Daily Archives: September 24, 2015

Wall Street Said to Win Lucrative Concession in Derivatives Rule

  • U.S. banks could cut billions on costs if swaps rule eased
  • Regulators may complete final version of rule next month

Wall Street is close to cutting billions of dollars from the cost of a derivatives rule as a debate among regulators over how tough the
provision should be shifts in banks’ favor.

Firms such as JPMorgan Chase & Co. and Morgan Stanley wouldn’t have to set aside as much money in trades between their own divisions in the final version of a rule U.S. regulators may release as soon as next month, said two people familiar with the discussions. After months of disagreement, the agencies, which include the Federal Deposit Insurance Corp. and Federal Reserve, decided to ease the demands of an earlier version of the proposal, according to the people.

The industry had fought the mandate that both a bank and an affiliate put up collateral, which was laid out in the version of the rule that was proposed last September and had strong support from the FDIC. In a compromise, banking regulators now agree that the final measure should only demand collateral from an affiliate trading with a U.S. bank unit, said the people, who requested anonymity because the rule hasn’t been released publicly.

Read on.

Court Dismisses BNY Mellon’s $600 Million RMBS Suit Against JPMorgan Chase

A New York Supreme Court Judge dismissed a suit filed by Bank of New York Mellon against JPMorgan Chase and a unit of General Electric Capital over $1.275 billion worth of toxic residential mortgage-backed securities, according to media reports.

Judge Shirley Werner Kornreich ruled that the case was time-barred, citing a ruling by the New York Court of Appeals earlier this year in the case of ACE Securities Corp. v. DB Structured Products. In that ruling, the highest court in New York sated that the clock began ticking for the six-year statute of limitations when the contract was signed rather than when problems with the securities were discovered.

In filing the suit in December 2013, BNY Mellon accused JPMorgan of misrepresenting the quality of loans packaged in an RMBS trust for which BNY acted as securities administrator. BNY also claimed that JPMorgan refused to repurchase the debt (which was originated by WMC Mortgage, a now-defunct subsidiary of GE Capital) even though it was contractually obligated to do so. BNY Mellon alleged in its complaint that it notified the defendants that more than 1,500 underlying mortgage loans contained one or more breaches from either WMC’s or JPMorgan’s representations of the quality of the loans and that neither party would repurchase the soured debt. BNY Mellon was seeking $600 million in damages in the lawsuit against JPMorgan Chase.

Read on.

David Petraeus: Don’t freak out over China dumping U.S. debt

David Petraeus of all people to give Treasury analyst advice to CNN Money? The same man that was charged and pled guilty of sharing classified documents to his mistress! What’s next, Bernie Madoff to give financial advice?

There are lots of real threats to America — but China selling U.S. debtisn’t one of them.

That’s the message from David Petraeus, the former four-star American military general, who now works in the world of finance.

“I don’t think that China’s sale of some of its holdings, in order to prop up China’s currency, presents a security risk to the U.S. — or a risk to our currency, for that matter,” Petraeus told CNNMoney.

Petraeus is one of America’s brightest minds on matters of national security. He served as a top military commander in charge of troops in Iraq and Afghanistan before becoming director of the CIA in 2011.

He resigned from the spy agency in 2012 following an extramarital affair, which has dogged him since. Just this week, Petraeus apologized to a Senate committee for his affair and mishandling classified materials.

Read on.

And more from Zerohedge. Click here.

Judge Compels Arbitration for Wells Fargo

SAN FRANCISCO (CN) – A federal judge Wednesday granted Wells Fargo’s request to compel arbitration in a class action accusing it of deceptively charging customers for “solutions” to nonexistent problems.
Lead plaintiff Shahriar Jabbari sued the bank in May, claiming it encouraged employees to use fraudulent and deceptive tactics to persuade customers to open fee-generating accounts by misrepresenting them or not informing them at all.
Wells Fargo called the tricks “solutions” and set “unrealistic sales quotas” for its employees, inducing them to add hidden fees and open unwanted second accounts for customers, Jabbari claimed.

Read on.

Global watchdog seeks deal on ending ‘too big to fail’ banks

Global regulators meet in London on Friday to agree a rule on stopping banks being “too big to fail” by requiring them to hold enough equity capital and bonds to avoid taxpayers being called on in a crisis.

The Financial Stability Board (FSB), chaired by Bank of England Governor Mark Carney, wants the world’s biggest banks to have enough funds to tap when in trouble.

The proposed rule is known as total loss absorbency capacity or TLAC, and is seen by Carney as the last major reform after the 2007-09 financial crisis forced governments to shore up lenders.

The rule will apply to nearly all the 30 big banks the FSB has already deemed to be “globally systemic” such as Goldman Sachs, Deutsche Bank and HSBC.

Under the original proposal, the banks would hold TLAC, made up of capital and bond issuance, equivalent to 16 to 20 percent of their risk-weighted assets, when written down.

Read on.

CFPB, DOJ fine Hudson City $27M for mortgage discrimination violations

The Consumer Financial Protection Bureau andthe Department of Justice announced a joint actionagainst Hudson City Savings Bank for providing unequal access to mortgage credit in Black and Hispanic neighborhoods.

If the court approves the consent, Hudson City will pay $25 million in direct loan subsidies to qualified borrowers in the affected communities, $2.25 million in community programs and outreach and a $5.5 million penalty.

This represents the largest redlining settlement in history to provide such direct subsidies. And according to the Department of Justice, this won’t be the last, with an increased number of mortgage redlining investigations underway.

Read on.

A Test Case for the DOJ’s New Policy?

In my last post: New DOJ Policy to Prosecute…Real or Smokescreen?, I commented that the DOJ’s new policy to go after  individuals who commit financial crimes – not just settle for fines, was a step in the right direction. I also expressed some cynicism, given their track record so far.
While it’s my belief that the new DOJ stance is a defensive smokescreen and a public relations ploy to shield itself from widespread criticism, I would dearly love to be proven wrong.
In that policy statement, Deputy Attorney General Sally Yates stated unequivocally that the DOJ will now pursue criminals “regardless of whether they commit their crimes on the street corner or in the boardroom,”… “A crime’s a crime.” As she said in her memo, “We mean it when we say, “You’ve got to cough up the individuals.””
Perhaps, but the DOJ is known for its frequent changes in position. As my cohort, Michael Winston, author of World-Class Performance: The Commitment; The Pursuit; The Achievement,commented in the Huffington Post , they throw up “a smokescreen activated every six months or so to create the illusion of law enforcement.”
Well, it looks as if the DOJ may be facing an early test of its long overdue policy change and Deputy Attorney General’s Yates’ demand that attorneys play hardball with corporations, and to pursue individual executives from the outset of any investigation.
Regards,
Richard