R. Allen Stanford's receiver and investors' committee sued Antigua, the Eastern Caribbean Central Bank and 23 former Stanford Financial Group Co. executives over allegations they aided the financier’s $7 billion fraud, Bloomberg News reported yesterday. The Official Stanford Investors Committee seeks repayment of at least $90 million in documented loans Stanford made to the dual-island nation of Antigua and Barbuda and accuses its elected officials of having been "Stanford's partners in crime." The nation’s leaders shielded Stanford’s scheme and traded choice real estate for as much as $230 million in loans that have not been repaid, according to the lawsuit.
Bank of America Corp., the second-largest U.S. lender, attracted record new assets last year to its unit servicing retirement and other employee-benefit plans as it cross-sold products through the commercial bank, Bloomberg News reported today. The company saw $24.3 billion in new assets, a 28 percent increase from a year earlier, said Kevin Crain, head of institutional retirement and benefit services at Bank of America Merrill Lynch. Assets from clients who had an existing relationship with the global commercial bank more than doubled to $10.6 billion from $5 billion in 2011. The nation’s largest banks, including Charlotte, N.C.-based Bank of America and New York-based JPMorgan Chase & Co., have been trying to win more of the $3.5 trillion that Americans held in 401(k) retirement plans as of September.
The 2008 financial crisis cost the U.S. economy more than $22 trillion, a study by the Government Accountability Office published on Thursday said, while the financial reform law that aims to prevent another crisis, by contrast, will cost a fraction of that, the Huffington Post reported on Saturday. "The 2007-2009 financial crisis, like past financial crises, was associated with not only a steep decline in output but also the most severe economic downturn since the Great Depression of the 1930s," the GAO wrote in the report. The agency said that the financial crisis’ toll on economic output may be as much as $13 trillion—an entire year's gross domestic product. The office said that paper wealth lost by U.S. homeowners totalled $9.1 billion. Additionally, the GAO noted, economic losses associated with increased mortgage foreclosures and higher unemployment since 2008 need to be considered as additional costs. The report, five years after the collapse of mortgage-focused hedge funds in late-2007 set off a yearlong banking panic and a deep recession, was published as part of a cost-benefit analysis of the Dodd-Frank financial reform law of 2010. The GAO tried to determine if the benefits of preventing a future economic meltdown would exceed the costs of implementing that law. "If the cost of a future crisis is expected to be in the trillions of dollars, then the act likely would need to reduce the probability of a future financial crisis by only a small percent for its expected benefit to equal the act’s expected cost," the GAO concluded.
Ally Financial Inc.'s banking subsidiary said that it agreed to sell a mortgage unit to Walter Investment Management Corp. as the U.S. auto lender continues to pull back from the home loan business, Reuters reported yesterday. Ally Bank said in October that it was selling its business lending operation, which buys mortgages from other lenders and makes loans through brokers. The transaction, which includes 300 employees, is expected to close on Feb. 28. Ally Financial, which is 74 percent owned by the U.S. government after a series of bailouts, is focusing on U.S. auto lending and Internet banking as it works to pay back taxpayers.
Many states with faster foreclosure processes are seeing sharper increases in home prices than states where foreclosures take longer to get done, USA Today reported yesterday. There are exceptions, and other factors—such as job growth—are likely stronger drivers of home price trends, economists say. But home price data generally show stronger price increases in states where courts do not have to approve foreclosures than in states where they do. Last year, home values tracked by Zillow, a web-based real estate tracker, rose an average 5.4 percent in the 24 states where foreclosures do not go through the courts. Where they do, the average increase, according to Zillow, was 3.2 percent. Asking prices, a leading indicator of price trends, show a similar pattern. In January, asking prices in non-judicial states were up an average of 7.3 percent year-over-year vs. 3.1 percent for judicial foreclosure states, according to data from real estate website Trulia.
Capitol Bancorp Ltd. is seeking to shore up its Sunrise Bank of Albuquerque with a $1 million payment to prevent the bank from being seized by regulators, Dow Jones DBR Small Cap reported today. The Michigan bank-holding company Friday requested court permission to enter into a loan deal, stressing that if it is not allowed to access the funds and the bank is seized, there will be serious financial harm to its subsidiary banks.
U.S. banks and securities firms would have to step up their compensation disclosures under rules being considered by the Federal Reserve, the Wall Street Journal reported today. The rules are in the formative stages and would not take effect for some time. The Fed's push ultimately could give investors large amounts of new data on how and when companies pay their employees—including scarce numbers on how much compensation has been promised but not yet paid out. The consideration comes as Wall Street, under pressure to curb risk-taking and reduce costs, embraces so-called deferred pay as never before. Morgan Stanley last month deferred the entire annual bonuses of thousands of high-paid employees, meaning they will not finish collecting their 2012 pay until 2016.
Ally Financial Inc. mortgage subsidiary Residential Capital wants more time to exclusively file a chapter 11 reorganization plan as it faces resistance from various creditors, Dow Jones Newswires reported yesterday. In a court filing yesterday, ResCap asked a judge to extend its exclusivity period through May 29 from a current expiration of Feb. 28. ResCap's exclusivity period has been extended twice before. Ally has proposed paying ResCap's estate $750 million to settle third-party claims, though creditors say that amount is too small. ResCap is in mediation with creditors and Ally to try to reach a consensual deal, though ResCap this week filed a motion to appoint a seasoned bankruptcy attorney as its chief restructuring officer to help further progress on this front.
Lehman Brothers Holdings Inc. is seeking to question Bruno Iksil, the former JPMorgan Chase & Co. trader known as the London Whale, about losses Lehman says spurred unnecessary collateral calls that helped force it into bankruptcy, Bloomberg News reported yesterday. JPMorgan in May disclosed billions of dollars in losses by London-based Iksil, who got his nickname because his positions were so big. Lehman, which has been fighting JPMorgan over $8.6 billion since 2008, said in a court filing yesterday that Iksil may have knowledge of the role JPMorgan's chief investment office played in managing exposure to Lehman. Lehman, which is gathering money to pay creditors an average of 18 cents on the dollar, said that it realized Iksil could help it after JPMorgan disclosed "risk management failures." Iksil was "central" to a dispute with JPMorgan over valuing derivatives, New York-based Lehman said.
Visa Inc. and MasterCard Inc., the world’s biggest payment networks, won dismissal of a price-fixing lawsuit brought by a group representing operators of automated teller machines, Bloomberg News reported yesterday. U.S. District Judge Amy Berman Jackson also threw out two related suits yesterday, ruling that all the plaintiffs failed to show the companies conspired to restrict independent ATM operators from charging varying prices for customers using alternative networks such as STAR, Shazam Inc. or TransFund. The allegations in the lead case were made by the National ATM Council Inc., a trade group based in Jacksonville, Fla., and 13 operators of ATMs in nine states.
