Daily Archives: May 23, 2015

Bankers from major institutions still haven’t been held responsible for financial crash

Three months ago, then-Attorney General Eric Holder gave his prosecutors 90 days to determine whether they could charge individual Wall Street executives with crimes related to the 2008 financial crisis.

“I’ve asked the U.S. attorneys … over the next 90 days to look at their cases and to try to develop cases against individuals and to report back in at 90 days with regard to whether or not they think they’re going to be able to successfully bring criminal and or civil cases against those individuals,” Holder said in a Feb. 17 speech at the National Press Club.

Holder is gone now, and this week that deadline passed. The Justice Department, however, is dodging questions about the former attorney general’s pledge.

“It is our policy not to publicly discuss on-going investigations,” said Justice spokesman Patrick Rodenbush.

Read on.

The Big Banks Are Corrupt — and Getting Worse

The Justice Department’s latest settlement with felonious big banks was announced this week, but the repercussions were limited to a few headlines and some scattered protestations.

That’s not enough. We need to understand that our financial system is not merely corrupt in practice. It is corrupt by design – and the problem is growing.

Let’s connect the dots, using news items from the past few weeks:

The latest sweetheart deal

Four of the world’s biggest banks pleaded guilty to felony charges this week, agreeing to pay roughly $5.6 billion in fines for fixing the price of currencies on the foreign exchange market. Justice Department officials made much of the fact that, unlike previous sweetheart deals with Wall Street, this one required the banks’ parent companies to enter a guilty plea.

That’s an improvement over previous deals. But it’s not as significant as it might have been, since the settlement wasn’t finalized until the banks were able to strike side agreements with regulators to ensure they’d be able to keep doing business as usual.

One of the institutions involved in this deal was Citigroup. That’s the bank whose self-written and self-serving “Citigroup amendment” passed Congress last December, a move which made it the target of an epic Elizabeth Warren takedown.

Another was J.P. Morgan Chase. Chase CEO Jamie Dimon was lionized for far too long by politicians and members of the mainstream media, many of whom insisted that Dimon was smarter and more ethical than his peers. There is now a considerable body of evidence to contradict that assertion – and it keeps on growing.

All four banks of these banks are repeat offenders with long records of serial fraud, as even this outdated graphic shows.

Read on.

JPMorgan Officially Apologizes For Being A Criminal Market Manipulator

And how many people went to jail for this??? H/T to Zerohedge.

Via JPMorgan,

The purpose of this notice is to disclose certain practices of JPMorgan Chase & Co. and its affiliates (together, “JPMorgan Chase” or the “Firm”) when it acted as a dealer, on a principal basis, in the spot foreign exchange (“FX”) markets. We want to ensure that there are no ambiguities or misunderstandings regarding those practices.

To begin, conduct by certain individuals has fallen short of the Firm’s expectations. The conduct underlying the criminal antitrust charge by the Department of Justice is unacceptable. Moreover, as described in our November 2014 settlement with the U.K. Financial Conduct Authority relating to our spot FX business, in certain instances during the period 2008 to 2013, certain employees intentionally disclosed information relating to the identity of clients or the nature of clients’ activities to third parties in order to generate revenue for the Firm. This also was contrary to the Firm’s policies, unacceptable, and wrong. The Firm does not tolerate such conduct and already has committed significant resources in strengthening its controls surrounding our FX business.

The Firm has engaged in other practices on occasion, including:

  • We added markup to price quotes using hand signals and/or other internal arrangements or communications. Specifically, when obtaining price quotes for bids or offers from the Firm, certain clients requested to be placed on open telephone lines, meaning the client could hear pricing not only from a salesperson, but also from the trader who would be executing the client’s order. In certain instances, certain of our salespeople used hand signals to indicate to the trader to add markup to the price being quoted to the client on the open telephone line, so as to avoid informing the client listening on the phone of the markup and/or the amount of the markup. For example, prior to agreement between the client and the Firm to transact for the purchase of €100, a salesperson would, in certain instances, indicate with hand signals that the trader should add two pips of markup in providing a specific price to the client (e.g., a EURUSD rate of 1.1202, rather than 1.1200) in order to earn the Firm markup in connection with the prospective transaction.
  • We have, without informing clients, worked limit orders at levels (i.e., prices) better than the limit order price so that we would earn a spread or markup in connection with our execution of such orders. This practice could have impacted clients in the following ways: (1) clients’ limit orders would be filled at a time later than when the Firm could have obtained currency in the market at the limit orders’ prices, and (2) clients’ limit orders would not be filled at all, even though the Firm had or could have obtained currency in the market at the limit orders’ prices. For example, if we accepted an order to purchase €100 at a limit of 1.1200 EURUSD, we might choose to try to purchase the currency at a EURUSD rate of 1.1199 or better so that, when we sought in turn to fill the client’s order at the order price (i.e., 1.1200), we would make a spread or markup of 1 pip or better on the transaction. If the Firm were unable to obtain the currency at the 1.1199 price, the clients’ order may not be filled as a result of our choice to make this spread or markup.
  • We made decisions not to fill clients’ limit orders at all, or to fill them only in part, in order to profit from a spread or markup in connection with our execution of such orders.For example, if we accepted a limit order to purchase €100 at a EURUSD rate of 1.1200, we would in certain instances only partially fill the order (e.g., €70) even when we had obtained (or might have been able to obtain) the full €100 at a EURUSD rate of 1.1200 or better in the marketplace. We did so because of other anticipated client demand, liquidity, a decision by the Firm to keep inventory at a more advantageous price to the Firm, or for other reasons. In doing so, we did not inform our clients as to our reasons for not filling the entirety of their orders.

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Lehman Brothers suing over crisis-era toxic mortgages

Lehman Brothers Holdings filed suit against Syncora Holdings, U.S. Bancorp (USB) and GreenPoint Mortgage Funding in an effort to try to get “duplicate” claims filed by those three companies against Lehman Brothers thrown out because Lehman Brothers is ready to settle and move on.

According to a report from the Wall St. Journal, Lehman Brothers bought crisis-era mortgage loans from GreenPoint Mortgage, which is now owned by Capital One Financial (COF). Many of the loans went into default and then set off a now-familiar series of events of suits and countersuits with each party trying to get their money back.

From the WSJ:

At issue is a structured-finance transaction where Lehman bought mortgage loans made by GreenPoint, and through a process of financial engineering, transferred the loans to a trust which then issued notes backed by the loans.

Syncora, the monoline insurance subsidiary of Syncora Holdings, sold insurance to the trust, GreenPoint Mortgage Funding Trust 2006-HE1, that guaranteed payments of principal and interest to investors. U.S. Bank is the trustee for those trusts.

Many of the mortgage loans, made at the tail-end of the housing bubble, went into default, putting Syncora on the hook for the shortfall in payments to investors.

According the WSJ report, Lehman has set aside more than $600 million to pay out the initial claims.

“These claims, which Lehman has been trying to resolve over the past two years, continue to impede the administration of the plan and the orderly distribution of assets,” Lehman said in the filing, as reported by the WSJ.

Source: WSJ

Barclays mortgage bond trader fired for allegedly lying to clients

Barclays Capital (BCS) fired one of its mortgage bond traders after he allegedly lied to clients about residential mortgage-backed securities trades.

According to a report from Bloomberg (first reported by Asset-Backed Alert), Barclays terminated Yoon Seok Lee on Feb. 11 for “allegations involving certain inaccurate communications to customers during the negotiation of residential mortgage-backed securities trades.”

Click through to the Bloomberg report from more on Lee’s firing.

Source: Bloomberg

Former Dallas Cowboy out of prison after serving 3 years for mortgage fraud

A former Dallas Cowboys player is out of federal prison after serving three years for taking part in a $20 million mortgage fraud scheme.

Eugene Lockhart, who played linebacker for the Cowboys from 1984 to 1990 before spending the last two years of his career with the New England Patriots, was convicted of mortgage fraud in 2012 and sentenced to 54 months in prison, but is now free after three years.

According to a Dallas Morning News report from 2012, Lockhart and at least 10 other people were convicted in the mortgage fraud scheme, which saw the group recruit straw buyers who falsified their income documents to obtain loans with inflated prices.

The Dallas Morning News report states that Lockhart and his co-conspirators obtained 54 fraudulent loans from 2002 to 2005.

Now, Lockhart is free and he spoke with Dallas’ Fox 4 about his time in prison and what’s next in his life.

From the Fox 4 report:

“Something went into my stomach and it’s like a hurt came up over me and I was just weak,” said Eugene. ”Fifty-four months? I’m trying to do the math in my head and confusion all comes in my head. Four years?”

The federal government said he was part of a $20 million mortgage fraud scheme. He and nine others were implicated.

Eugene thought he’d get probation with his guilty plea and avoid a trial and lengthy sentence.

“They take me to Seagoville, and then when I get there, I have to undress and I’m looking for a coat hanger and they say ‘Nah, nah, nah, you don’t have to worry about hanging that up. Throw it on the floor; we get it,’” said Eugene. “And then they give you this orange suit.”

That’s when reality hit. He was put in the hole for protection because he’d been a Dallas Cowboy.

The Fox 4 report says that Lockhart is still facing two years of probation, but Lockhart, who ministered to other inmates while in prison, said that he now has a “purpose” in his life and hopes to write a book about his experiences and become a motivational speaker for students, adults and prison inmates.

Source: Fox 4

Senate banking committee passes massive regulatory relief bill

The Senate Committee on Banking, Housing and Urban Affairs passed “The Financial Regulatory Improvement Act of 2015″ on Thursday.

This is a big deal for housing and mortgage finance. Among the most significant proposals in the 216-page draft bill is a requirement raising the SIFI bank threshold from $50 billion to $500 billion, altering the $10 billion threshold, and targeting specific GSE changes. This would, in effect, free smaller lenders from the heavy capital requirements and strict oversight currently enforced against the big banks. It also includes a provision increasing the $50 billion SIFI threshold to $500 billion, while maintaining some degree of FSOC review.

Other proposals in the bill take aim at mortgage finance firms Fannie Mae and Freddie Mac, “systemically important” designations to nonbanks and insurance industry supervision.

Read on.