Receiving Wide Coverage ...

JPM Under Fire: JPMorgan Chase disclosed in a filing on Wednesday that the U.S. Justice Department has opened up a criminal and civil probe into its sale of mortgage-backed securities leading up to the crisis. Per the filing, investigators have "preliminarily concluded that the firm violated certain federal securities laws" while selling subprime mortgage securities to investors. Both JPM and the DOJ are declining to comment further at this time. News outlet say the investigation is powered by President Obama's federal mortgage task force, announced back in January 2012. Per the Washington Post, "the investigation is the latest sign that federal prosecutors and regulators are not letting up in their efforts to hold Wall Street accountable for actions related to the crisis," which, yes, conflicts, with a Journal report from earlier this week that suggested the SEC, at least, was losing steam when it came to crisis-related investigations. The Journal's more recent article on JPM's latest woes calls the DOJ's potential action against the bank "another illustration of how regulators and government investigators are still working through a backlog of cases focused on banks' activities during the housing downturn and financial crisis." (Scan readers will recall that on Tuesday federal prosecutors filed civil actions against Bank of America for alleging misleading mortgage-backed securities investors in 2008.) The Journal also notes the potential penalties "open up a new set of problems for JPMorgan, a bank already operating under four enforcement actions, more than any other big U.S. bank." Dealbook concurs: "Once a darling in regulatory circles, JPMorgan has become a magnet for scrutiny in recent years, drawing attention from at least eight federal agencies, a state regulator and two European nations."

Nationalizing Grameen Bank? The Bangladesh government is set to announce plans to take over Grameen Bank, the widely respected microlender that offers small loans to poor borrowers founded by Nobel laureate Muhammad Yunus. Per the Journal, under the plan, which could be announced this week, "the government is expected to increase its stake in the bank to 51% from 25%, diluting existing shareholders and giving it control of the lender, which is now controlled by 8.4 million rural women who are borrowers and shareholders in the bank." A Times editorial board op-ed discourages lawmakers from making the move, which it believes is politically motivated. "Turning Grameen into an arm of the state would jeopardize the bank's core mission by subjecting it to destabilizing political interference," the op-ed argues. "And breaking it up would make its operations less efficient while eliminating it as an influential national organization that might challenge government policies."

Wall Street Journal

Benjamin Lawsky is not alone. Unnamed sources tells the paper the Justice Department is investigating banks that enable companies, including online payday lenders, to withdraw money from people's bank accounts. "The government has issued subpoenas to banks and other companies that handle payments for an array of financial offerings, ramping up an investigation that has been under way for several months," the paper reports. "Officials said banks have begun voluntarily self-disclosing wrongdoing to the Justice Department and cutting off access to payment processors they consider questionable."

Banks representing bond investors are suing the city of Richmond, Calif., in order to block its officials from seizing and buying mortgages using eminent domain in an effort to reduce foreclosures. "The lawsuit … could serve as a key test for whether a city can move forward with such a strategy," the article notes.

New York Times

Right on the heels of a Journal article on peer-to-peer lending platforms, Dealbook profiles Lending Club. "Lending Club, which just passed the $2 billion mark in total loans made, already has plans to expand into small-business and student loans, and may pursue credit cards, insurance and mortgages," the article notes. "It may also expand globally."

Barclays plans to suspend the accounts of a number of money transfer companies used to send funds to developing countries in order to avoid incurring regulatory ire over abetting the financing of terrorists or money laundering. The move, expected to be made this Saturday, could be particularly problematic for Somalia as residents depend on the outside remittances. "Somalia is uniquely exposed because decades of violence and chaos have left it without a functioning banking system," the article explains. "If the money transfer businesses are shut down, experts say, the transfers will not go through other official channels but will be driven underground instead, making it harder to track money going to militant groups." Activists and politicians are appealing to the bank and the U.K. government in efforts to keep the companies open. But these individuals may be fighting an uphill battle. As Jon Matonis noted in an earlier BankThink column on the developments: "If banks sufficiently fear punitive action from the authorities, it matters not whether an actual law is being violated. The fear of prosecution is enough to warrant an abundance of caution."

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