Report Sharp Drop in U.S. Homes Lost to Foreclosure in February
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Banks Bow to New York on Clawbacks
Three more top banks, including Citigroup Inc., will broaden their clawback policies to cover more executives, increase disclosures or add potential triggers, increasing to six the number of leading financial companies that have bowed to pressure from the New York City's Comptroller's Office, the Wall Street Journal reported today. Comptroller John C. Liu also appears to have broken new ground, with Capital One Financial Corp. agreeing to make public the total dollar amount of pay it claws back. The sixth-largest U.S. bank will disclose how much it recouped from errant workers, so long as the event that triggered the collection has been publicly disclosed in regulatory filings. It is believed to be the first company to agree to disclose clawback dollar amounts.
Judge Approves Accord Between JPMorgan MF Global Parent
Bankruptcy Judge Martin Glenn yesterday approved a settlement that will increase JPMorgan Chase & Co.'s potential recoveries from the liquidation of MF Global Holdings to as much as 76 cents for every dollar in claims, Reuters reported yesterday. The deal resolves a complaint from JPMorgan over the value of an intercompany settlement among MF Global affiliates. That complaint had posed a potentially significant obstacle to getting creditor support and court approval for MF Global's payout plan. Judge Glenn approved a supplement to the payback plan that raises the maximum projected recovery for JPMorgan for its $1.2 billion loan. Its recovery had maxed out at about 73 percent in an earlier version of the plan. The settlement also provides for a slight increase in the size of JPMorgan's claim.
Judge Allows Lehman Creditors to Question London Whale
Bankruptcy Judge James Peck yesterday gave creditors of Lehman Brothers approval to subpoena former JPMorgan Chase & Co trader Bruno Iksil, the so-called "London Whale," in an $8.6 billion lawsuit against the bank, Reuters reported yesterday. Judge Peck rejected arguments from JPMorgan that Iksil had little to do with the allegations in the lawsuit, which centers on JPMorgan's role as Lehman's main clearing bank in the days leading up to its Sept. 15, 2008, bankruptcy. Lehman and its unsecured creditors' committee accuse JPMorgan of using its access to Lehman to extract $8.6 billion of collateral in the four business days ahead of the chapter 11 filing.
Underwater Americans Skirting Default as HARP Use Rises
Homeowners with underwater mortgages in U.S. states worst-hit by foreclosures are leading refinancings after the government expanded programs to aid borrowers, strengthening the weakest link in the housing recovery, Bloomberg News reported today. In Nevada, where property values fell by half in the real estate bust, the government’s Home Affordable Refinance Program (HARP) accounted for 68 percent of refinancing in December, according to a Federal Housing Finance Agency report. For Florida, 58 percent went through HARP. The two states topped the nation in loans more than three months overdue at 2012’s end, according to the Mortgage Bankers Association.
Greenberg Forges Ahead with Lawsuit over AIG Bailout
The American International Group's former chief executive is moving ahead with a lawsuit against the federal government over its $182 billion rescue of the insurer—even without the backing of the company itself, the New York Times DealBook blog reported yesterday. AIG's former leader, Maurice R. Greenberg, filed an amended complaint against the government yesterday, largely restating his arguments that 2008 bailout of the insurer was unconstitutional and wrongly cheated shareholders out of billions of dollars. His case received support on Monday, when the federal judge overseeing the case granted the lawsuit class-action status.
BofAs Countrywide Asks Appeals Court to Undo MBIA Ruling
Bank of America Corp. asked a New York appeals court to overturn portions of a lower-court ruling that improved bond insurer MBIA Inc.'s chances of recovering losses on mortgage loans, Bloomberg News reported yesterday. The bank's Countrywide unit argued in a court hearing that State Supreme Court Justice Eileen Bransten was wrong when she ruled last year MBIA does not need to establish a "direct causal link" between misrepresentations about the loans and claims payments paid by the insurer. 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 portrayed by Countrywide, and as they defaulted, the Armonk, N.Y.-based company was forced to pay investors.
White Says Her SEC Would Be Tough on Wall Street
While she received a friendly reception during two hours of testimony, the Senate Banking Committee grilled Mary Jo White, the nominee for SEC chair, on her regulatory agenda, demanding that White create new rules for Wall Street that take aim at financial fraud, the New York Times DealBook blog reported today. Lawmakers argued that the agency, four years after the financial crisis, must confront a broad array of problems facing the public markets. White promised to tackle enforcement actions and unfinished regulation, but offered scant details on her plans. She did, however, signal a flexible approach to reforming money market funds, an approach that could draw scrutiny from investor advocates and liberal lawmakers.
AIG Shareholders Can Sue as Group in Greenberg Case
American International Group Inc. shareholders can sue the U.S. as a group in a lawsuit brought by former Chief Executive Officer Maurice "Hank" Greenberg over losses caused by the government takeover of the insurer, a judge ruled, saying that the case may affect tens of thousands of people, Bloomberg News reported yesterday. U.S. Claims Judge Thomas Wheeler yesterday granted a request by Greenberg's Starr International Co. to certify two classes of AIG investors in the suit. The judge also appointed David Boies of Boies, Schiller & Flexner LLP as lead counsel for the groups. Starr International Co. sued the government in 2011 in the U.S. Court of Federal Claims in Washington, D.C., calling the public assumption of almost 80 percent of AIG stock in September 2008 a seizure of property in violation of the Constitution’s Fifth Amendment right to just compensation. The lawsuit seeks at least $25 billion in damages.
Merkin Sued by Charity over Madoff-Related Losses
Money manager Ezra Merkin has been hit with a new lawsuit over client money he allegedly secretly steered to Ponzi schemer Bernard Madoff, Reuters reported yesterday. Keren Matana, an Israeli charity, sued to recover $1.5 million it lost by investing in the Ascot Fund, an offshore hedge fund managed by Merkin that fed money to Madoff. The charity is also seeking $5 million in punitive damages. Merkin agreed last year to a settlement of $405 million for investors in his hedge funds whose assets went to Madoff, ending a lawsuit brought by the New York attorney general's office. In its lawsuit filed last Thursday, Keren Matana claimed it cannot collect through the settlement. Keren Matana said a Merkin lawyer, an unnamed partner at Dechert, claimed that the charity is excluded from the settlement unless Benjamin Jesselson, a former member of its executive committee, waives his right to an arbitration award against Merkin. Jesselson won a $1.5 million award over investments made by his family trusts in Madoff feeder funds.