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Bahrain-based Arcapita is aiming to build a new asset management firm with a debut local deal in the logistics, education or health care sector as the company recovers from the first chapter 11 bankruptcy process undertaken by a Gulf Arab entity, Reuters reported on Friday. The Islamic investment firm emerged from chapter 11 on Sept. 17 after seeking court protection in March 2012 under hedge fund pressure ahead of the repayment of a $1.1 billion Islamic loan. Under the court-approved restructuring plan, Arcapita is to be split into two entities: one will hold the existing company assets as they are sold down to pay creditors, while a second will be in charge of the process's management. The latter entity hopes to rebuild itself going forward, said Atif Abdulmalik, chief executive of Arcapita, aiming to raise $100 million of new equity from original Arcapita investors by January to help fund dealmaking.

A former official at Bank of America Corp.’s Countrywide unit said that he went to federal authorities and filed a whistle-blower lawsuit after learning the government might settle with the lender, Bloomberg News reported on Friday. Edward O’Donnell, who now works for Fannie Mae, said that he contacted the office of Manhattan U.S. Attorney Preet Bharara in February 2012 after reading in news accounts that the Justice Department was considering settling with large U.S. banks accused of selling bad mortgages to government-sponsored enterprises (GSEs). In a complaint filed that month under the False Claims Act and unsealed eight months later, O’Donnell alleged that Countrywide Financial Corp. issued defective mortgages under its “High Speed Swim Lane” program, or HSSL, and then sold them to Fannie Mae and Freddie Mac. The U.S. later joined the suit and the trial, which began Sept. 24 in federal court in New York.

Five years ago, Congress authorized the Treasury Department to spend more than $200 billion to shore up banks throughout the country as part of the Troubled Asset Relief Program (TARP), Dow Jones Daily Bankruptcy Review reported yesterday. While taxpayers have officially profited from the program overall, they've lost billions of dollars on the TARP-funded institutions that have filed for bankruptcy. A Dow Jones review of the bankruptcies of TARP recipients shows that Treasury has written off, or is likely to write off, its entire investment in all but one of the cases, for a total of nearly $2.8 billion.

Citigroup Inc. agreed to pay $395 million to Freddie Mac as part of a settlement over defective mortgages sold to the government-controlled home-loan financier, the Wall Street Journal reported today. Citi's settlement covers 3.7 million loans sold to Freddie Mac between 2002 and 2012, the bank said. In July, Citi reached a similar settlement with Fannie Mae for $968 million. Bank of America reached an $11.6 billion settlement with Fannie in January and a $1.3 billion settlement with Freddie in 2011. The federal regulator for Fannie and Freddie has directed the firms to reduce outstanding repurchase demands by the end of the year. The companies had some $5.8 billion in loan repurchase demands outstanding at the end of June, down from $17.5 billion one year earlier.

Fannie Mae is planning a bond deal that will pay buyers to share a tiny sliver of the risk of the U.S. home-lending business, the Wall Street Journal reported today. The Washington, D.C.-based company plans to sell about $675 million of securities in an offering that is expected to be announced next month. The securities are derivatives whose value will depend on the performance of a pool of $28.05 billion of mortgages acquired by Fannie Mae in the third quarter of 2012. The deal follows a similar issue in July from Fannie's smaller brother, Freddie Mac. Both companies are issuing the securities to help meet a mandate from their regulator, the Federal Housing Finance Agency, to reduce the cost of defaults to U.S. taxpayers, who bailed out the companies with $188 billion during the financial crisis.

JPMorgan Chase & Co.’s negotiations with federal and state authorities to resolve a series of investigations tied to mortgage bonds are focusing on a potential $11 billion figure, including $4 billion for consumer relief, Bloomberg News reported today. Those involved in the talks include the Justice Department, the Department of Housing and Urban Development and New York Attorney General Eric Schneiderman, who is co-chairman of a federal and state working group on residential mortgage-backed securities. JPMorgan is seeking to negotiate a resolution to mortgage-bond investigations being conducted by federal and state authorities, including probes by U.S. attorneys in Philadelphia, Washington and Sacramento, California.

The Federal Deposit Insurance Corp. is bolstering its efforts to recover $1 billion from a pair of accounting firms that failed to catch massive fraud that brought down Colonial Bank, the bank regulator's sole effort to sue the auditors of a failed bank since the onset of the financial crisis, Dow Jones Daily Bankruptcy Review reported today. The FDIC, the government agency in charge of managing the receiverships of failed banks, is suing the two firms—PricewaterhouseCoopers LLP and Crowe Horwath LLP—for professional malpractice, gross negligence and negligent misrepresentation for failing to detect the long-running fraud at Colonial's largest client, Taylor Bean & Whitaker Mortgage Corp.

After Washington Mutual became the biggest bank failure in U.S. history, 92 of its officers and executives tried to profit from the collapse through illegal golden-parachute payments, according to a claim by the bank's receiver, Courthousenews.com reported yeserday. The WMI Liquidating Trust sued the Federal Deposit Insurance Corp., the Board of Governors of the Federal Reserve, and the 92 former bank officers in Federal Court. Washington Mutual filed for bankruptcy and was placed in receivership in 2008. JPMorgan Chase bought it for $1.9 billion in September 2008, in a deal brokered by the federal government. WaMu had $310 billion in assets when it collapsed. In its 103-page lawsuit, the WMI Liquidating Trust seeks a judgment that various severance and benefits sought in bankruptcy proceedings are prohibited by the federal Golden Parachute Regulations.

JPMorgan Chase & Co. resumed settlement talks with the U.S. after authorities prepared to sue the bank yesterday in California federal court alleging it misrepresented the quality of mortgage-backed securities it sold from 2005 to 2007, Bloomberg News reported yesterday. The government told JPMorgan that it was ready to file a complaint yesterday. Soon after, talks restarted between the bank and Justice Department officials over a possible settlement. JPMorgan is seeking to negotiate an accord resolving mortgage-bond investigations being conducted by federal and state authorities, including probes by the U.S. attorneys in Sacramento, Philadelphia and Washington, D.C. The bank had also tried to settle a $6 billion claim by the Federal Housing Finance Agency and an investigation by New York Attorney General Eric Schneiderman, who sued the company in October over mortgage bonds packaged by Bear Stearns Cos., which JPMorgan acquired in 2008.

Sixteen financial institutions are being investigated by government officials as part of their scrutiny of bank actions in the years before the financial crisis, according to a court filing by Wall Street’s largest mortgage due-diligence firm, Bloomberg News reported today. Clayton Holdings LLC, objecting today to a July 1 subpoena seeking documents related to the firm’s work on residential mortgage-backed securities (RMBS), said the U.S. Justice Department was engaged in a “fishing expedition” aimed at collecting massive amounts of data on almost 200 clients. Clayton didn’t identify the 16 institutions being probed by the RMBS working group, a group of federal and state officials that includes the Justice Department. The Justice Department’s financial fraud task force has increased its activity in RMBS cases, suing Bank of America Corp. last month as New York-based JPMorgan Chase & Co. disclosed criminal and civil investigations. Bank of America has denied wrongdoing and said it will fight the suit.