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The Government Accountability Office (GAO) drafted a report faulting U.S. bank regulators for a flawed review of foreclosure documents, saying that the agencies did not establish consistent procedures or adequately monitor the consulting firms performing the work, the Wall Street Journal reported today. The GAO's report criticized the Office of the Comptroller of the Currency and Federal Reserve for not ensuring banks were using consistent methods to determine which foreclosure files to scrutinize for possible errors. The regulators ordered an independent review of banks' foreclosure files in April 2011 to determine how many borrowers should be compensated for foreclosure-processing and other mistakes. Earlier this year, the regulators reached a $9.3 billion settlement with banks, saying that the review threatened to drag on into 2014, delaying compensation to borrowers. So far, 13 of 16 banks have signed the agreement.

Thirty state attorneys general are investigating alleged interest-rate rigging by banks that set Libor, and the probe is not slowing despite a U.S. judge's ruling last week in favor of the banks in private lawsuits, the Wall Street Journal reported today. The number of states involved in the coordinated probe has grown substantially in recent months and could result in enforcement actions seeking billions of dollars in damages. New York and Connecticut are leading the investigation, which has widened to include Arizona, Delaware, Iowa and Maryland. It is not clear when the probe will be completed or which banks could be most vulnerable. But state officials are plowing ahead even though the judge threw out proposed class-action lawsuits and suits filed by Charles Schwab Corp. alleging wrongdoing by banks related to the London interbank offered rate and other interest-rate benchmarks.

The push to change Barclays from a predominantly British retail bank to a global financial giant over the last two decades created a culture that put profit before customers, according to a report released yesterday, the New York Times DealBook blog reported. The independent review, which was ordered by the bank’s top management in the wake of a rate-rigging scandal last year, highlighted an "at all costs" attitude, particularly within the firm's investment bank, that was reinforced by a bonus system that encouraged taking risks over serving clients. "Barclays became complex to manage," said the report, which was overseen by Anthony Salz, former head of the law firm Freshfields Bruckhaus Deringer. "The culture that emerged tended to favor transactions over relationships, the short term over sustainability and financial over other business purposes."

JPMorgan Chase & Co., the biggest U.S. bank, defeated most of a lawsuit brought by Dexia SA over about $1.6 billion in mortgage-backed securities it bought before the financial crisis, Bloomberg News reported yesterday. U.S. District Judge Jed Rakoff narrowed the case to five securitization deals from 65 at issue in a complaint brought by Dexia, according to an order filed today. Rakoff said he would issue an opinion later explaining his reasoning. Dexia, based in Brussels, sued JPMorgan in 2012 along with the Bear Stearns and Washington Mutual businesses JPMorgan acquired, accusing the lender of "egregious fraud" in the sale of mortgage bonds. Dexia claimed loans backing securities purchased between 2005 and 2007 were riskier than promised.

The Federal Reserve approved a final rule yesterday that brings the government closer to placing large nonbank companies that were at the heart of the financial crisis under stricter supervision, the Washington Post reported today. The rule leaves a strikingly wide swath of companies on the table as potentially falling under tougher oversight, including private-equity firms and hedge funds. Yet industry officials and others following the process say it is unlikely that officials will ultimately single out more than a handful of firms. Any final decision by officials will be closely watched by Wall Street, since a company designated by the government as "systemically important" would face tougher capital standards, among other restrictions, that could eat into the firm’s profitability. It has taken federal regulators nearly three years since the passage of Dodd-Frank, the country’s overhaul of Wall Street rules, to define which nonbank companies, if they were to fail, could threaten the integrity of the country’s financial system. Yesterday's move indicates that the Financial Stability Oversight Council, an interagency panel of regulators, is in the final stages of reviewing institutions. Regulators say they will vote in the next few months on which companies will fall under increased scrutiny.

Lehman Brothers Holding Inc. has slashed billions of dollars of claims made by a former Swiss derivatives unit as details of the agreement were presented in a court filing, Reuters reported yesterday. Lehman Brothers emerged from bankruptcy a year ago but it is still working to resolve several outstanding legal battles. The agreement with Switzerland-based Lehman Brothers Finance AG was the last major dispute to be settled, according to Daniel Ehrmann, Lehman Brother Holding's international chief.

San Francisco-based Wells Fargo & Co. has become the dominant U.S. mortgage lender, grabbing an unprecedented 28.8 percent share of all home loans issued nationwide last year, up from 11.2 percent in 2007, the year before it bought Wachovia, the Wall Street Journal reported today. Its home-loan production hit $524 billion last year, the largest annual total ever for one lender and greater than the output of the next five largest lenders combined, according to the publication Inside Mortgage Finance. The mortgage-banking operations of U.S. banks and thrifts reported profits of $31.9 billion last year, about six times the $5.2 billion notched in 2011 and the largest total in at least a decade, according to Inside Mortgage Finance. Wells recorded income of $11.6 billion from mortgage banking last year, up nearly 50 percent from 2011.

The creditors of MF Global Holdings Ltd. overwhelmingly approved the failed brokerage firm's liquidation plan, as the company moves closer to a judge's final approval of that proposal, Dow Jones Daily Bankruptcy Review reported today. MF Global said in a court filing on Monday that in all but two of the classes allowed to vote on the proposal, 100 percent said yes. The only two classes of voters that did not accept it at 100 percent ratified it at 99.97 and 86.92 percent, respectively.

Last month, Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, released a draft proposal to change how we tax certain types of businesses known as pass-throughs, according to a commentary in the New York Times DealBook blog yesterday. Under current law, the owners of these partnerships, limited liability companies and subchapter S corporations pay their share of the company’s income or loss on their individual tax returns instead of paying tax at the entity level. Camp's proposal would maintain this basic approach and simplify aspects of it for small businesses. Reaction to Camp's proposal has been subdued compared with the praise for his plan to change the way derivatives are taxed. Camp's proposal steers clear of the most controversial aspect of partnership tax: carried interest. Carried interest refers to the share of partnership profits earned by an investment fund manager, and under current law it is often taxed at low capital gains rates. Critics argue that because carried interest is labor income, not investment income, it ought to be taxed as ordinary income.

MBIA Inc., the bond insurer suing Bank of America Corp. to recover losses tied to mortgage loans, won an appeals court ruling that the lender could be required to repurchase securitized loans even if they are not in default, Bloomberg News reported yesterday. MBIA is entitled to have Bank of America buy back a performing loan that it can prove "materially and adversely" affected its interest, the New York state appeals panel said in a decision yesterday, reversing part of a ruling by a lower court. The panel also reversed a decision that MBIA could seek so-called rescissory damages. The decision stems from MBIA's lawsuit against Bank of America and its Countrywide Financial unit. MBIA, which sued Countrywide in 2008, guarantees payments to investors that bought securities backed by pools of the lender's loans. The insurer says the loans were riskier than represented by Countrywide, and as the loans went into default, the Armonk, N.Y.-based company was forced to pay investors.