Receiving Wide Coverage ...
JPM Settlement(s) Update: In case you missed it, late on Friday, JPMorgan Chase agreed to pay $5.1 billion in a deal with the Federal Housing Finance Agency to settle allegations it sold bad mortgages to Fannie and Freddie in the years leading up to the financial crisis. The deal is part of the broader, reported $13 billion mortgage-related settlement the bank has been trying to broker with federal regulators and the Justice Department over the last month or so. Negotiations, however, over that broader settlement have stalled after the DOJ asked the bank to agree not to pass liabilities from the failed Washington Mutual, which JPM bought back in 2008, to the Federal Deposit Insurance Corp. The stakes over the ultimate outcome here are high. "Wall Street executives and some lawyers warn that if [JPM] is found liable for the WaMu bonds, otherbanks will think twice before buying failed rivals," Francesco Guerrera of the Wall Street Journal explains. "But if [JPM] prevails and gets the FDIC to pay, it could wipe out most of the $2.7 billion reserved for bondholders and other WaMu investors." The FHFA deal, meanwhile, represents a kind of, sort of victory for JPM. A provision in the settlement essentially allows JPM to try to recoup about $1 billion from the FDIC. The bank was also not required to admit wrongdoing as part of the settlement. "The results show that, even as [JPM] is facing an onslaught from the government, the bank is seeking to contain the fallout — and is succeeding on some fronts," Dealbook notes. "The government may be split over how to punish the bank for misrepresenting the quality of mortgage securities it sold to investors before the 2008 financial crisis." A Journal review of the FHFA settlement, meanwhile, concludes thatJPM's subprime troubles ran deep: "The bank dealt with some of the biggest subprime lenders of the time, including Countrywide Financial Corp., Fremont Investment & Loan and WMC Mortgage Corp., a former unit of General Electric." And JPM's legal woes are far from over. The bank still faces, among other things, a criminal investigation of its role in Bernie Madoff's Ponzi scheme and a probe into its Chinese hiring practices. Financial Times, American Banker
Wall Street Journal
The paper interviews Citibank India head Pramit Jhaveri about new rules requiring foreign banks to, among other things, lend a greater portion of their money to agriculture-related activities and small businesses. "India remains one of Citi's most important markets in Asia," Jhaveri says. "While the environment has been a challenging one for all the banks [in India], on the whole, we are managing well. We are seeing good growth in some of our businesses, including retail."
Some Federal Reserve officials want to establish a firm rule as to when the central bank will begin to taper its stimulus program in order to quell market confusion. Others think a concrete rule will limit options in uncertain times. "The quandary is a real-time microcosm of a long-running academic debate over rules versus discretion in forming monetary policy," the paper notes.
The payday loan/debt collection crackdown continues as New York's Department of Consumer Affairs filed a complaint on Friday to permanently ban National Credit Adjusters LLC, a Kansas-based debt-collection firm, from operating in the city. The complaint was filed after the firm continued to collect debts from New York residents even though the department had denied a request to renew its license. The department says it denied the license renewal request after finding the firm was collecting on "so-called payday loans and other high-rate loans that violate state law that limits most annual interest rates to no higher than 16%."
Here's a story Scan readers will have heard before: the P-2-P lending industry has become overrun by institutional investors who, in some cases, are even going so far as to sell securitizations of the loans. A choice quote at the very end of the article from an unnamed large investor: "The real story is that peer-to-peer is dead … Individual investors don't really have a chance against folks like me."
Regulators at the New York Fed are investigating banks' exposure to mortgage real estate investment trusts. "The worry is that MReits could be vulnerable to a sharp increase in interest rates which would force the vehicles to quickly reduce their holdings of mortgage-backed securities and set off a wider fire sale," the paper notes.
Royal Bank of Scotland, which is poised to be split into a good bank and a bad bank, can learn a thing or two from Citigroup, suggests U.S. banking editor Tom Braithwaite. "Quarantining bad mortgage securities, a flailing consumer finance company and other non-core loans did have a positive impact," he writes. "That said, the split between Citicorp, the good bank, and Citi Holdings, the bad bank, had no legal effect … The bad assets are still on the balance sheet and there is an overall profit and loss account each quarter, which ignores the split."
New York Times
This Dealbook article looks at Rebecca Mairone, formerly of Countrywide, a "rare midlevel executive found liable in the mortgage crisis."
Dealbook profiles Goldman Sachs' charitable giving with this headline, "Goldman Sachs, Buying Redemption," and this note: "Executives inside the bank say the Goldman Sachs Foundation, the clearinghouse of the company's giving, has been given more resources at a time when the bank itself has been cutting back sharply on expenses — and people — on big trading desks."
This USA Today article on how CEOs are often clueless about technology relays an anecdote from a guest at a White House dinner that included Google's Eric Schmidt: "The president, whose most important job is surely to protect the integrity of the monetary system, smugly asked Schmidt if Bitcoin, one of many growing challenges to currency hegemony, was anything he had to worry about."