CFPB defends its toughness; Freedom Mortgage's rapid rise

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Looking back: Ten years “after presiding over the collapse of Lehman Brothers,” which the Wall Street Journal calls “the biggest casualty of the worst financial crisis since the Great Depression,” former CEO Dick Fuld “is still working on the second act of a Wall Street career that many predicted had also expired in September 2008.”

Branded as one of the villains of that era, blamed for not heeding the warnings about Lehman’s risks and not securing a deal that might have averted disaster,” Fuld continues to run Matrix Private Capital, a financial advisory firm he opened shortly after Lehman’s collapse.

Scott Freidheim was Lehman’s chief administrative officer “on the day it closed its doors forever.” In a Financial Times op-ed, he says: “Speaking as someone who was on the inside looking out, the answer is clear: Lehman could have and should have been saved.”

One of the biggest changes on Wall Street since then is the shift of “profits, assets and influence” from big investment banks like Goldman Sachs to “money-management giants such as BlackRock and Vanguard Group. These firms were once sleepy clients of Wall Street. Today they are its power brokers, directing huge flows of capital and capturing the lion’s share of the finance industry’s fees.”

The Journal offers “five important takeaways from [the Lehman] collapse that still haven’t sunk in.”

The FT looks at five things that were supposed to happen in the wake of the crisis but didn’t.

Wall Street Journal

More woes for Wells: The Justice Department is investigating Wells Fargo’s wholesale banking unit to see if employees committed fraud by improperly altering customer documents without their consent. DOJ “in recent weeks has sought more information from the bank to examine if management pressure prompted the employees to improperly alter or add the information,” the paper says. It is “interested to learn if there is a pattern of unethical and potentially fraudulent employee behavior tied to management pressure.”

Take that, critics: The Consumer Financial Protection Bureau “continues to scrutinize financial companies under the Trump administration,” according to the agency’s first supervisory report under acting Director Mick Mulvaney. “What’s notable is that the supervisory or examination part of the CFPB has experienced very little change. It’s largely business as usual,” according to Alan Kaplinsky, a financial industry lawyer.

Rising star: Freedom Mortgage, a New Jersey-based nonbank mortgage lender, is now the 11th largest mortgage originator in the country, up from 78th just six year ago. It produces more home loans than either Citigroup or Bank of America. "Its rise points to a bigger shift in the home-lending business to specialized mortgage lenders that fall outside the banking sector. Such nonbanks, critically wounded in the housing crisis, have re-emerged to become the market’s dominant players. They symbolize both the healthy reinvention of a mortgage market brought to its knees a decade ago — and how the growth in that market almost exclusively has been in its less-regulated corner.”

AML probe continues: The investigation into money laundering at Denmark’s largest bank is centered around $150 billion of transactions that flowed through Danske Bank’s Estonian branch — more money than in all of Estonia’s banks combined.

Financial Times

Citi never sleeps: Citigroup unveiled more major changes to its structure and management two days after announcing the retirement of its longtime CFO John Gerspach and two other executives. On Thursday the bank said it was merging two of the biggest divisions in its investment bank and reshuffling its management as it “looks to the future” following years of “repairing and rebuilding.” The revamped unit will be called Banking, Capital Markets and Advisory and will be jointly run out of New York and London. Citi promoted bankers Tyler Dickson and Manolo Falco to run the reconstructed units.

Let the promos begin: U.K. banks are offering a wide variety of rewards — from free coffee to movie tickets — to differentiate themselves in the battle to win premier banking customers.

Low tolerance: The U.K.’s Financial Conduct Authority is cautioning accountants to improve their auditing of financial companies’ client assets, saying they’re often “just not good enough.” “Be warned,” FCA Chairman Charles Randell said.

Quotable

“I’m the guy who played a central role in this home thing and I regret it because … it got abused beyond everybody’s imagination. I will never, ever, ever, ever live out that scar that I carry for what happened with something I created. It did so much damage to so many people.” — Lewis Ranieri, the investor of the mortgage-backed bond, on the security’s role in the global financial crisis.

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