Receiving Wide Coverage ...
AIG vs. B of A: The battle over Countrywide's bad mortgage-backed securities continues as the New York State Supreme Court is set to hear arguments on Monday over whether the $8.5 billion settlement Bank of America reached with investors over the soured investments should be approved. Insurer AIG is leading opposition to the settlement, believing its sum should be much higher. The Journal calls the hearing "part of a broader battle over which company should bear the brunt of losses suffered during the financial crisis." AIG is also pushing B of A to settle its separate $10.5 billion claim over mortgage-backed securities losses and "people familiar with the matter" tell the paper the insurer would drop objections to the investor settlement if the bank were to negotiate deal on those claims. The FT, which makes a point of noting that AIG and B of A collectively received $225 billion in government bailouts during the financial crisis, says denial of the settlement could ultimately saddle B of A with a bigger bill while approval, though "an important step forward" in the "subprime mortgage mess," is likely to be met by an appeal from AIG. This Lex column elaborates on what settlement approval would mean for the bank: "B of A faces other cases, but if this settlement stands, it will go a long way to clearing out the crisis-related clouds that have followed the bank."
UBS Tax Probe: French prosecutors are looking into whether the French unit of UBS solicited French customers to open Swiss banks accounts that would let them evade taxes. The FT notes the investigation "comes as the French government, embarrassed by the recent resignation of its budget minister over revelations that he hid a Swiss bank account for years," clamps down on tax evasion. The Journal, having spoken to several former UBS employees questioned as part of the probe, outlines the system allegedly used to sign up new clients. "[Bankers] allegedly dressed in casual clothes, carried encrypted computers that could be activated through a game of Solitaire and used jargon inspired by Swiss dairy farmers," the article summarizes. The paper also notes UBS paid $780 million back in 2009 to settle U.S. government charges that it helped American clients use Swiss accounts to evade taxes.
Dodd-Frank on Deck: The Journal points out regulators are poised to act on two key pieces of financial reform this week. The Financial Stability Oversight Council, created by Dodd-Frank, is expected to propose designating at least three large nonbank financial firms as systemically important, while the Securities and Exchange Commission, following pressure from the FSOC, will finally vote on tightening rules for the money market fund industry. The paper notes "the need for such moves has long been apparent but, like many of Washington's efforts to address financial-system risk, action has been delayed by lobbying efforts, internal government disputes and regulators' concerns about triggering lawsuits." Meanwhile, a Dealbook column addressing the SEC's impending money market fund vote says "the outcome will tell us just how much ... [of] an overseer [FSOC] will be, which in turn will tell us something about how much the Dodd-Frank Wall Street Reform Act, which created FSOC, has, in fact, changed Wall Street." In other words: stay tuned.
Wall Street Journal
Some mortgage investors recently received notice of $1 billion of previously undisclosed losses on bonds backed by subprime loans, resulting from a standoff between Wells Fargo and Ocwen Financial Group on how to treat loans subject to a certain modification. The occurrence has renewed "concerns that were common during the subprime meltdown and subsequent financial crisis about the accuracy of financial reporting and the risks of certain assets associated with the housing and mortgage markets."
The Federal Reserve is examining risks associated with online payment providers such as PayPal and Bitcoin. Per a statement from Fed Vice Chair and possible Ben Bernanke successor Janet Yellen at an international money conference Monday: "This is very much on our radar screen and we are carefully trying to identify where the risks are."
Don't expect Wells Fargo to rush into foreign markets. "We are largely a domestic bank, and we like it that way," CEO John Stumpf tells the paper.
New York Times
Suspicions about how Bloomberg was using its financial data brought together Goldman Sachs and JPMorgan Chase.
Gretchen Morgenson's latest column says the rise in bank earnings and stock prices are not what they seem. "The quality of the banks' earnings an important consideration for investors starts to look less pretty when you start examining the data," she writes. "Once you do that, you can identify one-time gains or other gimmicks that can create ephemeral increases or otherwise make the results appear better than they actually are."