Daily Archives: May 7, 2016

Berkshire Hathaway discloses unit’s ties to Iran, opens probe

Warren Buffett’s Berkshire Hathaway Inc said on Friday it recently learned that one of its foreign units made sales through a third-party distributor to customers in Iran, despite U.S. sanctions against that country.

In its quarterly report filed with the U.S. Securities and Exchange Commission, Omaha, Nebraska-based Berkshire said it alerted federal authorities including the Department of the Treasury on Friday about the transactions in question.

It said the customers “include or may include parties that meet the definition of the ‘Government of Iran.'”

The transactions took place from June 2013 to November 2015, and generated about $2,500 of profit on $45,000 of revenue, Berkshire said.

Berkshire did not identify the unit involved or when it learned there might be a problem, but said the unit has stopped shipments to the Iran parties and does not intend to resume them.

Read on.

Treasury Department Rejects Teamsters’ Central States Proposal to Cut Retiree Benefits

The Treasury Department on Friday rejected a proposal by a pension fund to cut the payout for hundreds of thousands of truck drivers, construction workers and other service personnel, though the retirement plan’s financial headaches are far from over.

It is extremely rare for retirees to ever see reductions in their pension benefit. In most cases, such action is illegal. But a 2014 federal law made it possible for cuts to certain cash-strapped multiemployer plans. The Teamsters’ Central States’ proposed cuts would have slashed some members’ income by 50% or more.

On a media call, Kenneth Feinberg, the star mediator who reviewed the proposal, said he rejected Central States because the overhaul was based on rosy investment return assumptions, uneven cuts among retirees and flawed plan notice to recipients

“We at Treasury do not believe that the plan as submitted will reasonably avoid insolvency,” Mr. Feinberg said.

Central States represents about 400,000 truckers, construction and other types of service workers. Decades ago, Central States had four active workers contributing into the retirement plan for every one retiree or inactive member. But now that ratio has nearly reversed, meaning far fewer active workers are paying into the pension versus receiving benefits.

Read on.

Trump’s Finance Chair Made Billions Off The 2008 Financial Crash

International Business Times:

Days after Trump’s decisive primary win in Indiana, his campaign indicated that it was growing. Team Trump has added a finance chair: Steven Mnuchin, the founder of a private equity firm that received a government-funded jackpot after the 2008 housing collapse.

Mnuchin, a former partner at Goldman Sachs, heads up Dune Capital. The investment firm put together a holding company in 2008  — attracting investors like J.C. Flowers, a George Soros investment fund and Paulson & Co. — that then bought up $32 billion worth of IndyMac bank assets for the cut-rate price of $13.9 billion. Renaming the bank OneWest, Mnuchin’s consortium invested $1.3 billion and got the Federal Deposit Insurance Corporation to assume responsibility for the majority of future losses. The FDIC lost an estimated $8.5 billion to $9.4 billion in the deal — while the holding company made money with the taxpayer-subsidized set-up.

“Steven is a professional at the highest level with an extensive and very successful financial background,” Trump said in a statement accompanying the announcement. “He brings unprecedented experience and expertise to a fundraising operation that will benefit the Republican Party and ultimately defeat Hillary Clinton.”

Aside from OneWest — which last year made $3.4 billion and has issued $2 billion in dividends to shareholders, according to Mother Jones — Dune is known for its holdings of public pension fund money. Private equity firms have been paid billions in fees from state pensions, and the financial institutions now receive roughly one-third to one-half of their new capital each year from the nation’s public pension system.

And we know back then how much OneWest was a living hell for homeowners after 2008 financial crisis trying to save their homes. From Wikipedia:

In enforcing its rights under the loans purchased from IndyMac, OneWest Bank has taken a much more aggressive approach to foreclosing on properties.

On November 25, 2009, Judge Spinner in Long Island, New York penalized OneWest for their “harsh, repugnant, shocking and repulsive” actions in trying to work out a distressed mortgage, by canceling the debt in favor of the borrower.[5] A year after the New York Judge Spinner wiped away the debt, an appellate panel ruled that the judge had no right to do it. While Judge Spinner ruled that the bank’s practices warranted him erasing the homeowners’ debt, the appellate judges found that he had no authority to render such a judgment—and did not give the bank fair notice that such consequences were even on the table.[6]

On December 8, 2009 OneWest worked with the Hennepin County, Minnesota Sheriff’s department to change the locks on a distressed home despite stating in a Nov. 25 e-mail that they were rescinding both the foreclosure and the sheriffs sale. OneWest Bank said, “You expressed concern that … you and your mother will be evicted from the property. Rest assured, that will not take place …”.[7] Changing the locks was done without any court action which bypasses acknowledged and mandated Due Process on home foreclosures in Minnesota.[7]

Additionally several judges have issued Temporary Restraining Orders and Preliminary Injunctions against OneWest preventing OneWest from foreclosing on properties where the borrower claims OneWest failed to follow proper procedure in foreclosing on the property or otherwise violated the borrower’s rights.[8]

Yeah, trying to throw an 89 year-old widow out on the street, changing the locks on a women trapped in the snow, and engaging in “harsh, repugnant and repulsive” acts, etc., this is the presumptive GOP Presidential nominee’s finance chair man.

Morgan Stanley promotes exec who oversaw controversial sales contest that pushed risky loans on some of its wealthiest customers

Morgan Stanley has promoted an executive who oversaw a questionable sales contest that pushed risky loans on some of its wealthiest customers — even as a Wall Street watchdog is probing the Wall Street firm over the practice.

Lynn Sullivan, an executive director who oversaw a 2014 sales contest to promote the loans in the New England region, was named the head of cash management sales in Purchase, NY.

In March, The Post exclusively reported that the bank had been giving out financial incentives to brokers who sold the most securities-based loans, one of the firm’s biggest money-makers. Regulators look askance at incentivizing employees to sell a specific product.

Sullivan was one of the highest-ranking executives on an e-mail chain obtained by The Post that divided brokers into “teams” and detailed how the bank would pay out thousands of dollars through a pilot program.

The report spurred a probe by the Financial Industry Regulatory Authority into the bank’s loan sales practices.

Read on.

Less than 1% of seriously underwater properties qualify for principal reduction

RealtyTrac®, a national source for comprehensive housing data, today released its Q1 2016 U.S. Home Equity and Underwater Report, which estimates that less than 1 percent of all seriously underwater properties nationwide potentially qualify for principal loan forgiveness under a new mortgage modification program introduced in April by the Federal Housing Finance Agency, which oversees government-backed loan agencies Fannie Mae and Freddie Mac.

To be considered eligible in the RealtyTrac analysis, the seriously underwater properties (loan-to-value ratio of at least 125 percent) needed to also be actively in foreclosure, owner-occupied, and have an estimated loan amount no more than $250,000 on a loan that is guaranteed by Fannie Mae or Freddie Mac.

Out of 6,703,857 million seriously underwater U.S. properties as of the end of Q1 2016, the RealtyTrac analysis estimated that 33,622 (0.50 percent) would potentially qualify for the FHFA principal reduction program.

Read on.

Over 25 years ago, bankers took such complete charge of Trump’s business and personal finances that they are putting him on an allowance

“I would borrow, knowing that if the economy crashed, you could make a deal..”—Trump told CNBC on how he would deal with the US national debt.

All In With Chris Hayes show on Friday mentioned that over 25 years ago how bankers took complete charge of Trump’s business and personal finances and how the bankers put him on an allowance. From Philly.com article in 1990:

ATLANTIC CITY — Bankers are taking such complete charge of Donald Trump’s business and personal finances that they are putting him on an allowance, confidential documents made available to The Inquirer show.

The documents, dated Friday and made available over the weekend, show that as conditions for lending the erstwhile King of Cash $65 million more to ease his cash crunch, the banks will name two executives to run the Trump empire, bar him from moving money among his companies without the banks’ permission, and limit him to a $450,000 allowance for “personal and household spending.”

By the way, that’s $450,000 per month, not per year.

The $5.4 million personal budget for this year results from a month of hard, dawn-to-dusk negotiations with lenders. Imagine what the Trump lifestyle must have cost before fortune left The Donald at the mercy of his bankers.

More than 50 banks from Newark, N.J., to Dresden, East Germany, to Tokyo are demanding radical spending cuts, both in Trump’s personal life and his business empire.

Trump is submitting to the bankers’ financial shackles because he cannot come up with enough cash to pay interest on more than $3.3 billion he borrowed from banks and junk-bond buyers.

 

Wells Fargo told staff to keep quiet about missing papers: lawsuit

 

A former employee accused Wells Fargo & Co of instructing workers at a call center to refrain from telling customers about lost deeds or other missing documents, and of firing the worker who called the policy unethical, according to a lawsuit made public this week.

Duke Tran, who was a customer service specialist at the bank, says that his supervisor berated him for telling a husband and wife that their loan contract was missing from an internal system.

Tran and others later received an email instructing them not to tell customers about situations “where we have a lost contract, deed, any type of document, really, but especially when it relates to securing a property,” according to a copy of the email filed with the lawsuit.

The email told the employees “to say that we need to do further research or something similar” and then to escalate the phone call to a boss.

Representatives for Wells Fargo, the largest U.S. mortgage lender, declined to comment on Friday.

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