Foreclosure Pact Within Reach: The Journal and the FT are echoing earlier reports that the largest U.S. banks are nearing a $10 billion foreclosure-abuse settlement that, according to various unnamed sources close to the talks, could be announced, literally, any minute now. The deal, which would see banks pay out $3.5 billion in cash apiece, will replace an earlier settlement which required banks to review loan files in an effort to see whether a homeowner had unfairly lost their home due to robo-signing or another shortcut in the foreclosure process. But readers of American Banker will know this review process has come under fire recently for benefiting the independent consultants hired to do the work and not the homeowners who may have been affected by banks' mistakes and/or misconduct.
Here's one potential way to spot a corporate rogue (or a London Whale, perhaps?): linguistic analysis software, designed to flag phrases such as "nobody will find out" or "off the books" in worker emails. According to research from Ernst & Young, this software can be used to spot more than 3,000 potentially problematic words and phrases (though it doesn't mention if "muppets" or "structured by cows" are among them). It can also flag uncharacteristic changes in tone in electronic conversations.
New York Times
In an article that unwittingly highlights the potential need for such software, Dealbook postulates that a financial fraudster can be extremely difficult to spot, using Philip Horn, a Wells Fargo employee who "systematically executed and canceled trades in clients' portfolios, pocketing the profits" as an example of someone who long eluded detection.
Meanwhile, Matt Taibbi over at Rolling Stone, argues that government intervention in 2008 has created a "permanent bailout state" based around a Ponzi-like culture within the banking industry. "[The bailout] built a banking system that discriminates against community banks, makes Too Big to Fail banks even Too Bigger to Failier, increases risk, discourages sound business lending and punishes savings by making it even easier and more profitable to chase high-yield investments than to compete for small depositors," Taibbi writes. "[It] has also made lying on behalf of our biggest and most corrupt banks the official policy of the United States government."