Receiving Wide Coverage ...
Citi Settles: In a story that will sound familiar, Citigroup has agreed to pay $730 million to settle claims that it misled its bond and preferred stock investors about possible exposure to losses on securities backed by subprime mortgages. The settlement is now the second-largest class action settlement related to the financial crisis. Bank of America's $2.4 billion payout to shareholders over the health of Merrill Lynch still takes the top spot. Citi, which maintains it did nothing wrong and merely settled "to eliminate the uncertainties, burden and expense of further protracted litigation," plans to cover the costs with "existing litigation reserves," the FT reports. One analyst told the Journal he thinks "we're starting to see the light at the end of the tunnel" in terms of the litigation, "which is one reason why these stocks have been trading better." New York Times, American Banker
Cyprus Update: Cyprus banks will remain closed until Thursday as lawmakers work to modify the $13.07 billion European bailout plan that includes a controversial levy on depositors. According to the Journal, Cyprus's government is hoping to exempt "savers with less than €20,000 (about $26,000) in their bank accounts" from paying the levy. Meanwhile, protesting Cypriots gathered on the streets, "officials scrambled to explain what went wrong" and global markets dropped "modestly" amid fears that bank runs were going to sweep over Europe. But Dealbook's Andrew Ross Sorkin argues the Cyprus bailout won't result in the "full-fledged global crisis" everyone else fears. For one, the country is "tiny" with a banking system that is "unique." Most of its large deposits belong to foreign investors who knew the institutions they were using were in trouble. This is one of the reasons why depositors in other countries shouldn't fear a levy should the country they bank in need a bailout. (A notion supported by the fact that, by the end of the afternoon, "the euro, as well as Spanish and Italian government bonds, were up slightly," the Journal reports. American Banker further outlines the reasons why a tax on insured depositors is an "extremely unlikely scenario" here in the U.S.) The Sorkin article ends with this kicker: Investors who kept their money in Cyprus banks over the last five years fared better than they would have had they kept their money in a U.S. one. "If you had 100,000 euros in a Cypriot bank account over the last five years, where the interest rate has averaged about 5%, you would have about 127,600 euros today. Even after the bailout … you would be left with 114,840 euros," Sorkin writes. "The $100,000 you deposited at Bank of America five years ago is about $105,100, at the going rate of about 1% interest a year."
(Sort of) Good Housing News: More borrowers are regaining home equity, short sales are trending, which could be a good thing, depending on who you ask and, perhaps most notably, the housing rebound, which has helped Fannie Mae return to profitability, may allow the GSE "to repay as much as $61.5 billion in rescue funds to the U.S. Treasury." The last bit is per the Journal, which reports the potential payout could come as the result of an accounting move that would allow Fannie to reclaim certain "so-called deferred-tax assets," which means, no, "a payment wouldn't erase its debt to taxpayers or remove it from government control."
UBS executives should take pay lessons from former Citigroup CEO Vikram Pandit, who "took a salary of only $1 and no bonus for a couple of years until he had achieved his goals," argues banking editor Patrick Jenkins.
New York Times
Why did Carl Levin hold his Senate hearing about the London Whale? He tells the Times one of his goals was to "stiffen the spine of regulators. Rule-makers are struggling with what to allow in terms of hedging under the Volcker Rule." And why wasn't CEO Jamie Dimon asked to be there? Also per Levin, "we wanted to speak to the people who had the most information."