Monthly Archives: October 2015

Inside the Secretive Circle That Rules a $14 Trillion Market

Fifteen of the biggest players in the $14 trillion market for credit insurance are also the referees.

Firms such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. wrote the rules, are the dominant buyers and sellers and, ultimately, help decide winners and losers.

Has a country such as Argentina paid what it owes? Has a company like Caesars Entertainment Corp. kept up with its bills? When the question comes up, the 15 firms meet on a conference call to decide whether a default has triggered a payout of the bond insurance, called a credit-default swap. Investors use CDS to protect themselves from missed debt payments or profit from them.

Once the 15 firms decide that a default has taken place, they effectively determine how much money will change hands.

And now, seven years after the financial crisis first brought CDS to widespread attention, pressure is growing inside and outside what’s called the determinations committee to tackle conflicts of interest, according to interviews with three dozen people with direct knowledge of the panel’s functioning who asked that their names not be used. Scandals that exposed how bank traders rigged key interest rates and fixed currency values have given ammunition to those who say CDS may also be susceptible to collusion or, worse, outright manipulation.

Read on.

Deutsche Bank Said to Near $200 Million Sanctions Settlement

  • Fed, New York regulator may announce deal as soon as next week
  • More than 10 other global banks have settled sanctions cases

Deutsche Bank AG is close to settling a regulatory probe into alleged violations of U.S. sanctions laws, probably paying about $200 million, according to a person briefed on the matter.

The New York Department of Financial Services and the Federal Reserve may announce the deal with Germany’s largest bank as soon as next week, the person said, asking not to be identified because the talks are confidential. The agreement wouldn’t resolve investigations opened by the Manhattan district attorney’s office and the U.S. attorney’s office in Manhattan, the person said.

Amy Chang, a spokeswoman for Deutsche Bank in Hong Kong, declined to comment. Spokesmen for the regulators also declined or didn’t respond to messages seeking comment. The Frankfurt-based bank previously said it’s cooperating with investigators. The New York Times reported the settlement talks earlier Wednesday.

Read on.

Greece, creditors disagree on foreclosures law but bailout talks on track, EU official says

ATHENS, Greece (AP) — Greece and its bailout creditors remain divided over how to toughen foreclosure laws, a European Union official said Monday, though the overall talks on getting the country the next batch of loans are on track.

Valdis Dombrovskis, a European Commission vice-president for the euro, said Greece has already done many reforms, quickly. But he warned “there is no time to lose. There is a need to work very actively to modernize the Greek state and economy.”

Greece has committed to broad reforms, savings and tax hikes to secure its third bailout package from its European partners. Bailout creditors are currently reviewing the government’s compliance with the measures they had agreed upon before paying the country a 2 billion euro loan installment.

Greece is under pressure to lower the income and wealth criteria based on which non-compliant borrowers’ primary residences enjoy protection.

Dombrovskis and the Greek government officials he met in Athens at the start of a two-day visit agreed that differences remain on the issue of foreclosures.

About 40 percent of all Greek bank loans are now in serious arrears, as successive income cuts over more than five years have left borrowers struggling to repay. At the heart of the issue are housing loans.

Read on.

Wood Dale residents say Seterus, Fannie Mae cheated them into foreclosure, wrongly took their home

Two Wood Dale residents have sued Fannie Mae, alleging the federal mortgage agency was in cahoots with a private home loan servicing company to hoodwink them into surrendering their house to foreclosure, under the guise they were late on loan payments.

Jesus Almodovar and Tina Palacios, both of Wood Dale, lodged a nine-count suit July 17 in Will County Circuit Court against Federal National Mortgage Association – better known as Fannie Mae – and Seterus Inc., alleging fraud, wrongful foreclosure, breach of contract and deceptive acts, as well as violations of the U.S. Fair Credit Reporting Act, the U.S. Fair Debt Collection Practices Act and the Illinois Consumer Fraud Act.

Seterus does business in Illinois and is incorporated in Delaware, with its main office in Beaverton, Ore. The company offers mortgage options to distressed borrowers.

Read on.

U.S. Banks to Face $120 Billion Shortfall in Fed Crisis Plan

  • Wells Fargo, JPMorgan may need to add long-term debt
  • Fed’s rule broadly matches parts of global regulators’ plan

The largest U.S. banks would face a $120 billion total shortfall of long-term debt under a Federal Reserve proposal aimed at ensuring their failure wouldn’t hurt the broader financial system.

Banks such as Wells Fargo & Co. and JPMorgan Chase & Co. will be required to hold enough debt that could be converted into equity if they were to falter, according to a Fed rule that was approved by a unanimous vote on Friday. The Fed’s proposal, which applies to eight of the biggest U.S. banks, requires debt and a capital cushion equal to at least 16 percent of risk-weighted assets by 2019 and 18 percent by 2022.

The broad strokes of the proposal, including the lengthy phase-in period and the 18 percent target instead of what some bankers thought could be as high as 20 percent, are easier than many in the industry expected. Fed staffers presenting the proposal at Friday’s meeting said the requirement probably will be manageable for the banks.

Read on.

First They Jailed The Bankers, Now Every Icelander To Get Paid Back In Bank Sale

Why can’t US learn from Iceland?? Check this out.

Submitted by Claire Bernish via,

First, Iceland jailed its crooked bankers for their direct involvement in the financial crisis of 2008. Now, every Icelander will receive a payout for the sale of one of its three largest banks, Íslandsbanki.

If Finance Minister Bjarni Benediktsson has his way — and he likely will — Icelanders will be paid kr 30,000 after the government takes over ownership of the bank. Íslandsbanki would be second of the three largest banks under State proprietorship.

“I am saying that the government take [sic] some decided portion, 5%, and simply hand it over to the people of this country,” he stated.

Because Icelanders took control of their government, they effectively own the banks.Benediktsson believes this will bring foreign capital into the country and ultimately fuel the economy — which, incidentally, remains the only European nation to recover fully from the 2008 crisis. Iceland even managed to pay its outstanding debt to the IMF in full — in advance of the due date.

Guðlaugur Þór Þórðarson, Budget Committee vice chairperson, explained the move would facilitate the lifting of capital controls, though he wasn’t convinced State ownership would be the ideal solution. Former Finance Minister Steingrímur J. Sigfússon sided with Þórðarson, telling a radio show, “we shouldn’t lose the banks to the hands of fools” and that Iceland would benefit from a shift in focus to separate “commercial banking from investment banking.”

Plans haven’t yet been firmly set for when the takeover and subsequent payments to every person in the country will occur, but Iceland’s revolutionary approach to dealing with the international financial meltdown of 2008 certainly deserves every bit of the attention it’s garnered.

BofA Agrees To Pay $335M To End Mortgage-Tracking Claims

Law360, Los Angeles (October 30, 2015, 10:07 PM ET) — Bank of America Corp. has agreed to pay $335 million to settle a class action accusing it of intentionally misleading investors about widespread issues with its system for keeping track of mortgages, the bank disclosed in a securities filing Friday.

Bank of America says it has reached a $335 million settlement of claims of misleading mortgage investors. (Credit: AP) The bank said in a 10-Q form that it had reached an agreement with the Pennsylvania Public School Employees’ Retirement System, the lead plaintiff in the suit…

Source: Law360

Capitol Gains: S.C. lawmakers profit from government connections

Current, former legislators benefit through side businesses

South Carolina’s legislators like to complain about how little money they earn from their part-time jobs running the state. But for some of them, the $10,400 salary is the ticket for a far more lucrative pursuit — profiting on business deals with state and local governments.

It’s almost impossible to say with certainty how much money flows from government coffers to lawmakers because the state’s reporting laws are littered with loopholes and inconsistency. It’s a murky system, created by lawmakers, that makes it difficult for the average voter to see just where the money is going and to whom.

Since 2009, 20 current and former lawmakers reported ties to about $16 million in contracts with state and local government, an analysis byThe Post and Courier and the Center for Public Integrity shows.

Separately, some reported that they, their businesses, their associates or their immediate family members earned more than $3 million in work for entities that lobby state government and nearly $17 million from work representing people, businesses or government bodies in government matters, such as worker’s compensation cases and adoptions.

Read on.

Eric Holder Defends Record of Not Prosecuting Financial Fraud

Oct. 16 2015, 11:05 a.m.

The Intercept:

And I noted that after he stepped down from his post in April, he went back to his job at Covington & Burling, the gigantic D.C. law firm whose clients have included many of the big banks that Holder chose not to prosecute. (The reception was actually held at Covington & Burling’s swanky new building downtown. While it was being built — while Holder was still attorney general! — the firm actually kept an 11th-story corner office reserved for his return. He was making over $3 million a year from the firm before his sojourn at the Justice Department; his current salary has not been disclosed.)

Holder bristled at my suggestion that there might be a connection between his current employer and his conduct at Justice, saying that many top prosecutors at Justice had pursued cases as best they could. “We were simply unable to do it under the existing statutes that we had, and given the ways the decision-making worked at those institutions,” he said.

However, Holder had all the statutory authority he needed to prosecute straightforward crimes such as robosigning fraud, perjury in front of Congress by Goldman Sachs executives, or for that matter, HSBC’s money laundering for Mexican drug cartels. He simply chose not to. (In response to another questioner, he denied that any of his decisions not to prosecute were based on the massive legal teams that were fielded against the government.) Moreover, he actively waved off offers of additional help such as the suggestion from Sen. Sherrod Brown, D-Ohio, that Congress give him more staff for his Residential Mortgage-Backed Securities Working Group, or extend the statute of limitations on some crimes.

At Wednesday’s event, Holder continued: “It’s an easy thing for people who are not a part of the process” to “ask questions,” he said. “It pisses me off, on the other hand,” for people “not conversant” in the process to “somehow say that I did something that was inconsistent with my oath or that I’m not a person of integrity.”

“I’m proud to be back at the firm,” he said. “It’s a great firm. And I’m proud of the work I did at the Justice Department.”

Holder’s comment was only the most recent in a series of pronouncements from formerly powerful government officials that they were in fact powerless — while talking tough once they no longer have the ability to do anything about it.

Clinton Takes Her Adviser’s Side, Attacking Big Banks but Not BlackRock

Hillary Clinton has received a mixture of plaudits and qualified skepticismfor her Wall Street reform plan. She insists that the plan is tougher than those of her Democratic presidential rivals, because it targets more participants in the financial industry beyond the big banks.

But Clinton’s plan was mute on a key sector of the industry: asset management firms, like BlackRock or Vanguard or Fidelity, which control a staggering $30 trillion in global wealth.

And a number of Clinton’s ideas mirror the preferences of leading asset managers, who would profit from crackdowns on their competition — the big banks — while they get a pass.

That’s probably not a coincidence. Cheryl Mills, arguably Clinton’s closest adviser, sits on the board of directors of BlackRock, the largest asset management firm in the world, with $4.5 trillion in investor assets.

Read on.