Receiving Wide Coverage ...
'Yet Another Bank': One week after New York Attorney General Eric Schneiderman filed a civil case against JPMorgan Chase alleging fraud in how Bear Stearns packaged and sold mortgage-backed securities, Wells Fargo finds itself being sued by the government for nearly a decade's worth of "reckless" mortgage lending. U.S. prosecutors (not affiliated with Schneiderman's mortgage task force, though he has promised more suits are on the way) are seeking "hundreds of millions of dollars" in civil damages from the bank on behalf of the Federal Housing Administration, alleging Wells "made false certifications" about the condition of their mortgage loans so that the government agency would insure them. FHA then had to foot the bill when the bank's alleged "mortgage factory" — Dealbook's interpretation of the complaint — output went belly up. "Yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance," United States attorney in Manhattan Preet Bharara said in a (perhaps obvious) statement.
The Times notes the lawsuits are being filed amidst public criticism of the Justice Department's lack of actual criminal action against banks and their executives regarding the housing boom. Meanwhile, the Post notes the case is particularly problematic for Wells, which "has been hit with a series of civil actions" related to its mortgage business in recent years (and we would add, unlike JPMorgan, can't blame Bear Stearns for its latest problem). The bank is denying the most recent allegations, saying it acted in "good faith and in compliance" with federal rules.
Good News, Bad News for Wall Street?: The Journal and the Times have taken different slants on a new report released by New York State Comptroller Thomas DiNapoli containing jobs and compensation data on Wall Street. The Journal's headline (and subsequent article) focuses on the 1,200 jobs Wall Street firms have cut since the beginning of 2012, while the Times, though noting the cutbacks, leads with the fact that "for those who remain, annual compensation in total is at near-record levels." According to the paper, the average pay package of securities industry employees in New York State was $362,950, up 16.6% over the last two years. The existing compensation paired with the persistent job cuts led DiNapoli to note life on the Street is "good work if you can get it."
Wall Street Journal
More details are emerging about the Federal Reserve's new stress test rules, mandated by Dodd-Frank. Among them are requirements that big banks with more than $50 billion in assets "run two internal 'stress tests' each year and publish some of the results on their websites." These big banks will also have to conduct one Fed-run test each year. The new rules will eventually require banks with more than $10 billion in assets to conduct at least one company-run test each year.
Goldman Sachs is lobbying against the Volcker rule, asking regulators to exempt investment vehicles known as credit funds from its reach in an effort to preserve the firm's "lucrative merchant-banking unit."
The Financial Services Authority is relaxing the U.K.'s new lending capital requirements and allowing banks to more easily access stock to sell assets in an attempt to call "the bluff of banking groups who say that overly ambitious regulatory reforms are preventing them from lending to the real economy."
Barclays is acquiring ING Direct U.K., which includes £10.9 billion of savings deposits and £5.6 billion of mortgages and "will increase Barclays' total U.K. customer base by about 10%."
New York Times
The Commodity Futures Trading Commission has drafted an appeal to a federal judge's decision to halt the agency's so-called position limits rule, which was mandated by Dodd-Frank and would cap speculative commodities trading. However, three of the CFTC's five commissioners must sign off on the plan before it can be formally filed.
This Dealbook op-ed from two bankruptcy attorneys asserts Congress still has not addressed how to deal with the collapse of large financial institutions, four years after Lehman Brother's demise, citing Dodd-Frank as "inadequate and, to some extent, ill-conceived."
"Whew, fiscal cliff to be averted once bank CEOs remind Congress who's in charge, snap their fingers and order action," former SIGTARP Neil Barofsky tweeted in response to this Politico article that says Lloyd Blankfein, Jamie Dimon and other big bank executives will be descending upon Washington post-election, not to repeal Dodd-Frank, but to persuade Congress to agree to a budget plan. According to the publication, these executives are so committed to encouraging "a big budget deal," they're willing "to consider ponying up more money in tax revenue to the government." We'd say these efforts are ironic considering the role big banks played in the U.S.'s collective economic woes, but the article does point out — before going on to include some "imagine-all-of-Congress-getting-together" quotes from Blankfein and Dimon — that the move is an attempt to provide "stability for investors by eliminating the threats of government shutdowns, credit-rating downgrades, debt ceiling disasters and wide fluctuations in spending and tax policy."