Receiving Wide Coverage ...
Citi Settles: Citigroup has agreed to pay $968 million to settle claims it sold bad mortgages to Fannie Mae. Analysts tell the Wall Street Journal Citi may settle with Freddie Mac over similar charges as well, though official spokesmen for both parties are declining to comment. Citi did say that the settlement charges would be covered by its existing mortgage repurchase reserves. The bank plans to add $245 million to this reserve in the second quarter. Scan readers will recall Bank of America agreed to pay $10.3 billion to settle similar claims with Fannie Mae back in January. The FT notes the Citi deal "brings the banking industry a step closer to paying for past wrongdoing related to mortgages, which has cost tens of billions of dollars in claims for compensation, lawsuits and fines." Wells Fargo and JPMorgan Chase remain as the "banks with the largest demands from Fannie" that have yet to settle. New York Times, Washington Post
A Bitcoin IPO? Remember the Winklevoss twins of Facebook lawsuit fame who announced they owned about $11 million worth of Bitcoin back in April? They've filed with the Securities and Exchange Commission for an initial public offering that would allow investors to track and trade the digital currency, just like stocks. The Winklevoss Bitcoin Trust would "sell about $20 million worth of shares, each of which will represent a fraction of a bitcoin," reports the Journal. The IPO is an attempt to bring Bitcoin, whose exchanges have received some regulatory attention recently, into the mainstream, which is interesting since many of the digital currency's fans seem to like the idea that it operates decidedly outside of it. The FT says "there is no guarantee that an exchange will take the product," but Dealbook notes "even if the Winklevosses' proposal fails, some industry experts said that it marks a significant signpost in the push to give virtual currencies at least a veneer of respectability."
China's Shadow Banking Woes: Chinese banks are "pressing customers to shift money from the old, regulated part of their operations savings deposits into the new, less regulated part" such as "high-yielding wealth management products that can be used to finance high-interest loans to desperate customers," reports the Times. The Chinese government's attempt to rein this and other shadow banking practices in "inadvertently contributed to a surge in global market anxiety," the Journal reports, after reviewing an internal document that revealed the nation's central bank "instigated the cash shortages that catapulted Chinese interest rates to nosebleed highs" in order to curb out-of-control credit growth.
Wall Street Journal
Top compliance executives from over 20 banks, including Bank of America and Citigroup, have met privately with the Consumer Financial Protection Bureau to express concerns with, among other things, a lack of credit for cooperating with investigations and the presence of enforcement lawyers at examinations. CFPB officials tell the paper they "are taking steps to train examiners and improve relationships with businesses."
Emerging markets like Brazil and Turkey are getting hammered lately "as economies slow, investors pull out cash, commodity prices tumble and protesters take to the streets all fresh reminders that these markets can be difficult places to try to make money."
Here's a choice quote from an unnamed chief risk officer provided to Money and Investing Editor Francesco Guerrera on banks' inconsistent and, as such, potentially problematic value-at-risk reporting: "It's like weighing yourself and announcing your weight in pounds and kilos. But it's even worse than that; it's like pounds on the moon and kilos at the bottom of the ocean."
New York Times
Goldman Sachs has appointed company veteran Ken Hitchner as its new president for the Asia-Pacific region, "excluding Japan". He will succeed David Ryan, who is retiring this year.
Anxiously awaiting our forthcoming Summer Reading List for Commercial Bankers? Here's Andrew Ross Sorkin's recommended Wall Street reading.
Reuters' blogger Felix Salmon, after having a bad experience with one of Citi's overdraft products, draws this conclusion: "Retail banking is broken, it's broken everywhere, it's endemically reliant on hidden fees, and if you think your bank is being transparent about how it's making money from you, or if you think that your banking is free, then you're almost certainly mistaken."
Correction: An earlier version of Scan erroneously stated Citigroup agreed to pay $968 billion to settle claims it sold bad mortgages to Fannie Mae. Citi agreed to pay $968 million to settle with Fannie over mortgage claims.