Daily Archives: March 3, 2016

Wall Street Is About to Go After Donald Trump Big Time

Wealthy donors will spend millions in coming weeks

Watch out Donald, Wall Street is gunning for you.

It’s looking increasingly unlikely that any of Trumps’ rivals can mount enough support to stop his winning the Republican nomination for president, but that’s not stopping some of Wall Street’s wealthiest tycoons from spending millions to thwart Trump.

According to a report Thursday in Politico, the newly formed Our Principles PAC—funded with an initial $3 million donation from Marlene Ricketts, wife of billionaire T.D. Ameritrade founder Joe Ricketts—will begin launching television ads against Donald Trump in the coming days.

In addition, the group held a conference call on Tuesday to solicit further donations. Included on the call were Paul Singer, billionaire founder of hedge fund Elliott Management; Hewlett Packard President and CEO Meg Whitman; and Chicago Cubs co-owner Todd Ricketts, one of Joe and Marlene Ricketts’ three sons; and others, according to Politico. Politico also talked to one person close to the group who said that, “The money is not going to be a problem. We will raise what we need to do what we need to do.”

Read on.

Bank of America revs up auto loans business despite warning signs

Bank of America (BAC.N) is making a big push into auto lending just as regulators are sending warning signals, losses from auto loans are rising, and rivals are growing more cautious after years of strong returns.

The bank tapped mortgage executives Matt Vernon and John Schleck to lead the auto lending business last May, saying they would be able to sell auto loans alongside other products such as checking accounts and home equity loans.

In interviews, the executives and their boss, D. Steve Boland, who oversees a broad swath of consumer lending, said they still see room for growth from borrowers who have good credit. They have hired extensively in recent months, adding dozens of loan officers and salespeople.

But some competitors and bank analysts said hiring doesn’t make sense at this stage, because auto sales may be close to peaking, and consumer credit is showing signs of weakness.

Read on.

Members of Congress call for reforms to bulk mortgage sales

Forty-five members of Congress have called for reforms to mortgage sales programs run by the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac — including one program that was the subject of a Center for Public Integrity probe.

The proposed changes are outlined in a March 1 letter to both Julian Castro, secretary of the Department of Housing and Urban Development (HUD), which oversees the FHA, and Mel Watt, director of the Federal Housing Finance Agency (FHFA). Watt’s agency regulates the government sponsored entities Fannie Mae and Freddie Mac.

The letter acknowledges prior reforms to the mortgage sales programs, such as the launch of sales to community-based nonprofit groups, rather than just commercial investors,  as a “step in the right direction.”

“However,” the letter continues “sale after sale seems to indicate…that the fundamental approach of these programs, to bundle up hundreds or thousands of properties at a time for sale to the highest available bidder, and without sufficient attention to potential outcomes for homeowners, communities, and the affordable housing missions of your agencies, has not changed.”

The letter was first circulated by Rep. Michael Capuano, D-Mass., who sits on the House Committee on Financial Services, including subcommittees on financial institutions and consumer credit and housing and insurance. Among the other signatories are fellow House financial services committee members Gregory Meeks, D-N.Y. and David Scott, D-Ga.

The Center for Public Integrity’s 2015 story about the FHA bulk sales program found that more than 98,000 mortgages have been sold through the so-called Distressed Asset Stabilization Program (DASP) since 2010, and thatonly a small fraction of those successfully avoided foreclosure. FHA began selling mortgages in bulk, often more than 900 loans at a time, in the wake of the 2008 financial crisis as a way to move troubled mortgages off its books.

Critics have argued that many of the mortgages are going to wealthy investors, who have not provided the original borrowers a second chance at avoiding foreclosure, which was also supposed to be a goal of the initiative.

Read on.

Aubrey McClendon Collected Chesapeake Paychecks Until His Death

The late shale entrepreneur Aubrey McClendon was entitled to more than $56,000 a week in salary and bonuses from Chesapeake Energy Corp. up until his death Wednesday, even though he was fired by the natural gas giant almost three years ago.

McClendon, who died in a car crash a day after being charged with bid rigging, parted ways in 2013 with Chesapeake, the shale gas explorer he co-founded and led for almost a quarter century. Upon his termination amid an investor revolt, his employment agreement entitled him to an annual salary of $975,000 as well as a yearly $1.95 million bonus for another four years, according to public filings by Chesapeake.

McClendon’s arrangement also entitled him to Chesapeake’s life insurance, medical plan and reimbursement for membership dues and travel expenses. The company disclosed a $69 million cost in association with McClendon’s exit in its annual report for 2014, including $7 million for use of company aircraft. A Chesapeake spokesman declined to comment.

Read on.

$8.9M Ponzi Scheme Victims Can’t Sue BofA, 9th Circ. Says

Law360, New York (March 3, 2016, 2:41 PM ET) — Investors duped into taking out fraudulent mortgage loans to invest in an $8.9 million Ponzi scheme don’t have racketeering claims against Bank of America and another lender, the Ninth Circuit ruled on Wednesday, saying the lenders didn’t cause the investors’ losses.

The 17 investors claimed the bank violated the Racketeer Influenced and Corrupt Organizations Act by aiding Kaveh Vahedi’s mortgage fraud and Ponzi schemes. They claimed the banks called him a “carefully screened” business partner and ignored fraudulent loan applications he filed on their behalf. But…

Source: Law360

#FannieGate: 9th Circuit rules that Fannie and Freddie are private companies

Decision could affect Delaware case on legality of net worth sweep

A decision by the 9th Circuit Court of Appeals yesterday could have big implications for a Delaware case where plaintiffs are arguing that Fannie Mae and Freddie Mac are Delaware corporations and therefore are subject to state, not federal law.

Because Delaware law doesn’t allow for the net worth sweep of Fannie and Freddie profits, if the GSEs are ruled to be private companies, that profit sweep would be illegal. The 9th Circuit seems to be saying just that in a decision that upheld a district court finding.

“The district court properly held that a claim presented to Fannie Mae or Freddie Mac is not presented to an ‘officer, employee or agent’ of the United States. And that’s because Fannie Mae and Freddie Mac are private companies, albeit companies sponsored or chartered by the federal government,” the ruling from the 9th Circuit stated.

[h/t Todd Sullivan’s ValuePlays blog]

Key to the Delaware proceedings is this phrase from the 9th Circuit:

Our prior decision in Rust v. Johnson, 597 F.2d 174 (1979), where we held that Fannie Mae was a federal instrumentality for state/city tax purposes, does not change the result, because Rust does not address Fannie Mae or Freddie Mac’s status under the False Claims Act. As we have previously held, just because an entity is considered a federal instrumentality for one purpose does not mean that the same entity is a federal instrumentality for another purpose…Nor does the Federal Housing Finance Agency’s conservatorship transform Fannie Mae and Freddie Mac into federal instrumentalities.

Read on.

Bank Whistleblowers United D.C. Press Conference Hits a Home Run!

In spite of the stormy weather in D.C. last week Thursday, our Bank Whistleblowers United press conference got off to a rousing start. William Black and I were able to make it to D.C.; Michael Winston, stranded en route, called in on his cell, and Gary Aguirre joined us by Skype.
Hosted by Campaign for America’s Future Co-Director Robert Borosage kicked it off by pulling no punches: “Millions of Americans were devastated by this financial crisis and the great recession. They then watched the banks get bailed out even as homeowners were left to sink. The banks ended up bigger and more concentrated than ever while most Americans still have not recovered from the ground lost in that recession.”
Introducing our initiative and the proposal we’ve presented to the presidential candidates, he stated, “each risked their careers to blow the whistle on what the FBI termed was an epidemic of fraud on Wall Street.”

Ex-HSBC Credit Trader Jorgensen Sues Bank for Unfair Dismissal

Former HSBC Holdings Plc senior credit trader Claus Jorgensen sued the bank for unfair dismissal after being fired last year.

A preliminary hearing in Jorgensen’s case will be held at a London employment tribunal on March 18, according to court records. Part of the lawsuit also relates to whistle-blowing allegations, the records say.

Jorgensen shared responsibility for trading investment-grade and high-yield bonds with John Gousias in the corporate-debt brokering business before being placed on leave in May, three people familiar with the matter, who said they didn’t know the reason for the suspension, said at the time.

Jorgensen and a spokesman for HSBC both declined to comment.

Read on.

It’s official: Original NMS servicers pass final metric tests

BofA, Chase, Citi, Wells Fargo, Ditech now done

The original National Mortgage Settlement servicers officially completed the final metric tests as of the end of third quarter ] 2015, marking the completion of the NMS rules for the servicers, Joseph Smith, Monitor of the National Mortgage Settlement, announced on Thursday.

The original servicers include: Bank of America, Chase, Citi and Wells Fargo.Ditech acquired a portion of the portfolio from another original servicer, ResCapParties and therefore was subject to the terms of the NMS agreement.

Read on.

Feds Helped Hide Investigation Into HSBC Money Laundering For Drug Cartels

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A federal judge ruled last week that the Hong Kong and Shanghai Banking Corporation (HSBC) will be forced to share a report on its business practices with the public — a decision both the bank and the Department of Justice (DOJ) fought in court to prevent. The report is based on the findings of an ongoing government audit of the bank initiated amid revelations in 2012, that it laundered money for drug cartels and terrorist organizations.

When HSBC’s sordid dealings were discovered in 2012, the DOJ declined to press charges, arguing the bank was too important to prosecute. As the Guardian reported at the time, Assistant Attorney General Larry Breuer argued “the Justice Department had looked at the ‘collateral consequences’ to prosecuting the HSBC or taking away its US banking license. Such a move could have cost thousands of jobs, he said.”

Further, “Had the US authorities decided to press criminal charges,” theGuardian summarized, “HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized.”

The DOJ’s refusal to prosecute those responsible was widely criticized, as HSBC was found to have laundered over $850 million for cartels, while also laundering money for Saudi banks with ties to terrorist groups. The bankalso helped nations like Libya and Iran bypass American financial laws. The lack of punishment for these transgressions appeared to reveal a double standard.

As Glenn Greenwald observed at the time:

The US government is expressly saying that banking giants reside outside of — above — the rule of law, that they will not be punished when they get caught red-handed committing criminal offenses for which ordinary people are imprisoned for decades. Aside from the grotesque injustice, the signal it sends is as clear as it is destructive: you are free to commit whatever crimes you want without fear of prosecution. And obviously, if the US government would not prosecute these banks on the ground that they’re too big and important, it would — yet again, or rather still — never let them fail.”

Rather than directly prosecute HSBC, the DOJ opted for a “deferred prosecution” and imposed a five-year monitoring program wherein government authorities would regularly audit the bank’s internal reforms to ostensibly prevent similar criminal behavior in the future. The bank was also ordered to pay a $1.9 million fine, which DOJ officials bragged was the largest ever for such a case.

A private individual, Hubert Dean Moore, recently sued in an eastern New York district court to publish the findings of the first annual audit, but both HSBC and the DOJ resisted. HSBC reportedly argued in a letter to U.S. District Judge John Gleeson that Moore “had not identified a public interest case for publishing the report that would outweigh the negative consequences.

Read on.