Embattled bank-holding company Capitol Bancorp Ltd. won court approval to sell its controlling stake in an Ohio community bank to Amalgamated Bank of Chicago, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Marci B. McIvor on Wednesday signed off on the sale of Capitol’s 51 percent stake in Bank of Maumee, a small northwest Ohio savings bank, to Amalgamated. The purchase price wasn't disclosed.
Residential Capital LLC’s disclosure statement for its reorganization was opposed by the U.S. Trustee, Bloomberg News reported yesterday. The U.S. Trustee said in a court filing yesterday that the statement doesn’t adequately describe the plan. Also, provisions of the plan contained in the disclosure statement include impermissible payments for the reimbursement of legal expenses of certain creditors, the trustee said. Unless the provisions at issue are removed, the plan “is not confirmable and neither the plan nor the disclosure statement may be approved,” the filing said. Last month, the bankrupt mortgage company filed a reorganization plan estimating unsecured creditors will recover about 36 percent of what they are owed, while debts backed by collateral will be paid in full.
Twenty-five Nuveen Investments Inc. funds sued American International Group Inc., claiming that the company and executives committed securities fraud leading to the U.S. financial crisis that intensified in 2008, Bloomberg News reported yesterday. Also named yesterday as defendants in a 237-page complaint in federal court in Chicago were former Chief Executive Officer Martin J. Sullivan, ex-Chief Financial Officer Steven Bensinger and Joseph Cassano, who led the AIG Financial Products unit. The funds accused the company, Sullivan and others of violating Illinois and federal securities laws, common law fraud and unjust enrichment. They asked for unspecified money damages.
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Freddie Mac reported it earned its second-largest profit ever during the second quarter, $5 billion, and said yesterday that it will make another $4.4 billion dividend payment to the U.S. Treasury, the Washington Post reported today. The latest payment will bring to $41 billion the amount that the mortgage finance company has returned to taxpayers so far. Freddie Mac still owes about $30 billion. A stronger economy is also keeping more borrowers out of trouble: Only 2.79 percent of borrowers with loans backed by Freddie Mac were seriously delinquent during the second quarter, compared with 3.03 percent during the same period last year. Freddie Mac, which was seized by the government during the 2008 financial crisis, reported that if current positive housing trends continue, it could make an additional payment to the Treasury this year.
Pacific Investment Management Co. and BlackRock Inc. are among bond investors seeking a court order blocking Richmond, Calif., and Mortgage Resolution Partners LLC from seizing mortgages through eminent domain, saying the initiative would hurt savers and retirees, Bloomberg News reported yesterday. The city’s plan is unconstitutional, according to a complaint filed yesterday by mortgage-bond trustees in federal court in San Francisco. The trustees, Wells Fargo & Co. and Deutsche Bank AG, were directed to take the action by investors in the debt that also include Jeffrey Gundlach’s DoubleLine Capital LP, said John Ertman, a partner at Ropes & Gray LLP. The plan advanced last month with Richmond backing offers to buy 624 loans, making it the first city to push the idea so far forward. Those offers would need to be refused before the city could follow through with its mayor’s vow to invoke its potential powers to force sales of the mostly non-delinquent loans, so that homeowners could get their debt balances cut to less than the current values of their properties. The program would harm owners of mortgage bonds by paying them too little for loans, as well as damage communities by drying up lending, at least 18 trade groups representing asset managers, bankers, real-estate firms and builders have said in past statements. Costs to investors could exceed $200 million just on loans in Richmond, according to the complaint.
JPMorgan Chase & Co., the biggest U.S. bank, said it’s under federal criminal investigation for practices tied to sales of mortgage-backed bonds that the Justice Department has already concluded broke civil laws, Bloomberg News reported yesterday. The department’s civil division told the bank in May of its preliminary finding after examining securities tied to subprime and Alt-A loans, which were sold to investors from 2005 through 2007, JPMorgan said yesterday. The office of U.S. Attorney Benjamin Wagner has been conducting civil and criminal inquiries, the bank said. Investigators are seeking to wrap up years-long probes of abuses that fueled the housing collapse and led global credit markets to freeze in 2008. This week, the Justice Department and Securities and Exchange Commission sued Bank of America Corp., the nation’s second-biggest lender, accusing it of misleading investors in an $850 million mortgage-backed bond.
Five former employees of Bernard Madoff, scheduled to go on trial in October for allegedly helping the convicted con man carry off the largest Ponzi scheme in U.S. history, are seeking a two-month postponement, Bloomberg News reported yesterday. U.S. District Judge Laura Taylor Swain set an Oct. 7 trial date for the fraud case against Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O’Hara and George Perez. The defendants, who have all pleaded not guilty, are charged with crimes including conspiracy, fraud and falsifying records.
Wells Fargo & Co. didn’t withhold material information about its securities-lending program from institutional investors and isn’t liable for any losses, a lawyer for the bank said at the end of a trial, Bloomberg News reported yesterday. Blue Cross Blue Shield of Minnesota and 11 other plaintiffs sued Wells Fargo in 2011, alleging that the company marketed a risky program as safe and cost investors millions of dollars. Wells Fargo has denied misleading the investors and blamed any losses on the financial crisis. The jury is set to begin deliberating today. A separate phase on punitive damages will follow if the jury finds against Wells Fargo on the claims of breach of fiduciary duty, fraud or deceptive trade practices.
The Justice Department sued Bank of America yesterday, accusing the bank of defrauding investors by vastly underestimating the risk of mortgage backed securities, the New York Times DealBook blog reported yesterday. The lawsuit is the latest action by President Obama’s federal mortgage task force that has vowed to hold Wall Street accountable for misconduct in the packaging and sale of mortgage securities during the housing boom. Bank of America, the Justice Department said, cloaked the risk associated with $850 million worth of securities backed by residential mortgages. As Bank of America assembled securities in 2008, the government claimed, the bank ignored that more than 40 percent of the mortgages included did not meet underwriting guidelines. Even though Bank of America knew about the troubled mortgages, the government said, the bank sold the securities anyway.
