she had done a more extensive examination before submitting it to regulators who later flagged the changes, the agency alleges.

Read on.

‘Sovereign citizen’ gets 7 years for targeting judges, prosecutors with bogus $100B liens

federal judge sentenced a “sovereign citizen” who targeted court and law enforcement officials with bogus liens to seven years in prison – beyond what even prosecutors had recommended.

Cherron Phillips filed maritime liens, each worth $100 billion, against former U.S. Attorney Patrick Fitzgerald, former chief U.S. District Court Judge James Holderman, three other judges, and five other law enforcement officials.

The 44-year-old Chicago woman, who goes by the name River Tali Bey, became involved in the sovereign citizen movement after her older brother died in 2003 and a younger brother was arrested on drug charges in 2006.

Her parents were then charged with tax evasion, and all three relatives were sentenced to federal prison.

Phillips, who was the longtime girlfriend of former NBA star Nick Anderson and is the mother of his adult son, engaged in the sovereign citizen practice the judge described as “paper terrorism.”

Read on.

JPMorgan Seems Less And Less Interested In Lending Money

JPMorgan Chase has a problem: It’s taking in money faster than it can lend it out.

As long as this trend continues, the biggest bank in America by assets will drift further away from a commercial bank’s core social and economic role of lending.

At the end of the third quarter, the bank was lending out just 56 cents for every dollar it had in deposits, according to earnings results released on Tuesday. At JPMorgan, that figure – known as the loan-to-deposit ratio – has been low and falling for years. In 2012, I made a chart showing how the bank’s excess deposits – the value of total deposits minus total loans – had risen after the crisis. That’s money customers have given the bank, but that the bank isn’t lending.

Back then, the bank’s loan-to-deposit ratio was a now rosy-seeming 64 percent. JPMorgan’s excess deposits were growing then on both an absolute and relative basis, and in the past two years they’ve kept on growing.

Here’s an updated version of the chart:

jp morgan deposits to loans

This is a chart showing a bank acting less and less like a bank. Banks take in deposits, lend a large portion of those deposits and buy things like bonds with the money that’s left over.

Read on.

AIG Bailout Trial and the Deadbeat Borrower Defense

Posted on October 14, 2014 by

It’s déjà vu all over again.

I’m only starting to dig into the AIG bailout trial by reading the transcripts and related exhibits. That means I am behind where the trial is now. However, that gives me the advantage of contrasting what is in the documents with the media reporting to date. And what is really striking is the near silence on the core argument in this case.

The Starr International v. the United States of America suit is, at its core, about whether an insolvent borrower still has the right to the protection of law. It’s thus a high-end, big-ticket replay of the same form of arguments that homeowners fighting foreclosure often tried in court to obtain a mortgage modification: we don’t dispute that we aren’t able to meet our obligations, but the party foreclosing on us needs to go through the proper steps to take possession of our house. In the mortgage borrower’s case, that meant establishing standing, as in proving that they really were the proper party to initiate the foreclosure. In the case of Starr, the AIG executive enrichment vehicle controlled by former CEO Hank Greenberg, the argument is that even though AIG was insolvent, the bailout, which included through a series of maneuvers getting control of 79.9% of AIG stock, was impermissible.

Let me stress I’m no fan of Greenberg. But you can’t ask for the rule of law to operate in one place and not another. We’ve seen the administration repeatedly bend over backwards to give banks all sorts of free or super cheap waivers for bad conduct and not enforce regulations against them, yet borrowers are held in court to strict terms of their agreements and face unreasonably high hurdles when they try to fight abusive conduct.

Despite his considerable warts, Greenberg is unearthing information that shows how one-sided and high-handed the Fed’s conduct during the crisis was. Yet people who claim to be on the side of curbing bank power are instead rallying to support the bank-cronyistic Administration:

Screen shot 2014-10-14 at 8.40.09 AM

We’ve embedded the transcript from the first day of the trial at the end of the post, which included both sides’ opening arguments, along with the testimony of the first witness, Fed Board of Governors general counsel Scott Alvarez, along with the sides each side presented.

The specific legal arguments from the Greenberg camp, represented by uber lawyer David Boies, are that the manner in which the government took control of AIG’s common stock involved a taking (a violation of the 5th Amendment requirement of offering adequate consideration for government seizure of property) and an illegal exactment (more on that shortly). Note that Greenberg can prevail on either contention.

A key issue is whether the Fed exceeded its legal powers in how it structured the bailout and coerced AIG’s board into taking it. The rescue was done as a Section 13(3) loan, which is often referred to as the Fed’s “unusual and exigent circumstances” authority. While that allows the central bank to take pretty much anything it wants to as collateral for a loan and make that loan to pretty much any party it chooses to, Greenberg’s attorneys argue there are still limits on how the Fed can conduct itself. Consider this slide from the Boies’ presentation (click to enlarge):

Read on.

BNY Mellon Nails JPMorgan With $475M Mortgage Loan Suit

Law360, Los Angeles (October 14, 2014, 10:01 PM ET) — The Bank of New York Mellon Corp., acting as a trustee for a pool of home loans, has hit JPMorgan Chase Bank NA and others with a New York suit seeking $475 million over alleged misrepresentations made in the sale of $959 million in residential mortgage loans.

Suing as the trustee of JP Morgan Mortgage Acquisition Trust Series 2006-WMC3, BNY Mellon seeks redress from WMC Mortgage LLC as successor-by-merger to WMC Mortgage Corp., JP Mortgage Acquisition Corp. and JPMorgan Chase Bank, for alleged breaches of contractual…

Source: Law360

Citi pulls out of consumer banking in 11 countries, profit jumps

(Reuters) – Citigroup Inc said it was pulling out of consumer banking in 11 markets, including Japan and Egypt, as the U.S. bank with the biggest international business looks to cut persistently high costs.

The third-largest U.S. bank, built with a series of acquisitions spanning back to the 1980s, has been trying to slim down since the financial crisis to be as profitable as rivals. It has shed hundreds of billions of dollars of bad assets.

The latest exits were the result of studies the bank began in early 2012 to figure out which countries were not profitable enough for retail banking.

Read on.