Regulators are expected to serve JPMorgan Chase & Co. with a formal action alleging weaknesses in the bank's antimoney-laundering systems, the Wall Street Journal reported today. The cease-and-desist order from the Office of the Comptroller of the Currency is part of a broader crackdown on the nation's largest banks. The OCC is expected to require JPMorgan to beef up its procedures and examine past transactions.
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Bank of America Corp., the second- biggest U.S. lender by assets, was sued by investors over $261.2 million worth of residential mortgage-backed securities, Bloomberg News reported yesterday. The case was filed on Tuesday in the New York State Supreme Court in Manhattan by investors including Phoenix Light SF Ltd. They asked for damages of more than $122.2 million from defendants including the Charlotte, N.C.-based lender and its Countrywide unit. The investors said they relied on offering materials that misrepresented and omitted statistical characteristics of the loans underlying the securities, including the percentage of properties that were occupied by owners.
Bankruptcy Judge James Peck yesterday approved nearly $158 million in lawyers' and other fees in Lehman Brothers' liquidation, Reuters reported yesterday. Yesterday's hearing covered $157.86 million split between 25 law firms and other professionals. That included about $80 million to Alvarez & Marsal, which managed Lehman's assets during bankruptcy, and about $40 million to Houlihan Lokey, financial adviser to Lehman's creditors' committee. Total fees in the case, the largest-ever chapter 11 bankruptcy, are about $1.8 billion, though only about another $985 million is subject to court approval.
U.S. prosecutors told a Houston jury that two former accounting executives at Stanford Financial Group Co. should be convicted of helping Texas financier R. Allen Stanford conceal the theft of billions of dollars from investors at his offshore bank, Bloomberg News reported yesterday. The government asked jurors to reject claims by ex-Chief Accounting Officer Gilbert Lopez and former Global Controller Mark Kuhrt that they were duped by Stanford and his finance chief into creating false financial statements, which investors relied on to buy $7 billion of fraudulent certificates of deposit from Antigua-based Stanford International Bank Ltd. Lopez and Kuhrt, who went on trial on Oct. 17, are the last two Stanford executives to be criminally tried for their roles in a Ponzi scheme built on bogus CDs.
Bank of New York Mellon Corp.'s Ivy Asset Management agreed to a $210 million settlement with the state of New York to resolve allegations it misled clients that invested with Bernard Madoff, Bloomberg News reported yesterday. Ivy, which reached the agreement with New York Attorney General Eric Schneiderman, was sued by the state in 2010, accused of concealing from investors negative information it learned about Madoff in order to keep collecting fees. Ivy was paid more than $40 million between 1998 and 2008 to give advice and conduct due diligence for clients with large Madoff investments, according to the attorney general’s office. Ivy's clients lost more than $236 million after Madoff's Ponzi scheme collapse, the office said.
Bank of America Corp. is seeking to buy the majority of $329 million of MBIA Inc. bonds to block the insurer’s efforts to distance itself from a cash-strapped unit that sold products protecting the lender from losses on more than $6 billion of debt, Bloomberg News reported yesterday. Bank of America's bid follows a move by MBIA last week to persuade bondholders to change the terms governing almost $900 million in bonds, which would prevent a regulatory seizure of its MBIA Insurance Corp. unit from dragging the parent into bankruptcy. That would leave policyholders including Bank of America holding guarantees from an insurer that cannot make good on claims. Bank of America units bought credit-default swaps backed by MBIA that protect the lender from default on $6.2 billion of debt, the bank said.
Community banks say that they may be pushed out of the residential mortgage market, leaving it in the hands of a few lending giants, because of an effort by global regulators to make banks hold more in their reserves in the event of a crisis, the Washington Post reported today. The move will hit smaller banks harder than big ones, lessening their ability to provide mortgages and other loans to consumers, community bank advocates say. Their complaints, which will be aired during a hearing on Capitol Hill today, follow long-standing concerns that out of the crisis a few behemoths, such as JPMorgan Chase and Wells Fargo, are dominating banking. Read more: http://www.washingtonpost.com/business/economy/small-banks-battle-regul…
For more information on the Senate Banking Committee's hearing today at 2:30 p.m. ET, please click here: http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&….
Bart Chilton, a regulator at the Commodity Futures Trading Commission, criticized the "floundering" that kept the stock market shuttered after Hurricane Sandy and said that he plans to urge financial firms and federal authorities to bolster coordination in the face of future calamities, the New York Times DealBook blog reported yesterday. "Now that we have this stark and frankly frightening example to work from, we'd be negligent not to move quickly to make sure that our emergency systems are comprehensive and fully tested," Chilton said. He called for the creation of a private-public task force that would convene in advance of crises like hurricanes. Calling it the Financial Market Multi-Agency Command, Chilton said that the group would mandate technology testing protocols, spell out guidelines for operating in a crisis and potentially sketch a timetable for recovery efforts.
The Securities and Exchange Commission has deepened its probe into whether Knight Capital Group Inc. did enough to police its trading systems before computer errors nearly destroyed the brokerage, the Wall Street Journal reported today. The inquiry, which began after Knight's errant Aug. 1 trades saddled it with more than $450 million in losses, initially focused more narrowly on what caused the errors. The probe has broadened to look further at the company's risk-control procedures and Knight's compliance with a rule implemented last year—called the market-access rule—that requires brokerages to guard against these sorts of problems.
