Receiving Wide Coverage ...
A Bear of a Case: In the first action by his task force on mortgage securitization fraud, New York Attorney General Eric Schneiderman sued JPMorgan over bonds that Bear Stearns sold before JPM acquired it. Naturally, the complaint quotes from embarrassing, obscenity-laced emails, and one Bear Stearns trader allegedly coined a phrase that would make Henry Blodget blush (the Huffington Post saw fit to put this innovation of profanity in its headline). More significantly, the suit will serve as a blueprint for other cases against big banks totaling tens of billions in potential damages, according to the Journal. "We intend to follow up with similar actions," an official in Schneiderman's office tells the paper, showing a true commitment to accountability by refusing to attach his or her name to the vow. Oh, and did you notice this is coming out a month before Election Day? "Banking lawyers are not too pleased" about the timing, writes Politico's Ben White. "Typically, according to these lawyers, the Justice Department goes dark on such cases near a major election so as not to be seen as acting out of political motivations. No such informal strictures apparently apply to Schneiderman, even though his task force includes federal resources. … Will Obama mention the new case in the debate tomorrow?" Start your office pools … Wall Street Journal, Financial Times, New York Times, Washington Post, Huffington Post, Politico
Centurion Censured: This one is more surprising, given the generally clean reputation of the accused. American Express agreed to pay $112.5 million to solve charges of illegal credit card practices ranging from age discrimination to misleading debt collection tactics. It was the third enforcement action from the young CFPB, which was joined this time by several other federal and state banking regulators. The case "tarnishes a company that has long touted its customer-service features," notes the Journal. Indeed, Amex is the one credit card issuer you always see at the top of all those customer-satisfaction surveys, aside from USAA and credit unions. Wall Street Journal, Financial Times, New York Times, Washington Post
QE3: It's only been two weeks since the Fed started its third round of quantitative easing, but already banks are profiting handsomely on mortgage originations as a result, according to the FT. How much homeowners are benefitting remains a matter of debate. In related news: Bernanke rebuts critics who say the Fed's low interest rate policies are enabling fiscal irresponsibility in Washington — he argues that "the Fed's approach could help shrink the federal budget deficit over time"; the Post reports that risk-averse Americans are saving more, despite the strong disincentives the Fed has created; and several letters to the editor in the Journal discuss how easy money policies hurt savers and the middle class.
Exec Leaving JPMorgan's CIO: Irene Tse, the head of North America for JPMorgan's chief investment office, is leaving to start a hedge fund. She reportedly sparred with colleagues in London last year over their risky and ultimately money-losing trades. Bloomberg News, Wall Street Journal, Financial Times
Wall Street Journal
Michael Perry, the former CEO of failed IndyMac, agreed to pay $80,000 to settle the remaining SEC charge against him after a judge threw out most of the others.
The Fed gave MetLife another three-month extension to submit a capital plan. The insurer is selling its banking operations to GE, which would remove the need for MetLife to provide capital plans to the Fed, but the deal hasn't closed as soon as expected, hence the extensions.
"A Kentucky businessman, a former bank executive and an ex-investment banker were charged Monday in a series of financial frauds that allegedly topped more than $100 million, including a scheme to make a troubled New York lender appear more stable so it could qualify for funds under" TARP. The bank in question is the posh-sounding Park Avenue Bank, which failed in 2010.
Bank of America's Merrill Lynch is dangling big bonuses to lure wealth management brokers from Morgan Stanley, which is smarting from "a tumultuous computer system conversion" and the Facebook IPO mess.
Issuance of credit card asset-backed securities is surging, "spurred by voracious demand from investors and looming regulatory changes." Specifically, the liquidity coverage ratio mandated by Basel III is "putting pressure on banks to diversify their sources of funding away from short-term instruments and deposits." For that reason, the recent credit card securitizations have longer maturity dates.
A feature article looks at BlackRock's Aladdin Trading Network, which attempts to disintermediate investment banks by allowing buy-side investors to trade with one another directly.
Today's the deadline for mortgage servicers to make more than 300 process improvements under the terms of the national mortgage settlement. "Officials from the five banks involved in the settlement — Bank of America, JPMorgan Chase, Wells Fargo, Ally Financial and Citigroup — said their firms have spent months making the necessary changes and expect to be in compliance come Tuesday."
Wired: Ever hear of a payment processor called Stripe? Neither did we, but the firm gets a gold star from the Morning Scan for this move: Stripe has committed to notify customers whenever it is subpoenaed for their records, provided the subpoena does not bar it from doing so. Now that is customer service. (Twitter has a similar policy.) Stripe will also post any legal requests it receives to stop doing business with a customer to the Chilling Effects Clearinghouse website, whose name is pretty self-explanatory. The company will be the first payment provider to post takedown notices to that site, a joint project of the Electronic Frontier Foundation and several law school clinics. (Twitter and Google already report their cease-and-desist mail to the site.) If you need a refresher on the context, Wired reminds us that "the power and lack of transparency by the net's dominant payment intermediaries was demonstrated in the fall of 2010, Visa, Mastercard and PayPal all cut off donations to WikiLeaks … on the grounds it was engaged in illegal activities, though the site has never been prosecuted in the U.S. and many legitimate news sites also published many of the cables, without retribution from the payment companies." Stripe's general counsel tells Wired: "We [are] concerned about intermediaries being used to control what kind of content is available on the internet." Plus, it's probably no fun for those intermediaries to get drafted into the auxiliary police force, as any banker filling out a suspicious activity report can surely testify. But Stripe has demonstrated that there are ways for stout-hearted businesspeople to treat their customers decently in these awkward situations.