Morning Scan

Thursday, February 9, 2012

Receiving Wide Coverage ...

The Servicing Settlement: It’s apparently really, finally happening, with an announcement expected today. The holdout attorneys general, including New York’s Eric Schneiderman and California’s Kamala Harris, have been brought back into the fold, the papers report. To win over the dissident AGs, “the banks and other government negotiators preserved regulators’ and prosecutors’ ability to use facts assembled from foreclosure-related probes in their securitisation investigations,” the FT says. “While the banks would be released from claims involving foreclosure abuses, securitisation claims would remain.” Indeed, the Journal reports that the SEC plans to send Wells notices to several major financial institutions, warning it intends to sue them for misrepresenting mortgage-backed securities sold during the go-go years. (It's not clear which companies will get the head's up, but the agency's been looking at Bank of America, Citi, Ally Financial, Goldman Sachs and Deutsche Bank, the paper says.) Also, Schneiderman’s suit against MERS and three banks will be allowed to proceed, and he retains the right to sue other servicers for using the mortgage registry system, according to a very informative and detailed post by David Dayen on the FireDogLake blog. The papers give conflicting figures on the size of the settlement — it’s either $26 billion or $40 billion, depending on the headline. That’s because the bulk of the settlement ($17 billion) is not cash but principal reductions, and “the banks will not get dollar-for-dollar credit for every write-down,” according to the FireDogLake post. (Remember that the banks were supposed to get more credit for eating the loans they hold on balance sheet than for writing down mortgages they service for investors, though there’s still skepticism whether this incentive will work.) “Housing and Urban Development Secretary Shaun Donovan believes that they will be able to get between $35-$40 billion in principal reduction in real dollars out of the settlement,” Dayen writes. The Times appears to be the only one of the major news outlets to provide an infographic breaking down the settlement amount, which a story like this cries out for. Some more interesting tidbits: a chunk of the cash portion of the settlement is to go to the states, and according to Dayen they will use at least some of that money to fund legal aid services for borrowers facing foreclosure; he also reports that Oklahoma’s attorney general isn’t participating in the settlement, because he doesn’t think the banks should be penalized at all. Since we’re quoting so profusely from his post, we should also acknowledge that Dayen regards the settlement as still overly broad in releasing banks from liability, and still insufficient in compensating borrowers. As other consumer advocates probably will, too. Wall Street Journal, Financial Times, New York Times, Washington Post, Politico.

Wall Street Journal

Chrysler is in talks with potential partners, including Ally and JPMorgan Chase, about creating an auto-lending joint venture. Currently Ally is the automaker’s preferred lender, but it hasn't had a captive finance subsidiary since the 2009 bankruptcy.

Financial Times

Get this: Goldman Sachs CFO David Viniar argues that the Volcker rule could actually end up boosting bank profits.

New York Times

“Did felons get a free pass in the financial crisis?” Eliot Spitzer and other marquee names debated this question at a recent panel discussion at New York University, moderated by Neil Barofsky.

 

, with contributions from Katherine Kane.

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