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Argentina creditors asked a U.S. judge to allow intermediaries to identify restructured debt holders, so the South American nation can seek their waiver of a clause that may scuttle any deal with holders of defaulted bonds, Bloomberg News reported yesterday. While Argentina has said that it’s seeking to negotiate with holdouts, the nation may be constrained by a “rights against future offers” clause that obliges it to extend any improved offer on defaulted bonds to holders of restructured debt. Since restructured debt holders settled for about 30 cents on the dollar, they could cite the clause to demand equal treatment if a better offer is made. Holdouts argued that the move may be a ruse to circumvent the court and pay restructured debt holders. U.S. District Judge Thomas Griesa in Manhattan last month blocked trustee Bank of New York Mellon Corp. from paying restructured bondholders $539 million it got from Argentina. The nation was barred by the judge from making those payments unless it pays defaulted bondholders in full. Judge Griesa set July 22 as the next hearing in the bond battle, when he will rule on motions by both sides just one week before restructured holders must be paid, or Argentina faces its second default in 13 years.
http://www.bloomberg.com/news/2014-07-16/argentine-creditors-seek-names…

In related news, the Wall Street Journal today reported that if Argentinian President Cristina Kirchner opts to settle with two New York hedge funds that have won court-ordered awards of more than $1.5 billion, economists say that it will most certainly lead to additional claims that will cost Argentina's government about $13 billion. Kirchner and her top economic aides have fought against paying out the full value on bonds the hedge funds bought cheap, mostly after Argentina's massive 2001 default. Calling the creditors "vultures" and their demands "extortion," the Argentine government says that paying the hedge funds would open the floodgates to myriad suits costing $120 billion and drive the country into bankruptcy. But economists and former policy makers in Kirchner's government said that while Kirchner is right about Argentina facing a hefty bill, the cost is likely to be far less than what Argentine officials have claimed. And they say that the government could soften the blow by negotiating a payment schedule and offering compensation in bonds. (Subscription required.)
http://online.wsj.com/articles/if-argentina-settles-debt-dispute-more-c…

Bank of America Corp. said second-quarter profit slid 43 percent as the banking giant was again weighed down by large one-time legal charges and a slump in mortgage originations, the Wall Street Journal reported today. Bank of America said it had resolved private lawsuits with American International Group Inc. over mortgage securities it sold in the financial crisis. The bank will pay AIG $650 million to settle lawsuits that the insurance company filed, alleging that Bank of America, as well as Countrywide and Merrill Lynch, which Bank of America bought in 2008 and 2009, had been misleading about the quality of mortgage securities it sold. AIG also agreed to stop objecting to an $8.5 billion settlement that Bank of America had reached with private investors, including AIG. For the quarter, Charlotte-based Bank of America reported a profit of $2.29 billion, compared with $4.01 billion a year earlier. The results include a litigation charge of $4 billion, up from a year earlier charge of $471 million.

Treasury Secretary Jacob J. Lew said that Congress should immediately change the law to stop companies from avoiding U.S. taxes through inversion transactions, Bloomberg News reported yesterday. Any change should be retroactive to May 2014, Lew wrote in a letter yesterday to lawmakers. “We should prevent companies from effectively renouncing their citizenship to get out of paying taxes,” Lew wrote. The pace of inversion deals has escalated in recent months, as companies such as Medtronic Inc. and Mylan Inc. have announced transactions that let them move their legal address outside the U.S. In inversions, U.S.-based companies purchase a foreign company, then switch the legal address to take advantage of the foreign jurisdiction’s favorable tax rules.

Standard & Poor's Ratings Services, after more than a year of fighting a crisis-era lawsuit, is willing to reopen discussions with the Justice Department to settle the case, the Wall Street Journal reported today. The company isn't in active talks with the Justice Department and no deal is imminent, and while no penalties have been discussed, negotiations would likely focus on a range of several hundred million dollars to around $1 billion. The government had previously demanded more than $1 billion before talks broke down. It then filed a lawsuit in February 2013 seeking $5 billion. S&P's apparent strategy shift is in part tied to a new general counsel taking over at S&P's parent company, McGraw Hill Financial Inc. The company also has generally grown more willing to resolve the lawsuit instead of fighting, according to the people familiar with the matter. S&P has previously called the lawsuit "meritless" and alleged it was retaliation for its 2011 downgrade of U.S. sovereign debt, which the government denied.

Citigroup Inc., the third-largest U.S. bank by assets, agreed to pay $7 billion in fines and consumer relief to resolve government claims that it misled investors about the quality of mortgage-backed bonds sold before the 2008 financial crisis, Bloomberg News reported today. The bank, which is scheduled to report results today before U.S. markets open, took a $3.8 billion pretax charge in the second quarter ended June 30 to cover the cost of the settlement, the New York-based firm said. The accord covers securities issued, structured and underwritten between 2003 and 2008, according to Citigroup. The settlement includes a $4 billion civil penalty, the largest of its kind, according to the Justice Department. It also includes $500 million to state attorneys general and the Federal Deposit Insurance Corp. The rest will be divided among various forms of consumer relief to be provided by the end of 2018, according to Citigroup’s statement.

Federal Reserve Vice Chairman Stanley Fischer said a council of financial regulators established by the Dodd-Frank Act may need more authority to help guard against threats to the banking system, Bloomberg News reported yesterday. Members of a committee of key regulators, including the Fed and the Treasury Department, would benefit from having financial stability added to their mandates, Fischer said yesterday. The panel, known as the Financial Stability Oversight Council, could also be given greater independence to address systemic risks, Fischer, a former governor of the Bank of Israel. “It may well be that adding a financial stability mandate to the overall mandates of all financial regulatory bodies, and perhaps other changes that would give more authority to a reformed FSOC, would contribute to increasing financial and economic stability,” Fischer said.

A federal judge yesterday rejected PricewaterhouseCoopers' request to dismiss a $1 billion lawsuit accusing the auditor of providing bad accounting advice that contributed to the October 2011 collapse of MF Global Holdings Ltd., a brokerage run by former New Jersey Governor Jon Corzine, Reuters reported yesterday. U.S. District Judge Victor Marrero rejected PwC's argument that the MF Global's bankruptcy plan administrator, which brought the lawsuit, "stands in the shoes" of the company under the “in pari delicto” legal doctrine, and cannot recover because Corzine and other officials were also to blame for the collapse. Judge Marrero has yet to review other PwC arguments for dismissal, including that the administrator had no authority to sue and did not show that the accounting advice was a "proximate" cause of MF Global's bankruptcy.

U.S. regulators are poised to complete long-awaited rules intended to prevent a repeat of the investor stampede out of money-market mutual funds that threatened to freeze corporate lending during the 2008 financial crisis, the Wall Street Journal reported today. The Securities and Exchange Commission is expected to vote on a plan as early as this month that would require certain money funds catering to large, institutional investors to abandon their fixed $1 share price and float in value like other mutual funds. The plan also would allow money funds to temporarily block investors from withdrawing their money in times of stress, or require a fee to redeem shares. Other regulators, including members of the Financial Stability Oversight Council, have said such redemption restrictions could spur, rather than curb, investor stampedes. The rules are aimed at making the $2.6 trillion money-fund industry less prone to investor runs during periods of market tumult by training investors to accept fluctuations in the value of their investments, and by ensuring funds could stop a trickle of outflows from turning into a flood.

The Justice Department and Citigroup Inc. are close to a deal for the bank to pay about $7 billion to settle allegations it sold shoddy mortgages in the run-up to the financial crisis, the Wall Street Journal reported today. The two sides, which had been far apart just weeks ago, are ironing out details of an agreement that could be announced as early as next week that would avert a federal lawsuit over the mortgages. The potential settlement marks a reversal from mid-June, when the Justice Department had warned that it planned to file a lawsuit unless Citigroup significantly raised its settlement offer. Citigroup had been offering about $4 billion, while the government was seeking close to $10 billion, a figure the bank found objectionable. The bank had argued that its pre-crisis conduct shouldn't warrant such a large penalty and that it should pay far less than the $13 billion paid in November by JPMorgan Chase & Co., which packaged and sold far more mortgage securities before the financial crisis.

American Express Co.'s rules preventing merchants from encouraging customers to use less-expensive payments stifle competition, a lawyer for the U.S. government argued at the start of an antitrust trial, Bloomberg News reported yesterday. "AmEx has controlled the price and has excluded competition," Craig W. Conrath, a Justice Department lawyer, told U.S. District Judge Nicholas Garaufis on Monday in Brooklyn, N.Y. "AmEx does not have to worry that a competitor is going to come along with a lower price." The company prohibits businesses that accept AmEx from offering incentives, such as discounts, to customers who use cards from companies that charge less to process payments, including Visa Inc. and MasterCard Inc. Those all-or-nothing rules, long an irritant to business, violate antitrust law, the government says.