Daily Archives: January 15, 2016

Under Dodd-Frank Pressures, Finance Institutions Are Breaking Themselves Up


Forget too-big-to-fail.

The operative question for the country’s largest financial firms is increasingly whether the government has made it too expensive to be big.

On Tuesday, insurer MetLife Inc. became the second major firm in the past 10 months to decide that the demands of being “systemically important” in the eyes of regulators may outweigh the benefits of continuing to operate at its current size. General ElectricCo. made the same choice in April for its giant finance arm, GE Capital.

The moves show that while the U.S. government hasn’t heeded populist calls to “break up” the nation’s largest financial firms, those demands are at times being answered through indirect pressure from regulators.

Next up could be MetLife rivals Prudential Financial Inc. andAmerican International Group Inc., analysts say. The latter is facing a challenge from investors, including Carl Icahn, who argue in part that the firm is “too big to succeed” given the regulatory requirements it now must meet that restrain profits.

Bill would weaken protections for homeowners in foreclosure

Indiana homeowners who have fallen behind in their mortgage payments and face foreclosure could lose the right to a court-monitored settlement process to try to save their homes under a new bill going through the General Assembly.

Last year, a similar measured died after housing advocates and Attorney General Greg Zoeller assailed it as unfair to homeowners. They said the settlement process, rolled out during the height of the foreclosure crisis in 2010, has helped more than 6,000 Hoosiers save their houses by letting them sit down with lenders and work out a plan.

But Sen. James Merritt, R-Indianapolis, the new bill’s sponsor, said Indiana is plagued by an abundance of abandoned houses. He said the measure could cut up to two months out of the foreclosure process, and return the houses to the market faster.

Still, he acknowledged that the measure probably doesn’t have the necessary votes. He said he plans to remove the controversial provision from the bill, Senate Bill 204, which also deals with tax sales and vandalism of foreclosed property.

Read on.

Why Senator Cruz’ Undisclosed Goldman Loan is a Violation of the Federal Law


The recent revelation that Republican hopeful Ted Cruz failed to disclose a 2012 $1 million loan from the Wall Street investment bank, Goldman Sachs, raises legitimate legal concerns, and could spell trouble for the presidential hopeful. As Mediaite.com’s Rachel Stockman reports (via LawNewz.com),

The New York Times first reported that campaign disclosure reports show that before a scheduled run-off in the May 2012 senatorial election, Cruz received a low-interest loan from his wife’s bank, which his campaign committee never reported to the Federal Election Commission.


The Cruz camp is brushing this all off as a BIG oversight.  Cruz promised to immediately amend the filing if there were any problems. The Texas Senator said that he and his wife put their liquid net worth into the campaign and the loans in question were “disclosed over and over and over again.”


That’s great but here’s the problem: what he did could still be a violation of federal law.

“The fact that the information was out there somewhere doesn’t negate the fact that it wasn’t disclosed on the candidate’s campaign disclosure… that’s a violation of federal law,” Paul Ryan with The Campaign Legal Center told LawNewz.com.  The group is a nonpartisan, and goes after Republicans and Democrats alike for campaign finance violations.

To be clear, here’s the federal law that Cruz may have violated:

52 USC 30104 (b)(2) (6) requires the committee of a federal candidate to disclose on a report filed “loans made by or guaranteed by the candidate” and 52 USC 30104(b)(4)(d) requires the reporting of “repayment of loans made by or guaranteed by the candidate”

So the question is, what can happen next? Clearly someone will have to file an official complaint (I have no doubt that will happen). If they do, the FEC could impose fines.

The real problem for Cruz is if evidence somehow emerges that this was ‘knowing and willful.’ If that could be demonstrated, then Cruz could potentially be prosecuted criminally by the U.S. Department of Justice, according to campaign finance experts. Cruz insists that it’s not.

Goldman Fined $15M Over Short Selling Procedures

Law360, New York (January 14, 2016, 4:49 PM ET) — Goldman Sachs & Co. has agreed to pay a $15 million penalty to settle U.S. Securities and Exchange Commission allegations that it filled customers’ short selling orders without ensuring it could borrow enough stock to cover the order, the agency announced Thursday.

Goldman Sachs agreed to pay the fine without admitting or denying that it violated SEC regulations on short sales. The SEC said Goldman Sachs improperly accepted and filled short sale orders without ensuring that it could find and borrow enough stock to deliver on…

Source: Law360

After ex-CFO admits to embezzling $20M, Michigan credit union placed into conservatorship

Just days after the former chief financial officer of a Michigan credit union walked into the local sheriff’s office and confessed to embezzling $20 million from his former employer, the credit union has been placed into conservatorship by the Michigan Department of Insurance and Financial Services.

Earlier this week, HousingWire (citing the Detroit Free Press) reported on the shocking confession of Michael LaJoice, who was described as a “community hero.”

LaJoice reportedly walked into the Oakland County Sheriff’s Office and told the authorities that he stole about $20 million from Clarkston Brandon Community Credit Union during a 12-year period when he worked as the credit union’s CFO.

Now, due to “unsafe and unsound practices” at the credit union, Clarkston Brandon Community Credit Union has been placed into conservatorship and the National Credit Union Administration has been named as conservator.

According to the NCUA, deposits at Clarkston Brandon Community Credit Union remain protected by the National Credit Union Share Insurance Fund.

According to the NCUA, the Michigan Department of Insurance and Financial Services placed Clarkston Brandon Community Credit Union into conservatorship because of “unsafe and unsound practices” at the credit union.

The release from the NCUA made no mention of LaJoice’s alleged embezzlement.

Read on.

New York banking regulator proposes new anti-money laundering rules


On December 1 2015 Governor Andrew M Cuomo announced a proposed new anti-money laundering regulation issued by the New York State Department of Financial Services (NYDFS) that would apply to banks, trust companies, private bankers, savings banks, savings and loan associations, branches and agencies of foreign banking organisations, cheque cashers and money transmitters that are chartered or licensed under the New York Banking Law (collectively, ‘regulated institutions’). The proposed rule sets forth the minimum attributes of a robust transaction monitoring and watch list filtering programme for detecting illegal transactions. Most notably, it requires a senior compliance officer of a regulated institution to certify annually that the institution has sufficient programmes in place to comply with the regulation – a requirement that is modelled on the certification approach of the Sarbanes-Oxley Act 2002.

In the last few years, the NYDFS has conducted investigations on Bank Secrecy Act/anti-money laundering and sanctions compliance at financial institutions and discovered serious deficiencies – particularly with respect to transaction monitoring and filtering systems and governance, oversight and accountability at senior levels of the institutions. The NYDFS believes that these shortcomings may be present in other financial institutions, resulting in a widespread failure to flag suspicious activity adequately. The proposed rule is intended to address these concerns and clarify and expand the obligations of regulated institutions to detect and prevent illicit transactions by terrorist organisations and other criminals. The NYDFS has also been active in examining for anti-money laundering and sanctions compliance violations, and has imposed significant fines on banks for such violations.

Proposed requirements

Transaction monitoring programme
Under the proposed rules, each regulated institution must maintain a transaction monitoring programme to monitor transactions for Bank Secrecy Act/anti-money laundering violations and suspicious activity using manual or automated systems. This programme must include certain attributes specified in the proposed rule, such as:

  • system settings and detection scenarios designed to reflect the institution’s anti-money laundering risk assessment, customer due diligence information and relevant information from areas such as security, investigations and fraud prevention;
  • end-to-end, pre and post-implementation testing, as well as periodic testing of the programme;
  • protocols for the investigation and decision-making process for alerts; and
  • ongoing analysis of the continued relevance of parameters, thresholds and other settings.

Read on.

More People Have Decided to Stop Giving Wall Street Money For No Reason


Newly released data for 2015 shows that this message is filtering down to you, the average idiot (and the average idiot pension funds and whatnot that have all your retirement money). From the Wall Street Journal: “Clients yanked $207.3 billion in 2015 from U.S.-based mutual funds that hand pick their positions while pouring $413.8 billion into funds that mimic broad indexes for a fraction of the cost, according to new data from research firm MorningstarInc… The movement of money in 2015 was the first net outflow from traditional money managers since the 2008 financial crisis and the largest-ever from actively managed U.S. stock funds.”

If the average actively managed mutual fund charges something like 1.5% a year in fees, that means that last year this industry lost more than $3 billion of our money that would have gone into their pockets, and then into prime Manhattan real estate and Maseratis. Instead, you and your retirement funds keep that money. And in the long run your investment return will most likely be better for it.