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Bank of America Corp.'s Merrill Lynch unit was sued by two trusts that hold and administer mortgages on behalf of investors who own more than $1 billion of securities collateralized by the loans, Bloomberg News reported yesterday. Merrill bought more than 6,000 mortgages with an original principal balance of more than $1.1 billion from a third-party loan originator, ResMAE Mortgage Corp., in 2006 and turned them into tradeable securities that were sold to investors, according to the complaint filed yesterday in New York State Supreme Court. ResMAE filed for bankruptcy in February 2007 and the trusts pursued claims against ResMAE in bankruptcy through LaSalle Bank, demanding that it buy back loans where borrowers had missed their first or second payments or provide other compensation, according to the complaint. LaSalle in July 2008 settled those claims on behalf of five Merrill-sponsored trusts, including the two plaintiffs in yesterday's suit.

UBS AG, Switzerland’s biggest bank, must pay about 1.4 billion Swiss francs ($1.5 billion) to U.S., U.K. and Swiss regulators for trying to rig global interest rates, triple the penalties levied against Barclays Plc., Bloomberg News reported today. Fines from the U.S. Commodity Futures Trading Commission and the U.S. Department of Justice total $1.2 billion, UBS said. It will pay 160 million pounds ($260 million) to the U.K. Financial Services Authority, the largest- ever fine imposed by the regulator, and disgorge 59 million francs in estimated profits to the Swiss Financial Market Supervisory Authority. Global authorities are investigating claims that more than a dozen banks altered submissions used to set benchmarks such as the London interbank offered rate (Libor) to profit from bets on interest-rate derivatives or make the lenders' finances appear healthier.

General Motors Co. said it will purchase 200 million shares of stock held by the U.S. Treasury Department in the first step of the government's eventual exit from the automaker within the next 12 to 15 months, the Wall Street Journal reported today. The auto maker will pay $5.5 billion for the shares in a deal that is expected to close by the end of the year. The repurchase price of $27.50 a share represents a 7.9 percent premium over the closing price on Dec. 18. The U.S. Treasury plans to sell its remaining shares of common stock through the market and may begin the disposition of its holdings as soon as January.

For employees at the biggest Wall Street banks, 2012 brought a humbling post-crisis reality of job cuts and lower pay, but the 81-company Standard & Poor’s 500 Financial Index is up 27 percent this year, its largest annual increase since 2003, Bloomberg News reported yesterday. Nine banks -- Deutsche Bank AG, Barclays Plc, JPMorgan Chase & Co., Bank of America, Citigroup Inc., UBS AG, Credit Suisse Group AG, Goldman Sachs Group Inc. and Morgan Stanley -- announced more than 30,000 job cuts in the first nine months of the year, according to data compiled by Bloomberg. Total pay for traders and investment bankers is about half what it was in 2007, according to an October report from Options Group, a New York-based recruitment firm.

While thousands of former MF Global Holdings Ltd. customers still do not have a chunk of their money more than a year after the brokerage firm's collapse, some of its big clients largely avoided similar losses thanks to arrangements struck with the firm before its demise, the Wall Street Journal reported today. These clients include energy-trading heavyweights ConocoPhillips and Koch Industries Inc. They are now battling in court against trustee James Giddens, who says that letters of credit struck by these clients have created imbalances. Most of the ranchers, farmers and small traders who traded commodities through MF Global were required to back their trades with cash or other assets as collateral. But nine customers, including two units of Houston-based ConocoPhillips and the energy-trading arm of Koch, based in Wichita, Kan., had agreements to back millions of dollars in trades with letters of credit, meaning their losses were smaller than they would have been if they had put up cash.

The U.S. Treasury Department said on Friday that it has completed its final sale of common stock in American International Group (AIG), reducing its shares in the insurer to zero four years after a massive government bailout, Reuters reported on Friday. The Treasury said it received $7.6 billion in proceeds from the sale of its remaining 234 million shares at $32.50 per share. Overall, the Treasury and Federal Reserve received a $22.7 billion positive return on their combined $182.3 billion bailout, the department said. The sale is part of Treasury's efforts to wind down its Troubled Asset Relief Program (TARP). AIG was rescued just before it would have been forced to file for bankruptcy, as losses on risky derivatives mounted. It was bailed out as the financial system stood at the brink of disaster.

Bank of America Corp. raised the stakes in its ongoing legal battle with bond insurer MBIA Inc. on Thursday, saying MBIA was in default on some of its debt and filing a lawsuit related to changes in that debt, Reuters reported yesterday. Bank of America said that it purchased $136 million worth of the 5.70 percent senior notes due in 2034 in a tender offer and that it had issued a notice of default to the company and the trustee for the notes. According to Thomson Reuters data, there are $329.1 million in notes outstanding from the bond issue in question. Bank of America also filed suit against MBIA in a New York state court, alleging that MBIA interfered in Bank of America's offer to buy the bonds. At issue is a change MBIA sought to make to the terms of the bonds to eliminate the risk that it might be considered in default if a troubled unit were put into rehabilitation or liquidation by New York regulators. MBIA said in early November that if there were a default, it would have insufficient liquidity to make good on the notes and would probably pursue other actions, including bankruptcy. Bank of America countered with an offer to buy the bonds, saying it believed the changes would increase the risk of MBIA's insurance unit being placed in rehabilitation or liquidation, which could jeopardize all policyholder claims.

UBS AG is close to finalizing a settlement with U.S. and British authorities in which the giant Swiss bank is likely to pay more than $1 billion to resolve allegations that it attempted to manipulate benchmark interest rates, the Wall Street Journal reported yesterday. UBS and the authorities are currently on track to announce the settlement early next week. Assuming the deal gets finalized, UBS will become the second bank, following Barclays PLC, to settle allegations that it attempted to manipulate benchmarks including the London interbank offered rate, or Libor, and the euro interbank offered rate, or Euribor. Together, they serve as the basis for interest rates on hundreds of trillions of loans, derivatives and other financial contracts worldwide. The settlement would conclude long-running investigations of UBS being conducted by the U.S. Commodity Futures Trading Commission, Department of Justice and the U.K. Financial Services Authority, as well as Swiss regulators. UBS has long been front and center in the rate-rigging investigations, emerging as one of the main targets of U.S. and British authorities. Since launching its own internal review into the matter, UBS has fired or suspended about 20 traders and managers who are believed to have been involved in attempted rigging. UBS executives are hoping that by resolving the rate-rigging allegations, they can close a difficult chapter for the bank.

Ally Financial Inc. has fired back at creditors of its mortgage subsidiary, Residential Capital, who argue that they should receive proceeds from a string of Ally asset sales before it repays the U.S. government's bailout, according to a Dow Jones Newswire report yesterday. Ally, the former in-house financing arm for General Motors Co. (GM), has been selling international businesses in an effort to slim down and repay a $17.2 billion government rescue. But creditors of ResCap, Ally's subprime mortgage lender that filed for chapter 11 bankruptcy in May, claim that they have a right to the proceeds, alleging that Ally stripped ResCap of valuable assets, including an ownership stake in Ally's depository institution, before its filing. Ally isn't part of the bankruptcy and has maintained that it and ResCap were separate companies with their own management and boards, arguing that claims that it raided ResCap of assets lack merit and that its recent asset sales aren't subject to ResCap's bankruptcy proceedings. Creditors argue that Ally stripped ResCap of most of its value when it transferred Ally Bank to the parent company from the mortgage company unit in a transaction completed in 2009. The transaction is among the deals that Arthur J. Gonzalez, the court-appointed examiner in ResCap's bankruptcy, is investigating as part of his review, which is expected to be completed in April.