Lehman Brothers Holdings Inc. is selling more of the claims against its defunct brokerage, as part of a continuing strategy to quickly recover money that will go to its creditors, Dow Jones Daily Bankruptcy Review reported today. Lehman said on Friday that it will sell an additional $1.06 billion of its general unsecured claims against the brokerage unit, Lehman Brothers Inc., which is being unwound by trustee James W. Giddens.
Efforts to overhaul money market funds have posed not just a challenge to the Securities and Exchange Commission, which will finally vote on an overhaul package on June 5, but also to its new overseer, the supercommittee of agencies known as the Financial Stability Oversight Council (FSOC), the New York Times DealBook blog reported on Friday. A lot of blame for the depth of the financial panic in September 2008 can reasonably be laid at the door of the money market funds, according to the analysis. The collapse of the Reserve Primary Fund – it broke the buck, which money market funds were designed and regulated to never do, on Sept. 16 of that year – led to the collapse of the entire asset class. Because money market funds were large purchasers of the commercial paper corporate America uses to finance its operations, that market ground to a halt as well. The Financial Stability Oversight Council has the power, under Section 120 of Dodd-Frank, to review and make recommendations related to a member agency’s regulation of a systemically significant sector of the financial system.
Shares in CIT Group Inc., the business lender run by John Thain, jumped 5.4 percent after reporting that regulatory curbs imposed in 2009 while the firm struggled to survive have been lifted, Bloomberg News reported yesterday. CIT received notice from the Federal Reserve Bank of New York that a written agreement dated Aug. 12, 2009 was terminated, according to a statement today from the company. Bad loans including subprime mortgages led New York-based CIT to take $2.33 billion from the Treasury’s bank rescue fund and then file for bankruptcy. Thain, who joined the company after its troubles began, led CIT with a plan that reduced the lender’s bad credits and high cost of funds, but the bailout wasn’t repaid. CIT’s 2009 agreement with the Fed required the company to seek the regulator’s approval for issuing dividends or incurring new debt. CIT also pledged to provide periodic updates focusing on cash and funding.
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Lehman Brothers' defunct brokerage told an appeals court yesterday that it was entitled to billions of dollars in cash it says was wrongly included in its 2008 sale to Barclays Plc, Reuters reported yesterday. The arguments in federal appeals court in New York renewed a court battle with huge implications for the brokerage's creditors, including Lehman affiliates and hedge funds. The dispute has its roots in the hectic sale of the brokerage's assets to Barclays in the days following the $639 billion bankruptcy of parent company Lehman Brothers Holdings Inc. in September of 2008. The brokerage contends the $250 million deal did not include the brokerage's cash assets. But Barclays says otherwise, relying on a clarification letter signed after the deal was approved.
Goldman Sachs Chief Executive Officer Lloyd Blankfein was awarded $26 million for his work last year, lifting him to No. 1 in the Bloomberg Markets ranking of the best-paid CEOs at North America’s 20 largest financial companies by customer deposits. John Stumpf, who led Wells Fargo & Co. to a record profit of $18.9 billion, was second at $19.3 million, according to Bloomberg. The pay of the 20 chiefs increased an average of 7.7 percent for 2012 compared with a year earlier, according to data compiled by Bloomberg. The tally is based on salaries, stock, bonuses and long-term incentive pay awarded to the CEOs for 2012.
McGraw Hill Financial Inc. and Standard & Poor’s are asking a panel of judges to pack up 15 state lawsuits in which they’re accused of inflating securities ratings and ship them to New York where the companies are based, Bloomberg News reported today. Lawyers for S&P and its corporate parent are scheduled to argue for the transfer today before the Judicial Panel on Multidistrict Litigation at a hearing in federal court in Louisville, Ky. Most of the states sued in February in conjunction with a U.S. complaint filed in Los Angeles federal court that alleges S&P downplayed risks associated with the mortgage-backed securities to increase its revenue and market share.
Federal regulators are widening an investigation into whether the nation’s biggest banks used flawed documents and incomplete records to collect on delinquent credit card debts, the Washington Post reported today. The scope of the inquiry is unclear, but those familiar with it say that the Office of the Comptroller of the Currency is expanding a probe that began in 2011 with allegations that JPMorgan Chase was using error-filled documents in lawsuits against debtors. The regulatory agency is examining the process several banks use to verify consumers’ outstanding debt before taking legal action. Regulators began examining the debt collection practices of JPMorgan in 2011 after a former bank employee, Linda Almonte, said nearly 23,000 delinquent accounts were riddled with inaccuracies. Almonte, who sued JPMorgan for wrongful termination, claimed she was fired after warning her supervisors about the records. The Almonte case, which was settled out of court, raised concerns among regulators that the same sorts of haphazard practices that plagued the foreclosure process might have crept into debt collection.
Federal prosecutors have filed criminal charges against seven men who allegedly set up an Internet-based currency and used it to launder $6 billion in criminal proceeds, a sign of growing concern among law enforcement about digital cash, the Wall Street Journal reported today. Federal prosecutors have accused digital-currency company Liberty Reserve and its founder of running a $6 billion money-laundering operation that became a “bank of choice for the criminal underworld.” The case comes just months after officials warned that digital currency exchanges should follow traditional anti-money-laundering rules and less than two weeks after the Department of Homeland Security froze an account tied to one of the larger exchanges that handle trading in the fledgling digital currency bitcoin.
Citigroup Inc. has reached a settlement with a federal agency that had accused the bank of misleading Fannie Mae and Freddie Mac into buying $3.5 billion of mortgage-backed securities, Reuters reported yesterday. The settlement with the Federal Housing Finance Agency was disclosed in a filing yesterday in U.S. District Court in Manhattan, where a series of related cases by the agency against Wall Street banks are pending. The filing did not disclose the terms of the deal. FHFA representatives said that the settlement was "satisfactory" but declined to say how much Citi would pay. The accord marks the second so far out of 18 securities fraud cases the FHFA filed against banks in 2011 over more than $200 billion in mortgage-backed securities sold to Fannie and Freddie. The FHFA settled a separate lawsuit in January, in which it had accused General Electric Co. of misleading Freddie Mac into buying $549 million worth of securities. Terms of that deal were also confidential.
