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Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said that he expects the U.S. economy to avoid another recession as long as Europe can contain its debt crisis, Bloomberg News reported yesterday. There will not be a recession "unless events in Europe develop in some way that spills over here big-time," Buffett said yesterday. Europe’s sovereign-debt crisis threatens to destroy the region's 17-nation currency union. Finance ministers and central bank governors from the Group of Seven economies agreed yesterday to coordinate responses to the crisis as Greece contemplates leaving the euro. European leaders need to resolve some of the union's weaknesses, Buffett said. "They're in on a common currency but they're not in on a common fiscal policy or a common culture or common labor practices," Buffett said. "They have to reconcile some of these things."

Hedge funds fell 2.9 percent in May, their worst month since September, as stocks slumped on concern Greece may exit the euro and the global economy is weakening, Bloomberg News reported yesterday. The decline was driven by long-short equity, multistrategy and global macro funds, according to data compiled by Bloomberg. Hedge funds have lost 1.3 percent since the start of the year, trailing a 0.9 percent gain for equities worldwide, including reinvested dividends.

The Senate Banking Committee yesterday delved into the nuances of JPMorgan’s trading loss, quizzing the bank’s primary regulators about how the blunder would affect the outcome of Wall Street regulation, the New York Times' DealBook blog reported yesterday. While the watchdogs were largely reticent in their views, saying that it was too soon to tell, some acknowledged that the losses would weigh on their deliberations over the Volcker Rule. "I would think our experience here with JPMorgan Chase would inform our views in the final rule-making," Comptroller of the Currency Thomas J. Curry told lawmakers. Neal S. Wolin, deputy secretary of the Treasury Department, called the JPMorgan incident "an important input" in creating a "strong Volcker Rule." Efforts to draft a final version of the new regulation, named after Paul A. Volcker, the former chairman of the Federal Reserve, gained a fresh push after JPMorgan disclosed last month that it lost at least $2 billion on dubious derivatives trading. The rule would ban banks from trading with their own money, a practice known as proprietary trading.

Click here to read the prepared testimony from yesterday's hearing.
http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&…

New York and Delaware won their bids to intervene in litigation over Bank of America Corp.'s proposed $8.5 billion settlement with mortgage-bond investors, Bloomberg News reported yesterday. New York State Supreme Court Justice Barbara Kapnick yesterday granted motions by the attorneys general of the states to intervene in the case over the objections of an investor group. New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden "have identified legitimate quasi-sovereign interests at play" in the case, Kapnick wrote. The judge also said that she is not persuaded by arguments that the intervention would delay or burden the proceeding. The settlement would resolve claims from investors in Countrywide Financial Corp. mortgage bonds. Bank of America acquired the mortgage lender in 2008. Bank of New York Mellon Corp., as trustee for investors, is seeking approval of the deal in state court.

The lead regulator overseeing the unit of JPMorgan Chase & Co. that racked up multibillion-dollar trading losses is probing whether the bank provided adequate information about its trading activities in the weeks and months leading up to the disclosure of the losses, the Wall Street Journal reported today. Examiners with the Office of the Comptroller of the Currency, which regulates national banks and the JPMorgan group where the losses occurred, met with bank managers in April to review the position, according to prepared testimony for a Senate Banking Committee hearing today. In the prepared testimony, Comptroller of the Currency Thomas Curry says that the losing trades established in recent months were a part of trading activity that began about five years ago.

To review the prepared testimony for today's Senate Banking Committee hearing scheduled for 10 a.m. ET, please click the link below.
http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&…

JPMorgan Chase & Co. won preliminary court approval of a $44.6 million settlement of a lawsuit in which it was accused of conspiring to rig bids on municipal bond deals, Bloomberg News reported yesterday. U.S. District Judge Victor Marrero ruled on Monday in a 2008 class-action antitrust case against JPMorgan and other banks. This settlement applies to only JPMorgan and its Bear Stearns unit. Other banks have settled, and state attorneys general have entered into accords with banks. "The court finds the agreement was entered into at arm’s length by highly experienced counsel and is sufficiently within the range of reasonableness," Judge Marrero wrote in his ruling.

Futures customers should have access to a fund that guarantees their accounts up to a certain threshold, the trustee liquidating MF Global Holdings Ltd said in a report yesterday, Reuters reported. In addition to updating the bankruptcy court on his efforts to recover up to $1.6 billion in missing MF Global customer funds, the report by James Giddens also makes recommendations to avoid a repeat of the chaos following the major brokerage firm's collapse, including a "modest protection fund" that would help futures customers in the event of a similar bankruptcy. "A fund capped at a relatively low dollar amount per customer would suffice to make these customers whole very quickly even in a case with a shortfall the size of" MF Global's, Giddens said in the report. More than three quarters of the firm's customers had claims below $100,000, he said.

Days before Bank of America shareholders approved the bank’s $50 billion purchase of Merrill Lynch in December 2008, top bank executives were advised that losses at the investment firm would most likely hammer the combined companies' earnings in the years to come, the New York Times reported today. But shareholders were not told about the looming losses, which would prompt a second taxpayer bailout of $20 billion, leaving them instead to rely on rosier projections from the bank that the deal would make money relatively soon after it was completed. What Bank of America's top executives, including its chief executive then, Kenneth D. Lewis, knew about Merrill's vast mortgage losses and when they knew it emerged in court documents filed yesterday in a shareholder lawsuit being heard in Federal District Court in Manhattan. The filing in the shareholder suit included sworn testimony from Lewis in which he concedes that before Bank of America stockholders voted to approve the deal he had received loss estimates relating to the Merrill deal that were far greater than reflected in the figures that had appeared in the proxy documents filed with regulators.

A federal agency that oversees JPMorgan Chase & Co. is taking heat over how much it knew about risk-taking in the part of the bank that suffered more than $2 billion in trading losses, the Wall Street Journal reported today. Sen. Sherrod Brown (D-Ohio) asked the Comptroller of the Currency Thomas Curry on Friday for details about the regulator's supervision of trading operations at the largest U.S. bank by assets. Brown also wants more information about the Office of the Comptroller of the Currency's "process for reviewing trading operations" at JPMorgan and other big banks.

Of the roughly 10,000 private-equity funds raised over the past decade, at least 200 now qualify as zombie funds, accounting for as much as $100 billion of the $1.5 trillion currently invested in these vehicles, according to consultants TorreyCove Capital Partners LLC, the Wall Street Journal reported today. Zombie funds are among a growing class of financial assets that are hard to price and whose value is difficult to ascertain, part of a lack of transparency endemic in today's financial markets that increasingly challenges investors. Private-equity funds raise money from investors to buy businesses that the funds then restructure and try to sell for a profit, often after just a few years. The idea is that once the businesses are sold, investors will get back their capital plus any profits, minus fees of course. Pension funds and other investors have billions tied up in near-dead buyout vehicles known as zombie funds. The Securities and Exchange Commission is delving into such issues as part of a broad look at private-equity funds and whether investors are being misled. "We're looking at zombielike funds that potentially have stale valuations," says Bruce Karpati, co-head of the SEC's asset-management enforcement unit. "The investigation into zombie funds is an important effort being driven across the country."