RBS Pays Big Fine, Pleads Guilty to Wire Fraud Over Libor Case; DOJ Versus S&P


Receiving Wide Coverage ...

And RBS Makes Three: Royal Bank of Scotland has reached a settlement with U.S. and U.K. regulators over its involvement in the Libor rate-rigging scandal. The settlement includes a combined $612 million fine. As previously speculated, RBS' Japanese unit pled guilty to criminal wrongdoing. Per Dealbook, this involves "a single count of felony wire fraud to settle the case." John Hourican, the head of RBS's investment bank, resigned as part of the settlement and his and other investment bankers' bonuses will be clawed back. Tangentially, an FT article, written prior to the formal settlement announcement, reports that U.K. Business secretary Vince Cable plans to "revive a radical plan to return Royal Bank of Scotland to the private sector by distributing free shares to the public," though it's unclear how likely this plan is to be implemented. The settlement makes RBS the third "giant global bank" to settle with regulators over the rate-rigging scandal.

S&P, Part II: Several news outlets are providing more info and analysis regarding the Justice Department's decision to file civil charges against Standard & Poor's for allegedly rating mortgage investments higher than they should have in the years leading up to the financial crisis. The Journal reports both sides are braced "for a long and costly legal fight" with one analyst noting that U.S. officials appear "willing to push this case harder than with any financial-crisis case against a major bank." But legal experts believe the Justice Department "faces an uphill battle" since S&P's ratings were "similar to those by government agencies, financial institutions and other experts." Meanwhile, Dealbook seems to be just as interested in the S&P case as it was in Davos, posting five new articles on the subject since yesterday's Scan. This one mirrors the Journal's sentiment that the Justice Department faces "an uphill battle." This one reiterates S&P's statement that the case is "meritless." This one looks at the Justice Department's contention that S&P employees "deliberately used models to produce inflated, fraudulent ratings." This one — and this one — take a closer look at the internal emails, documents and instant messages that have been made public in court documents related to the charges. (A highlight: "Job's going great. Aside from the fact that the MBS world is crashing, investors and the media hate us, and we're all running around to save face… no complaints.") According to both Dealbook and the Journal, one S&P analyst also rewrote the Talking Heads' "Burning Down the House" to reflect what was going on in the 2007 housing market. Full lyrics are reprinted in this FT Alphaville blog post. The scanned court documents you will find there also indicate there's a "videotaped vocal performance" out there somewhere. But the blog post goes on to note that the Justice Department case's focus should not be on embarrassing emails, but on whether S&P's ratings were material to investment decisions. "…for our money (and we know this is a very early stage) it seems fairly light," the blogger writes.

Wall Street Journal

It looks like Timothy Geithner is joining the Council on Foreign Relations — a "sort of think tank" that hosts panels, speeches, and publishes reports on a range of current events — as a distinguished fellow, following his recently completed stint as U.S. Treasury Secretary. Geithner previously served on the CFR as a senior fellow in 2001.

Nasdaq is in talks with the Securities and Exchange Commission to pay a $5 million fine over the botched Facebook IPO, which is estimated to have cost Wall Street around $500 million.

Pension funds are pulling out of commodity indexes, since they do little "to protect their portfolios against inflation risk and the unpredictable returns of stocks."

Financial Times

Jim O'Neill, chairman of Goldman Sachs' asset management arm, is set to retire. Unnamed sources tell the paper his departure "may have been motivated in part by frustrations over the status of Goldman Sachs Asset Management within the bank."

Washington Post

Virginia is moving closer to establishing its own currency.

Wonkblog profiles a paper that makes a case for "Too Big to Fail" banks. Among its arguments: "That without huge, regulated banks, companies will turn to the unregulated 'shadow banking' sector to meet their financial needs … If a bank break-up sparked a vast expansion of shadow banking, it would make the financial system more vulnerable."



Big Winners and Losers for Banks on Election Night

Republicans won a sizable victory late Tuesday, retaking the Senate after losing it eight years ago. Banks, too, largely benefited, as an ally of the industry captured a Senate seat in West Virginia, two credit union allies fell and a key Democratic senator squeaked past. Here's how election night played out for banks.

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