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The Justice Department is preparing a fresh round of attacks on the world’s biggest banks, again questioning Wall Street’s role in a broad array of financial markets, the New York Times reported today. With evidence mounting that a number of foreign and American banks colluded to alter the price of foreign currencies, the largest and least regulated financial market, prosecutors are aiming to file charges against at least one bank by the end of the year, according to interviews with lawyers briefed on the matter. Ultimately, several banks are expected to plead guilty. The charges will most likely focus on traders and their bosses rather than chief executives.

A cyberattack this summer on JPMorgan Chase compromised the accounts of 76 million households and seven million small businesses, a tally that dwarfs previous estimates by the bank and puts the intrusion among the largest ever, the New York Times DealBook blog reported yesterday. Last year, the information of 40 million cardholders and 70 million others were compromised at Target, while an attack at Home Depot in September affected 56 million cards. But unlike retailers, JPMorgan, as the largest bank in the nation, has financial information in its computer systems that goes beyond customers’ credit card details and potentially includes more sensitive data. Until just a few weeks ago, executives at JPMorgan said that they believed that only one million accounts were affected. As the severity of the intrusion — which began in June but was not discovered until July — became more clear in recent days, bank executives scrambled for the second time in three months to contain the fallout and to reassure customers that no money had been taken and that their financial information remained secure.
http://dealbook.nytimes.com/2014/10/02/jpmorgan-discovers-further-cyber…

To hear more on the latest breaches and further analysis of cybersecurity issues, attend ABI’s Winter Leadership Conference on Dec. 4-6 to hear Fortalice CEO Theresa Payton, former Chief Information Officer of the White House, provide her keynote, "Privacy in the Age of Big Data." The early bird rate on WLC expires tomorrow, so register today and save!
http://www.abiworld.org/WLC14/

The Pew Charitable Trusts released a report, which relied on a nationwide survey of borrowers, focus groups and data obtained from numerous sources, that concludes that fraud and abuse are widespread in the Internet market, American Banker reported today. Pew, which has released three previous reports about payday lending, is a sharp critic of both online and storefront lenders. But the most recent report focuses on ways in which online lenders are different from brick-and-mortar stores. Among Pew's findings: nine out of 10 Better Business Bureau complaints about payday lenders involve online operators, even though online loans only make up about one-third of the total market; 30 percent of online borrowers report being threatened by a lender or debt collector; and online payday loans typically have annual percentage rates of 650 percent.

The Federal Reserve Bank of New York poured billions of dollars into rescuing American International Group Inc. in September 2008 without drawing up documents that would cement the government’s control of the giant insurer, the bank’s lawyer testified, Bloomberg News reported yesterday. AIG’s dire condition required an immediate infusion of cash, and paperwork memorializing the terms of the loan wasn’t complete, Thomas Baxter, the New York Fed’s general counsel, told a judge in Washington yesterday in a trial over a shareholder challenge to the terms of the rescue. The Fed wanted to quickly get control of AIG because of concern that Rodgin Cohen, an attorney for the company, might try to re-negotiate the rescue terms, Baxter said. Cohen had succeeded in re-working the terms of JPMorgan Chase & Co.’s takeover of Bear Stearns and the Fed was worried that he might try again with AIG, Baxter testified.

The heads of Goldman Sachs Group Inc. and JPMorgan Chase & Co. told federal regulators days ahead of the 2008 government bailout of American International Group Inc. that they were putting together a private rescue of the insurance giant, a New York Fed lawyer testified, Bloomberg News reported yesterday. When AIG’s name came up in a Sept. 12 meeting of financial regulators and creditors of Lehman Brothers Holdings Inc., which was teetering toward bankruptcy, Goldman Sachs Chief Executive Officer Lloyd Blankfein and JPMorgan CEO Jamie Dimon said, “That’s another problem we’re taking care of,” said Thomas Baxter, general counsel of the New York Federal Reserve Bank. “I took careful note of that colloquy and it led me to believe that we had another issue in AIG but it was being addressed by the private sector,” Baxter told a judge in Washington, D.C., yesterday in a trial over the terms of the U.S. bailout. Maurice “Hank” Greenberg’s Starr International Co., the biggest shareholder in AIG when the financial crisis struck, sued the U.S. in 2011 seeking more than $25 billion for losses from the insurer’s bailout. Starr claims the assumption of 80 percent of AIG’s stock in exchange for an $85 billion loan was an unconstitutional “taking” of private property because the Federal Reserve Board of Governors lacked the legal authority to take equity in a company in consideration of a loan.

A judge yesterday approved a payout to MF Global's unsecured creditors, who have waited nearly three years as customers of the collapsed brokerage already had their money returned, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Martin Glenn said James W. Giddens, the trustee in charge of winding down the brokerage, could pay the unsecured creditors about $295 million. A lawyer for Giddens said that distributions to the unsecured creditors could begin as soon as the order is final, which typically takes two weeks. He also said settlements of unresolved claims could soon result in "very substantial" creditor distributions beyond the one approved yesterday.

Companies in the Standard & Poor’s 500 Index are currently the healthiest in decades, with the lowest net debt to earnings ratio in at least 24 years, $3.59 trillion in cash and marketable securities, and record earnings per share, Bloomberg News reported today. They are headed this year toward the fastest average monthly job creation since 1999, manufacturing is recovering and the U.S. has returned as an engine for global growth. The recovery, which stands in contrast to weak growth in Europe and Asia, has underpinned an almost threefold gain in the Standard & Poor’s 500 Index since March 2009. “The U.S. is leading the way — we’re the only major economy with accelerating growth,” said Mark Zandi, chief economist in West Chester, Pa., for Moody’s Analytics Inc. and a registered Democrat who has advised both the Obama administration and Senator John McCain (R). While Zandi lauds Obama’s $787 billion in stimulus spending and auto bailouts as “textbook” responses to the recession, one question for history is whether the Federal Reserve should instead get the credit. The Fed’s decision to drive down interest rates to zero allowed companies to refinance debt at lower costs, helping spur corporate growth, said Todd Lowenstein, a fund manager with San Francisco-based HighMark Capital Management Inc.

Debt collectors scored a major victory on Monday when the Eleventh Circuit Court of Appeals voted 3-0 to reverse a district court ruling in the case of Gulf Coast Collection Bureau Inc. v. Mais, CollectionsCreditRisk.com reported yesterday. The case involved plaintiff Mark Mais, who was treated in a Florida emergency room in 2009. His wife completed and signed admission forms for him, providing the hospital personal information including a cell phone number. The forms came with a standard notice that the information could be provided to and used by others in the case of both further medical care and bill payment issues. When Mais did not pay the medical bill, Gulf Coast was hired to collect the debt. The agency used an automated dialer to call Mais and left four messages. Mais then sued the collection agency, citing violations of the Telephone Consumer Protection Act (TCPA) for using the automated dialer without prior express consent. He also pushed to certify the case as a class action. Gulf Coast had pushed for dismissal, citing a Federal Communication Commission 2008 ruling that concluded when a consumer provides a cell phone number to a creditor, for example, on a credit application or on admission forms, then auto-dialed and pre-recorded calls to mobile numbers were considered to have prior express consent and therefore were permissible under the TCPA. The FCC further stated that calls placed by a third-party collector on behalf of the creditor should be treated as if the creditor placed the call. The U.S. District Court for the Southern District of Florida ultimately ruled against Gulf Coast, declining to apply the FCC's interpretation of prior express consent in a TCPA case. The court thus became the only one to conclude that district courts have jurisdiction to review FCC rulings and disregard FCC interpretation. Monday's appellate ruling is the first to clarify the scope of the FCC’s consent ruling. It specifically found that the act of providing a mobile phone number to a creditor is consistent with the meaning of "prior express consent" announced in the FCC's 2008 ruling and thus the collection agency's calls were legal. The appellate court further held that the FCC’s ruling applies to a wide range of creditors and collectors, such as those collecting medical debt.

A U.S. federal judge yesterday dismissed claims seeking to stop the U.S. government from making Fannie Mae and Freddie Mac pay a quarterly dividend to the U.S. Treasury, Reuters reported today. The dividend equals the entire net worth of each entity, minus a small reserve that shrinks to zero over time. The lawsuits were filed by investors Perry Capital LLC, Fairholme Funds Inc. and Arrowood Indemnity Company. The judge stated that Congress had given the Federal Housing Finance Agency and the Treasury Department the power to take the companies' profits as a provision of the Housing and Economic Recovery Act. The judge also said that the Housing and Economic Recovery Act's "unambiguous" statutory provisions, coupled with the "unequivocal language" of the plaintiffs' original GSE stock certificates compels the dismissal of all of the plaintiffs' claims.

Bank of America has agreed to pay $7.65 million to settle federal charges that it violated record keeping and internal rules in overstating its capital levels, the New York Times DealBook blog reported yesterday. The Securities and Exchange Commission said that the bank had failed for years to properly deduct losses on a large portfolio of structured notes and other financial instruments that it acquired when it bought Merrill Lynch in early 2009. As a result of the flawed calculations, the bank had overstated the capital cushion that regulators require the bank to hold by about $4 billion. The $7.65 million penalty, which is minuscule compared with the $16.65 billion the bank had paid to settle its mortgage-related misdeeds, caps an embarrassing flub for Bank of America. In March, the bank had easily passed the Federal Reserve’s annual stress test, gaining the regulator’s approval to increase its quarterly dividend for the first time in seven years.