Receiving Wide Coverage ...
It's Not True, and If It Is, It's Not Our Fault: Bank of America agreed to pay $335 million to settle government charges that Countrywide overcharged minorities and steered them into subprime loans, in the largest residential fair-lending settlement in history. The bank denied the Department of Justice's allegations (we've seen the boilerplate "neither admitted nor denied" line in some news stories, but in the proposed consent order there's a flat-out denial right there on page 4). Yet at the same time B of A "took pains to distance itself from the accusations levelled at Countrywide," which it bought in 2008, the FT says. "Bank of America's practices are not at issue," a spokesman tells the paper. (The consent order includes an acknowledgment by the government that it's all about Countrywide.) This was the first steering case brought by the DOJ, but more are expected, the Journal says. The paper's "DealJournal" blog tallies all the various Countrywide-related settlements and other legal and credit costs B of A has incurred from the acquisition; they well exceed the $4 billion the bank paid for the mortgage company. And Fox Business/Dow Jones writer Al Lewis cites a separate, ongoing lawsuit against B of A from another arm of the government, the Federal Housing Finance Agency, which says that before the acquisition "the top executives of Countrywide...complained to each other...that BOA's appetite for risky products was greater than that of Countywide." Lewis is amazed: "Imagine that. Bank of America doing mortgage deals that even Mozilo found shocking. This would be like Frankenstein convincing Godzilla that he is the bigger monster." Wall Street Journal, Financial Times, New York Times, Washington Post, Los Angeles Times, Huffington Post, Fox Business,
Floodgates Open: The European Central Bank extended $640 billion of low-interest, three-year loans to hundreds of banks in a single day. This was "the largest amount provided in a single ECB liquidity operation," the FT notes. The ECB's chief, Mario Draghi, has been reluctant to shore up the market for sovereign debt (this would be too close for his comfort to lending directly to governments, which the central bank is not supposed to do). But by infusing the banking system with funds, he aims to indirectly "relieve stress in government debt markets," as well as prevent institutions from failing or a recession-inducing credit crunch, the FT says. Wall Street Journal, Financial Times, New York Times
Fannie/Freddie Fallout: File under "saw this coming": Daniel Mudd is taking a leave of absence as CEO of Fortress Investment, following the SEC civil suit against him over his past stewardship of Fannie Mae. Meanwhile, the Journal's editorial board insists that Fannie and Freddie Mac were the prime movers behind the subprime bubble. Like Peter Wallison in his op-ed yesterday, they claim the SEC's case against Mudd and former Freddie CEO Richard Syron proves it. We're still with the Times' Joe Nocera on this one; Scan readers are invited to weigh in on the comment thread here.
Wall Street Journal
The paper has separate profiles of Frank Bisignano, JPMorgan's chief administrative officer, who's facing a new legal challenge from mortgage-backed security investors, and Kathy Patrick, the lawyer representing those bondholders.
"New York City Comptroller John Liu and the city's pension funds want Goldman Sachs, J.P. Morgan and Morgan Stanley to impose tougher clawbacks on executive pay."
The Journal explains Serve, American Express' prepaid answer to PayPal.
The paper has two separate year-in-review pieces on the investment banking sector; we prefer the one in the "Lex" column simply because it has the phrase "annus horribilis" in the headline. A third piece says that the eurozone must stabilize before merger and acquisition activity picks up in the U.S., and quotes activist investor Bill Ackman predicting both will happen in 2012.