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Robo-signing saga keeps going and going … : Morning Scan was hopeful of catching an early breakfast, figuring how much new could there be to say about the anticlimactic $25 billion mortgage settlement with five major banks? But, oh no! Hold the bacon. The morning papers feasted again on the gift that keeps on giving.
News reports dove deep into the 1,500-page agreement released Monday, extracting more excruciating accounts of banks' sins. The settlement document goes "well beyond" allegations of robo-signing, the Journal points out.
The five banks hammered customers with improper fees, wrongfully denied modifications for borrowers, misapplied payments, improperly foreclosed on members of the military, abused the bankruptcy process and tried to rip off the Federal Housing Administration.
The Times story focused on how high up the food chain these practices went. Many banks have blamed low-level employees for the mistakes, but "the report concludes that managers were aware of the problems and did nothing to correct them," the Times reports. Employees at Bank of America said they tried to raise concerns about documents that may have been improperly notarized but were told to keep them moving. Wells Fargo gave employees with little training, including a pizza restaurant worker, bogus titles such as "vice president of loan documentation." Wells Fargo's management quashed an independent study by a manager in charge of the affidavit process that was likely going to conclude the manager's department was woefully understaffed, the story says.
The Post story focused on the side deal between government officials and Bank of America. The bank agreed to reduce loan balances for as many as 200,000 borrowers who are under water, and the average amount of those principal reductions is expected to be more than $100,000. It will reduce the amount of penalties the firm owes by about $850 million, the Post notes. See related American Banker story and clip and save AB's cheat sheet of the long-awaited final terms of the settlement.
Steady Fed-dy? There were more stories in advance of the Federal Open Market Committee meeting that begins today. Federal Reserve officials will have a harder time balancing their interest-rate control and bond-buying efforts with improved economic data, the "Ahead of the Tape" column in the Journal says.
But the economic signals are still mixed, with strong jobs numbers on the one hand and underwhelming spending and wage numbers on the other, a Post story points out. The Fed will have to stand pat for now as a result, it says.
Speaking of the Fed … the central bank said it will release the results of its bank stress tests on Thursday.
But, far more interesting was a Journal report that the Federal Reserve is fighting a subpoena from lawyers in a civil lawsuit who want Ben Bernanke to testify about conversations he had with Ken Lewis and other Bank of America executives before the lender completed its purchase of Merrill Lynch & Co. A former Fed general counsel told the paper "it would be unprecedented" if Mr. Bernanke were deposed.
Put your lips together and ... : Whistle-blowers from banks, hedge funds and other companies are beating down the doors of the Securities and Exchange Commission with documents and audio recordings to try to demonstrate fraud and other improper activities, the FT reports. A provision of the Dodd-Frank Act promises fees of as much as 30% for informants who provide tips that lead to multimillion-dollar settlements.
Meanwhile, the SEC is poised to file civil charges tied to the trading of private stocks against at least three executives at a firm called Advanced Equities, the FT reports. It is the result of a probe of secondary markets that began more than a year ago. Other targets are Felix Investments, a Manhattan-based broker-dealer that was among the pioneers in the trading of social-networking companies, and SharesPost, an exchange aimed at the fast-growing market for privately held shares, according to the Times. The Times story gave Bloomberg News credit for the scoop on those cases.
Wall Street Journal
Billionaire investor Gerald Ford scored "a big win" Monday with an agreement to sell Pacific Capital Bancorp to a unit of Mitsubishi UFJ Financial Group Inc. for $1.5 billion. Check out the fancy photo of Ford, too. The department of shameless self-promotion directs me to mention a related AB story.
Whatever you do, don't tell Paul Volcker, but a page one story says that bond trading is on a strong upswing. It's good news for JPMorgan Chase, Goldman Sachs, Morgan Stanley and others. More corporate borrowing, higher appetite for risk among investors and decreased competition from Europe have helped the cause. However, it's not a full rebound yet, and regulatory and other factors could dampen the celebration.
American banks should look more seriously for business opportunities in the rebuilding of Europe, a Journal column says. It may not be a brand new idea, but Scan likes the use of the term "Le Crédit Crunch" in the headline.
A real-estate rebound taking root in the sands of Phoenix holds lessons for the rest of the country. If you are a city looking to copy the formula, you will need bold investors and first-time homebuyers, high-tech employers willing to go on a hiring spree and snowbirds from Canada fueled by the search for warmth and good exchange rates.
On the jobs front … if you are a CFO on the lookout for greener pastures, a company poised to go public may want to hire you.
Speaking of IPOs … Sixteen companies owned by private-equity firms have gone public this year, but they are raising smaller sums.
Financial Times
A top compliance officer at the Chicago Board Options Exchange has resigned amid a broad investigation by U.S. regulators into whether financial exchanges favor large trading companies at the expense of smaller customers, the company said on Monday.
New York Times
Four former members of the Congressional Oversight Panel for the Troubled Asset Relief Program released a statement condemning a tax-related exemption given to AIG.
