Receiving Wide Coverage ...
Sued: Well, we know this was coming The U.S. Justice Department and the Securities and Exchange Commission filed parallel civil lawsuits on Tuesday, alleging Bank of America misled investors about the quality of $850 million in mortgage-backed securities sold in the lead up to the financial crisis. Important to note: the case deals with prime jumbo mortgages that were securitized and sold by B of A, not its much-maligned acquisition Countrywide. The bank plans to fight the charges. Per a spokesperson's statement to various news outlets, "these were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that." The case represents the latest mortgage-related woes for Bank of America, which, for instance, reached an $8.5 billion settlement with mortgage-backed securities investors in June 2011 that is currently pending approval. But a Dealbook article on the latest action ends with this note: "While the accusations add to the pressure on Bank of America, which has been working to move past the crisis, previous government lawsuits against it that began with much fanfare have lost some of their momentum." Wall Street Journal, Washington Post
Settled: UBS has agreed to pay nearly $50 million to settle government allegations that it (you guessed it) misled investors in a complex mortgage security deal by pocketing $23.6 million in related upfront payments rather than transferring them into the collateralized debt obligation. UBS did not admit or deny wrongdoing and no individuals were charged in the settlement. Per a statement issued by the bank that is making the rounds, "UBS is pleased to put this investigation behind us, which involved a legacy business that was closed almost five years ago." The FT notes the settlement is "one of the lowest paid by a bank for mis-marketing CDOs." Still, Dealbook called the settlement "another black mark for the bank" citing that the SEC's civil order "depicted the bank's zealous pursuit of profit as coming at the expense of investors."
Outlined: President Barack Obama laid out his plans for housing reform at a speech in Phoenix, Arizona on Tuesday. Among them: a desire to wind down Fannie Mae and Freddie Mac, while maintaining a limited role for government in the housing system and preserving the 30-year fixed-rate mortgage. The President's ideas "align him with bipartisan efforts in the Senate but sharply contrast with the views of many House Republicans," the Post notes. The FT says the President's remarks "were not seen as a game changer," while observers suggested to American Banker "it's what the White House does after Obama's speech that will prove how serious the administration is in seeing housing finance reform through."
Wall Street Journal
Amid the new B of A lawsuit and UBS settlement, the paper reports "the SEC's investigations into whether companies or individuals broke the law with their conduct ahead of the crisis are running out of gas." The report appears to stem from the SEC's decision to not recommend filing civil charges against hedge fund firm Magnetar Capital tied to soured mortgage securities. But anony-mice also tell the paper "SEC officials are still considering at least one further CDO action before the end of the year Banks that have continuing SEC investigations into CDOs include Barclays PLC, Deutsche Bank AG and Morgan Stanley."
The paper profiles peer-to-peer lending, "an obscure corner of the financial-services sector in which consumers bypass banks altogether to borrow money from other individuals," as more professional investors get into the game. "With more money chasing the loans, lenders such as Prosper are working hard to come up with enough borrowers to meet the demand," the article notes.
New York Times
Overhauling the public pension system, which is under new scrutiny due to Detroit's financial problems, could, among other things, "cut off an important source of financing for venture capital and private equity."
The latest in parsing the Federal Reserve: remarks from two regional presidents suggest stimulus tapering will start "sooner rather than later," possibly as early as September.
Columnist Adam Davidson wonders if we wasted a financial crisis. "Remarkably, five years after the crisis, the health of the financial industry is just as hard to determine," he writes. "A major bank or financial institution could meet every single regulatory requirement yet still be at risk of collapse, and few of us would even know it."