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Standard & Poor’s probably will demand greater protections for investors when mortgage bonds are backed by loans to homeowners in jurisdictions that use eminent domain to seize debt to help borrowers, Bloomberg News reported yesterday. The use of eminent domain, such as is being contemplated by Richmond, Calif., would create an “additional risk of default,” as well as require different assumptions on the size of per-loan losses, S&P analysts James Taylor and Sharif Mahdavian said yesterday. The ratings firm would likely require more credit support, or protection such as some classes of deals taking losses before others, they wrote. Richmond is furthest along in considering using its eminent domain powers in such a way, which is being advocated by Mortgage Resolution Partners LLC and studied by about a dozen municipalities, according to data compiled by Bloomberg. S&P’s statement on its potential reaction if the effort progresses follows the ratings company’s response in 2003 to a predatory-lending law in Georgia with a refusal to grade bonds with home loans in the state.

As the clock runs out on a three-year statute of limitations, the Federal Deposit Insurance Corp. has filed a flurry of lawsuits to recoup losses tied to the largest wave of bank failures during the financial crisis, the Washington Post reported on Saturday. The agency is waging legal battles against hundreds of directors and officers that it claims had a hand in their bank’s demise, failures that cost the deposit insurance fund billions of dollars. These cases, however, may take years to play out in the courts, as the judicial process has been slow-going. The FDIC has filed 76 lawsuits against 574 former bank executives since 2008. Thirty-two of those cases were filed in the first eight months of 2013, nearly triple the number filed during the first eight months of last year, according to the agency. The surge in filings correlates with the peak of bank failures rooted in the crisis, which reached 157 in 2010.

Central bankers around the world are bracing themselves for more financial turbulence as the Federal Reserve prepares to wind down its easy-money policies, the Wall Street Journal reported today. Global markets have reeled since May, when the Fed began signaling it could soon start scaling back its $85 billion-per-month bond-buying program. U.S. mortgage rates have been rising, and currencies and stocks in many developing economies have been falling. This volatility is "a salient reminder" that the effects of the Fed's pullback "may not be smooth," said Charles Bean, deputy governor for monetary policy at the U.K. central bank.

A recent international study found that tougher rules for trading in over-the-counter derivatives will deliver economic benefits that outweigh the costs they impose on banks, Bloomberg News reported today. A group of supervisors and central bankers set up by the Bank for International Settlements estimated that when regulators have stricter standards in place, they will boost global economic output by 0.12 percent per year and the potential for financial crises will be reduced. Regulators and banks should try to have the largest number of derivatives trades as possible pass through clearinghouses, the group said. The market for OTC derivatives, which are traded away from exchanges and other regulated venues, should be based around a “modest number” of clearinghouses, the Basel, Switzerland-based group said.

The Consumer Financial Protection Bureau said that it has launched investigations into certain banks and other financial firms after finding many problems in the way they are servicing residential mortgages, The Washington Post reported yesterday. In the aftermath of the housing crash, the haphazard work of some mortgage servicers prevented thousands of struggling Americans from hanging onto their homes. Problems came to a head when regulators learned that banks were using forged and shoddy paperwork to rapidly foreclose on homeowners. Outrage over those practices led to multibillion-dollar settlements and a series of new rules, but a CFPB report released yesterday shows that many companies have not cleaned up their acts. Examiners found that some mortgage servicers engage in sloppy payment processing, which can result in extra fees for homeowners. They also uncovered instances in which servicers failed to tell homeowners that their loans were transferred to another company or gave consumers conflicting information on the process for reworking the terms of their mortgages.

The city of Detroit may have to publicly disclose at least some of the financial information in its digital vault, which includes what the city's fiscal future could look like, Reuters reported yesterday. Hon. Steven Rhodes on Wednesday accepted an offer by Jones Day, the law firm handling the city's July 18 municipal filing, to go through about 7,000 pages of financial information in a digital "data room" in the next few days and identify which documents could be made public. Judge Rhodes said that on Aug. 28 he will entertain the city's argument to keep some of the data out of the public eye. The city, under state-appointed Emergency Manager Kevyn Orr, set up and provided the content for the password-protected data room and allowed access to creditors involved in the historic Detroit bankruptcy filing only if they signed a nondisclosure agreement.

The Federal Reserve debated changing its plans for raising interest rates so that it could keep its easy-money policy in place longer, The Washington Post reported yesterday. The minutes of the Fed’s policy-setting meeting in July, which were released on Wednesday, show that officials discussed whether they should alter the terms of their landmark promise to keep short-term rates near zero at least until inflation reaches 2.5 percent or the unemployment rate hits 6.5 percent. The ideas broached included lowering the target for unemployment and establishing a floor for inflation. The Fed also considered providing more detail about what it would do once its existing thresholds are met. Although the central bank ultimately decided not to make any policy changes during the meeting, the discussion underscores the challenges facing the Fed as it grapples with the best way to wind down its unprecedented stimulus of the nation’s economy.

Ally Financial Inc. is taking new steps to repay the U.S. government for its financial crisis-era bailout and free itself from federal control, The Wall Street Journal reported yesterday. The Detroit-based auto-loan maker said that it has reached agreements to sell about $1 billion of common stock to investors. The sales would boost Ally's capital levels enough to allow it to buy back $5.9 billion in preferred shares owned by the U.S. Treasury if regulators approve the transaction. All told, the U.S. government pumped $17.2 billion into Ally during the financial crisis through the Troubled Asset Relief Program. To date, Ally has repaid about $6.2 billion. Ally, which began as General Motors Co.'s financing arm, will remain under federal control even after the sales. Assuming the transactions go according to plan, the government's stake in Ally would be reduced to about 65 percent from 74 percent.

Federal securities regulators accused a former portfolio manager at Oppenheimer & Company yesterday of misleading investors about the performance of a fund, a rare enforcement action involving the private-equity industry, The New York Times reported yesterday. The Securities and Exchange Commission contends that Brian Williamson issued quarterly reports and marketing materials that inflated the performance results of an Oppenheimer private-equity fund. In March, Oppenheimer agreed to pay $2.8 million to resolve its role in the case. But Williamson is fighting the charges and has hired a criminal defense lawyer to represent him. In recent years, the SEC’s asset-management unit, which brought the Oppenheimer case, has stepped up its focus on the private-equity business. One area of focus has been with how private-equity firms value their holdings and calculate performance. Unlike funds that invest in publicly traded stocks, private-equity firms own companies whose values can be hard to measure.

A federal judge has endorsed a broad interpretation of a savings-and-loan era law that the Justice Department is trying to use in cases against Wall Street banks, Reuters reported yesterday. U.S. District Judge Jed Rakoff said Monday that a "straightforward application of the plain words" of the Financial Institutional Reform, Recovery and Enforcement Act allowed the interpretation sought by the government. Rarely asserted until recently, it has become the basis of three lawsuits by lawyers under Manhattan U.S. Attorney Preet Bharara against banks. The latest decision came in a case that the Justice Department brought last October against Bank of America over toxic mortgages that its Countrywide Financial mortgage unit sold to Fannie Mae and Freddie Mac in the financial crisis. The government's case, which is set for trial on Sept. 23, focuses on a program instituted in 2007 by Countrywide called "High Speed Swim Lane." The government contends that the program speeded up some home loan processing by removing quality checkpoints, resulting in thousands of fraudulent and defective mortgages being sold to Fannie and Freddie. Rakoff issued a brief order in May dismissing some claims but largely allowing the case to move forward. His ruling on Monday explained his reasoning, particularly why the government could proceed with claims brought under a law adopted in the wake of the savings and loan scandals of the 1980s.The case is U.S. ex rel. O'Donnell v. Bank of America Corp., et al., U.S. District Court, Southern District of New York, No. 12-01422.