Daily Archives: May 9, 2015

After two crashes and Enron, fund industry says it struggles to reach millennials

WASHINGTON (MarketWatch)—Executives from leading investment management companies said Thursday they have a difficult time reaching the millennial generation—not just because of the technology they embrace, but because of their conservatism after witnessing so much financial turmoil in their formative years.

Reaching millennials, those aged between 18 and 34, turned out to be a major topic at the annual Investment Company Institute meeting of the $18 trillion mutual-fund industry here.

“The behavior of millennials is very different,” said Omar Aguilar, chief investment officer of equities at Charles Schwab Investment Management. “Mostly because they started their careers when the first crash happened—the dot-com boom—then they saw Enron, they saw WorldCom, then they saw the 2008 crisis.”

“They have economic post-traumatic stress disorder,” added Simon Mendelson, head of product management and development for the Americas for Deutsche Asset & Wealth Management.

Read on.

SEC examining Blackstone fee practices

Blackstone Group LP said that the Securities and Exchange Commission recently requested information about certain of its fee practices, including its pre-2014 collection of large one-time fees when selling or taking public companies it controlled.

Blackstone BX, +0.80%  last year voluntarily curbed its collection of such fees, often called monitoring-termination fees, which are charged by many private-equity firms but have become controversial.

A senior SEC official in a May 2014 speech criticized these as a type of poorly disclosed “hidden” fee whose cost often is borne by public pension funds and other investors in private-equity funds.

The decision to curb the fees by Blackstone, the world’s largest private-equity firm, represented a significant U-turn in an industrywide practice, and promised to save the firm’s investors tens of millions of dollars.

In a quarterly filing Friday, Blackstone said “recently, the SEC has informally requested additional information about our historical monitoring fee termination practices.”

Read on.

Goldman Sachs expected to settle forex suit for almost $130 million: WSJ

(Reuters) – Goldman Sachs Group Inc is expected to pay $129.5 million to settle its portion of a lawsuit that accuses banks of rigging prices in the foreign exchange market, The Wall Street Journal reported, citing a person familiar with the matter.

The Journal said in its report that a final agreement may be reached in the next several weeks.

The lawsuit accused traders at a dozen banks of improperly sharing confidential information about their clients’ orders through electronic chat rooms, then using that information to make money at the expense of their clients.

Read on.

New York Gov. Andrew Cuomo Gave Bond Deals To His Wall Street Donors, Despite Federal Rules

New York Gov. Andrew Cuomo has since 2012 taken in more than $131,000 in campaign contributions from three major financial firms that were then tapped by his administration to manage state bond work, according to an International Business Times review of campaign finance documents and state bond prospectuses. The Democratic governor accepted the money — and his officials handed out the government business without competitive bids — despite federal rules that bar campaign contributors from receiving taxpayer-financed state bond work.

Last week, Cuomo officials designated the three banks that contributed the campaign funds — JPMorgan Chase, Citigroup and Bank of America — as the dealers for a $33 million bond issue, enabling the firms to reap lucrative fees. That came on top of the Cuomo administration assigning the firms to manage a$68 million bond issue last fall, even as federal law enforcement officials were investigating allegations that New York lawmakers were doing favors for political donors.

Federal rules bar states from awarding bond work to parties who have donated to gubernatorial campaigns within the last two years (more than $86,000 of the campaign cash from the firms flowed to Cuomo in the last two years). The rules aim to prevent financial firms from gaining influence over officials who have the power to select which firms receive the lucrative bond business. The rules explicitly seek to stop financial companies from circumventing those strictures: They prohibit firms from channeling contributions to bond overseers through PACs, which are giant pools of money distributed to multiple campaign war chests.

“The pay-to-play rules are very clear,” said Craig Holman, an ethics expert at the watchdog group Public Citizen. “If Andrew Cuomo’s receiving any money from a PAC controlled by a municipal dealer, he’d be in violation of pay-to-play rules.”

Read on.

Bank of America’s Relief for Mortgage Borrowers Is Questioned

There was plenty of fanfare last August when Bank of America agreed to a record $16.7 billion settlement with the Justice Department over dubious mortgage practices. Prosecutors crowed about the deal, which required the bank to provide $7 billion of consumer relief — including such things asloan modifications — over the ensuing four years.

But now that the settlement has faded from the public eye, questions are arising about whether the promised assistance is actually getting to the right people and whether the bank will be allowed to claim credit for consumer relief that far exceeds its actual value.

The details are complex but worth delving into, given the importance of the issue. In the settlement, Bank of America is required to make a wide array of loans more affordable for borrowers. The bank was expected to forgive or reduce the amounts owed on the first and second mortgages it held. In exchange, the bank would receive credit for these reductions in dollar amounts outlined in the settlement.

Bank of America, in pursuing its goals, has told a number of borrowers that it intends to “forgive” some loans that have been discharged in borrowers’ bankruptcies. But that debt has already been forgiven.

Read on.

Wells Fargo settles Ponzi scheme lawsuit for more than $3 million

Thousands of victims — many of them working-class Haitian Americans from South Florida — are one step closer to receiving restitution for a Ponzi scheme that bilked them out of at least $30 million.

A federal judge on Friday approved the terms of a $3.175 million settlement between Wells Fargo Bank and a receiver appointed by the U.S. Securities and Exchange Commission to run the companies once owned by convicted scammer George Theodule.

The settlement came soon before a jury was expected to deliver its verdict after a 16-day trial.

JPMorgan Chase, Bank Of America Agree To Wipe Debt Cleared By Bankruptcy From Credit Reports

Two of the country’s largest banks are finally getting around to removing the debt consumers eliminated during bankruptcy proceedings from their credit reports, a move that puts Bank of America and JPMorgan Chase in line with federal law.

The New York Times reports that the banks have agreed to update borrowers’ credit reports over the next three months, providing needed relief for about a million consumers.

Under federal law, when someone erases a debt in bankruptcy, their bank is required to update their credit reports to indicate the debt is no longer owed. But according to several lawsuits, many of the country’s largest banks have been disregarding those rules, leading to inaccurate and unfair red marks on credit reports.

Instead, the financial companies allegedly ignored the discharges in order to make money by selling off the debt to collectors, who then refused to correct issues unless borrowers paid the debts that were already cleared, the Times reports.

While JPMorgan Chase and Bank of America agreed to correct credit reports, neither company is admitting any wrongdoing as part of the deal.

Read on.

JPMorgan Chase, Bank Of America Agree To Wipe Debt Cleared By Bankruptcy From Credit Reports

JPMorgan Chase, Bank Of America Agree To Wipe Debt Cleared By Bankruptcy From Credit Reports

Wilmington Trust Execs Facing Federal Charges

And not the big bank execs involved in the financial crisis in 2008!

(CN) – Four former top executives at Wilmington Trust Co. knowingly misled investors during the recent financial crises by keeping over $350 million worth of bad loans off the company’s books, federal financial regulators claim.
In a complaint filed May 6 in Delaware Federal Court, the U.S. Securities and Exchange Commission says the four defendants – former Wilmington Trust president Robert V.A. Harra Jr., former chief financial officer David Gibson, former controller Kevyn Rakowski and former Chief Credit Officer William North — violated federal law by failing to report all loans that were 90 days or more past due over a 15-month period beginning in 2009.
Rakowski and North are also accused of making false statements to the SEC and the Federal Reserve.
The SEC charged Rakowski and North with aiding and abetting Harra and Gibson in violating the Securities Exchange Act.
All four defendants are accused of falsifying the company’s books and records and aiding and abetting false SEC filings.
From late 2009 through mid-2010, according to the complaint, defendants knowingly made false disclosures concerning their commercial loans that were more than 90 days or more past due.
So even though the borrowers had stopped making payments on these loans, defendants allowed the bank to continue “recording as income the borrower’s obligation for ongoing interest payments as if the Bank expected payment,” states the lawsuit.
Accruing loans more than 90 days past due are a “key credit quality metric” for banks and investors. Under General Accepted Accounting Principles, or GAAP, Wilmington Trust was required to fully report these types of loans to the SEC and its banking regulator, the Federal Reserve Bank of Philadelphia.
The SEC says in the complaint that Wilmington Trust bet big on Delaware real estate-related loans in the 2000s, so that by mid-2009 the company had over $9 billion in commercial loans.

Read on.