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MF Global Inc.’s trustee said that former customers should get “significantly” increased distributions in coming months, and the goal is still 100 percent recoveries, Bloomberg News reported yesterday. Customers who traded on U.S. exchanges may get distributions starting in early September that would bring their percentage recoveries into “the high nineties” while customers who traded on foreign exchanges may get “in the sixties,” trustee James Giddens said yesterday. His projections assume that agreements with MF Global’s U.K. unit and JPMorgan Chase & Co. take effect in mid-August. A prior projection in June estimated customers would get 94 cents on their dollar. Giddens said at the time that disputes including a lawsuit against directors and officers delayed the potential for full recovery.

Regulators are taking a closer look at whether high-frequency trading firms might represent a threat to the stability of financial markets, the New York Times DealBook blog reported yesterday. The Financial Industry Regulatory Authority (FINRA), an industry-financed regulator, sent letters to 10 high-speed trading firms this week, asking them for more information about their trading programs and the steps they have in place to avert “market disruptions.” The letter sent out this week is focused primarily on the steps the firms take to test their programs, or algorithms, before they begin trading with them, and the preparations they take to deal with unexpected trading problems. Regulators have been focused on these issues since one trading firm, Knight Capital, lost nearly $500 million, and nearly went bankrupt, after its trading programs went haywire last August.

Credit Suisse Group AG was sued for more than $350 million by entities of Highland Capital Management LP who claim it marketed loans for high-end residential communities including the Yellowstone Club in Montana based on unreasonable and deceptive appraisals, Bloomberg News reported yesterday. The dispute stems from dividend capitalization loans for Yellowstone, the Turtle Bay Resort in Hawaii, the Park Highlands Master Planned Community in North Las Vegas, Ginn Clubs & Resorts and Rhodes Homes, according to a court filing on July 16 in New York State Supreme Court in Manhattan. The plaintiffs, Allenby LLC and Haygood LLC, were assigned the claims by managed investment funds that participated as lenders to the loans, according to the suit. They accused Zurich-based Credit Suisse of using “compliant stooges in two global appraisal firms” to overvalue the communities that secured the loans to persuade the lenders to invest.

Westport National Bank and its parent company, Connecticut Community Bank, were not liable for the losses of investors in Bernard Madoff’s vast Ponzi scheme in its role as a custodial bank, a jury found on Wednesday, the New York Times DealBook blog reported yesterday. Separately, the bank agreed to pay $7.5 million to 240 investors in a related case, a lawyer for the bank said. A federal jury in Hartford, Conn., had finished hearing eight days of evidence last month in a case before Judge Vanessa L. Bryant of the United States District Court for the District of Connecticut. The case had consolidated three similar lawsuits against the bank. Two of those cases settled before the jury began its deliberations. After the other cases settled, the jury did evaluate the bank’s custodial duties in a case brought by two Florida investors, but sent a mixed message. After 14 hours of deliberation, the jury said that the bank was not a fiduciary, and thus owed no fiduciary duty to two elderly Florida investors, Audrey Short and Faye Albert.

Global insurers identified as too big to fail will have to hold higher reserves and draw up recovery and resolution plans to limit the economic fallout should they go bust, the industry’s watchdog said, Bloomberg News reported yesterday. The International Association of Insurance Supervisors (IAIS), which collected data from 50 insurers in 14 jurisdictions, including the U.S., to help the Financial Stability Board (FSB) draw up a list of systemically important firms, released its assessment methodology and policy measures today. The list of insurers will be announced by the Basel, Switzerland-based FSB in coming days. The companies on the FSB insurer list will be included based on criteria such as size, global activity and the amount of non-insurance businesses they have. The IAIS would impose tougher capital standards on the systemically important insurers to increase their capacity to absorb losses and require them to design recovery and resolution plans to meet cases of severe financial distress. The FSB said in June it will follow up next year with a list of too-big-to-fail reinsurers.

Federal Reserve Chairman Ben Bernanke weighed in on the contentious debate over the future of the housing finance system on Thursday, saying some sort of backstop for mortgages was needed to protect the financial system in times of stress, Reuters reported yesterday. However, he stopped short of explicitly endorsing a government role, which many Democrats see as the best approach. A bipartisan group of senators has proposed winding down government-controlled mortgage financiers Fannie Mae and Freddie Mac over five years as part of an effort to reduce taxpayer support for the market. The two companies, which were seized by the government in 2008 as bad loans threatened their solvency, currently back nearly half of all new U.S. home loans. To fill the role they have played in ensuring a flow of housing credit in good times and bad, the senators would create a government backstop that would kick in times of stress after private creditors had absorbed large losses. A separate draft bill unveiled by Republicans in the House would also wind down Fannie Mae and Freddie Mac, but would put much sharper curbs on government guarantees. Bernanke said that if lawmakers created a system in which the government was offering guarantees, they should ensure that the government is appropriately compensated. He also said they should make sure that firms that are repackaging mortgages into securities for investors reserve enough capital to avoid sticking taxpayers with losses.

Residential Capital LLC won what might only be an interim skirmish in a quest to get a federal district court to halt a lawsuit by the Federal Housing Finance Agency against Detroit-based parent Ally Financial Inc. and some of its affiliates, Bloomberg News reported yesterday. The eventual outcome of the suit is important because the agency isn’t part of the global settlement to be implemented through New York-based ResCap’s pending chapter 11 reorganization plan. In its role as conservator of Freddie Mac, the agency sued ResCap, Ally and affiliates alleging there were false and misleading statements in documents related to residential mortgage-backed securities that Freddie Mac purchased. After ResCap filed for bankruptcy, the agency dropped ResCap from the suit. ResCap was Ally’s mortgage-servicing unit. ResCap started a lawsuit in bankruptcy court contending that continuing to sue Detroit-based Ally and other non-bankrupt affiliates was still a violation of bankruptcy’s automatic stay.

A U.S. Senate committee will hold a hearing next week on whether banks should control physical storage of commodities, a signal that lawmakers may toughen their stance on this controversial but lucrative business for Wall Street firms, Reuters reported yesterday. Goldman Sachs Group Inc., JP Morgan Chase & Co. and Morgan Stanley all have business units involved in the storage of physical commodities such as metals and oil, as well as in commodities trading. The Senate hearing will take place as a five-year grace period from the U.S. Federal Reserve that allows banks to hold physical commodities assets is set to expire before the end of the year.

The House Financial Services Committee will hold a hearing today at 1 p.m. ET titled "A Legislative Proposal to Protect American Taxpayers and Homeowners by Creating a Sustainable Housing Finance System." To view the witness list and obtain prepared hearing testimony and materials, please click here: http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=34…

U.S. Federal Reserve Chairman Ben Bernanke should be required to testify in Maurice “Hank” Greenberg’s lawsuit over the bailout of American International Group Inc., Greenberg’s lawyers said, Bloomberg News reported yesterday. Bernanke made key decisions about the government takeover of the insurer during the financial crisis, according to a filing by Greenberg’s Starr International Co. yesterday in the U.S. Court of Federal Claims in Washington, D.C. Starr sued the U.S. for $25 billion in 2011. Greenberg called the assumption of 80 percent of AIG’s stock by the Federal Reserve Bank of New York in September 2008 a taking of property in violation of shareholders’ constitutional rights to due process and equal protection of the law.