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Investors are gobbling up auto loans extended to the riskiest borrowers, looking past market warning signs as they reach further for returns, the Wall Street Journal reported. This year, they have been buying subprime auto securitization deals that offer slices with single-B credit ratings, well into junk territory and the lowest grade offered when such bonds are sold. Auto lenders have issued $318 million worth of single-B debt in 2018, more than all prior years combined, according to data from Finsight. Subprime auto deals, often bought by large money managers and other institutional investors, are typically backed by loans to borrowers with FICO scores below the mid-600s. Because these borrowers are at higher risk of default, the bonds tied to their loans can offer higher yields. For securities backed by subprime auto loans, the outlook is mixed. Borrowers are getting slightly more creditworthy, with average credit scores in this year’s securitization pools rising to 588 from 577 last year, according to a Fitch Ratings report from August. But more borrowers — roughly 80 percent — are taking out loans that have terms of more than five years, which are more prone to default. Delinquencies of greater than 90 days have been trending higher for all auto loans since 2012, according to the Federal Reserve Bank of New York.

A former Justice Department employee pleaded guilty on Friday to helping funnel tens of millions of dollars into the U.S. for the alleged mastermind of the multibillion-dollar fraud involving Malaysia’s sovereign-wealth fund, the Wall Street Journal reported. Some of the $74 million allegedly brought into the U.S. on behalf of Jho Low, a Malaysian businessman, was used to pay a prominent Republican fundraiser, court documents show. Low sought to use the funds to influence the Justice Department investigation into the fund, 1Malaysia Development Bhd, and other foreign lobbying activities, the documents said. George Higginbotham, who worked at the Justice Department as a senior congressional affairs specialist until August, pleaded guilty Friday to conspiring to make false statements to banks about the source and purpose of the funds to move them into the U.S. The Justice Department said Higginbotham played no role in the U.S. investigation, which led earlier this month to charges against two senior Goldman Sachs Group Inc. bankers along with Mr. Low. In addition, the Justice Department has filed civil-forfeiture lawsuits seeking to recover more than $1.5 billion in illicit assets accused of being tied to the alleged fraud. Higginbotham “failed to influence any aspect of the Department’s investigation of 1MDB,” the agency said.

Detroit is eyeing savings from a just-launched redemption offer for bonds it issued in 2014 as part of the city’s exit that year from its historic bankruptcy, municipal officials said on Tuesday, Reuters reported. The city is targeting $131 million of its nearly $632 million of series 2014B financial recovery bonds that mature in 2044 with a tender offer that expires Dec. 3. The move follows the redemption of $70 million series 2014C bonds earlier this year. The tender offer’s selling range is between $85 and $89 per $100 of the bonds’ par amount, according to city documents. Detroit issued the bonds as part of its federal court-approved plan to exit what was then the biggest U.S. municipal bankruptcy, which allowed the city to shed about $7 billion of its $18 billion of debt and obligations. Debt proceeds were used to fund settlements with bond insurers, interest-rate swap providers, city pension funds, as well as to raise money for capital projects.

A decade after the financial crisis, there is a new breed of risk-takers in the U.S. housing market. During the boom before the bust, lenders made mortgage loans to countless buyers who couldn’t afford them. Lenders later wrote off many of the loans, but borrowers’ obligation to pay remained. Today, in an improved economy, a group of individual investors, plus some Wall Street giants, is buying these old loans and trying to tease value out of them, the Wall Street Journal reported. The investors buy non-performing mortgages available for very low prices. The investors then track down borrowers, let them know they have a new creditor and tell them they need to resume payments, at least at a partial level, perhaps offering to modify terms. If necessary, the investors threaten foreclosure, but if all goes well, they collect on the debt or resell the mortgage as a now “reperforming” loan. The process marks a new chapter for hundreds of thousands of crisis-era borrowers who often had heard nothing about their unpaid loans for years and thought the debt had been disposed of. For investors, legal wrangling with such borrowers is common.

Some brokers at Merrill Lynch are pushing back against a compensation plan they claim rewards them for increasing debt their clients take on and in some cases can punish them for reducing it, the Wall Street Journal reported. Some of the 15,000 financial advisers at Merrill have complained internally to management about a compensation structure they say urges more customer debt at a time when interest rates are rising, according to brokers and managers. Others have written over the past year to Andy Sieg, head of Merrill Lynch Wealth Management, saying that the policy potentially pits them against their clients’ interests.

The Senate Judiciary Committee will hold a rescheduled hearing today at 2 p.m. EDT titled "Big Bank Bankruptcy: 10 Years After Lehman Brothers." The hearing was originally scheduled for September. To view the witness list and prepared testimony, please click here.

The Senate Judiciary Committee will hold a rescheduled hearing tomorrow at 2 p.m. EDT titled "Big Bank Bankruptcy: 10 Years After Lehman Brothers." The hearing was originally scheduled for September. To view the witness list and prepared testimony, please click here.

Years before Goldman Sachs Group Inc. arranged bond deals now at the heart of globe-spanning corruption probes, the firm’s then-CEO Lloyd Blankfein personally helped forge ties with Malaysia and its new sovereign wealth fund, Bloomberg reported. Blankfein was the unidentified high-ranking Goldman Sachs executive referenced in U.S. court documents who attended a 2009 meeting with the former Malaysian prime minister, the people said. The meeting was arranged with the help of men who are now tied to the subsequent plundering of the 1MDB fund, according to U.S. court documents unsealed last week. The high-level gathering laid the groundwork for a relationship that would prove profitable for the investment bank. Since then, the use of $6.5 billion that Goldman raised for 1MDB has sparked investigations across several nations, and entangled the U.S. bank in a high-profile corruption probe.