The trustee liquidating Peregrine Financial Group Inc. is weighing whether to sue two banks that handled accounts for the defunct brokerage firm, Dow Jones Daily Bankruptcy Review reported today. Trustee Ira Bodenstein sees "a number of viable claims" against U.S. Bank and J.P. Morgan Chase & Co., though no decision has yet been made to pursue the banks, according to a court document filed on Wednesday.
California’s top law enforcement official accused JPMorgan Chase yesterday of flooding the state’s courts with questionable lawsuits to collect overdue credit card debt, the New York Times DealBook blog reported yesterday. The suit, filed in California Superior Court by the state’s attorney general, Kamala D. Harris, contends that JPMorgan, the nation’s largest bank, “committed debt collection abuses against tens of thousands of California consumers.” For about three years, between January 2008 and April 2011, JPMorgan filed thousands of lawsuits each month to collect soured credit card debt, Harris said. On a single day, for example, JPMorgan filed 469 lawsuits, court records show. As the bank plowed through the lawsuits, Harris alleged that JPMorgan took shortcuts, like relying on court documents that were not reviewed for accuracy. “To maintain this breakneck pace,” according to the lawsuit, JPMorgan relied on “unlawful practices.”
A report to be released today could embolden creditors of bankrupt mortgage lender Residential Capital LLC to pursue billions of dollars of cash that its parent, Ally Financial Inc., had planned to use to repay a U.S. government bailout, Reuters reported today. The report by a court-appointed examiner deals with allegations of improper activity before the ResCap bankruptcy, including claims that Ally Bank was stripped from ResCap. ResCap creditors have said that Ally, which is about three-quarters owned by the U.S. government, could be on the hook for up to $25 billion owed to them by ResCap. Former bankruptcy judge Arthur Gonzalez was appointed by a bankruptcy court last year to examine the pre-bankruptcy deals between Ally, ResCap, Ally investor Cerberus Capital Management LP and others. Gonzalez also investigated the negotiations that led to Ally's initial proposed settlement, which was rejected by ResCap creditors.
Federal securities regulators have been slow to revamp rules abused by corporate insiders to trade their company stocks, according to a group of pension funds and a former SEC commissioner, the Wall Street Journal reported today. In a letter yesterday to the Securities and Exchange Commission, the Council of Institutional Investors urged the agency for the second time in four months to tighten rules on government-sanctioned trading plans that allow corporate executives and directors to sell shares despite potentially having knowledge of nonpublic information about their companies. Corporate insiders are barred from trading when in possession of potentially market-moving, nonpublic information. In 2000, the SEC gave executives a way to trade even when they do possess private information, through "10b5-1" plans, though an executive isn't supposed to have inside information when such a plan is set up. The plans involve a preset schedule for selling and buying company shares. Having the plan can be a strong defense against allegations of improper trading. "Weaknesses inherent in 10b5-1 plans were well known to the commission, to the commission's staff, and to practitioners when the rule was first adopted," said former SEC Commissioner Joseph Grundfest. "Many of us thought that, with the accumulation of experience, the commission would proceed, over time, to refine the rule so that it would better protect investors without imposing unreasonable burdens on executives and insiders," said Grundfest, now a law professor at Stanford University. "We have accumulated the experience but have yet to refine the rule."
|
Three weeks after checks sent to homeowners as compensation for foreclosure abuses were rejected for insufficient funds, the consulting firm at the center of the mishap erred again: a fresh round of checks was written for the wrong amounts, the New York Times DealBook blog reported today. In recent days, Rust Consulting issued nearly 100,000 checks for less than the homeowners were owed. The mistake potentially cheated consumers out of millions of dollars they were owed under a deal reached between the government and the nation’s biggest banks. Federal regulators ordered Rust to fix its mistake, and Rust said yesterday that it had “corrected the error and plans to mail supplemental checks to affected borrowers as soon as May 17.” It attributed the mistake to a “clerical error.”
The Consumer Financial Protection Bureau (CFPB) yesterday issued a series of proposals to create more flexible repayment plans for the millions of Americans struggling with private student loans, the Washington Post reported today. Such loans, which are offered by banks and other financial firms, account for $150 billion of the $1 trillion in outstanding student loan debt, but they have come under increased scrutiny. To ease the burden on borrowers, the CFPB said that those who pay on time should be able to refinance their debt at lower interest rates. Borrowers who fall behind should have access to income-based repayment plans, it said. The CFPB urged lenders to implement those recommendations. In addition, it said that policymakers should help those with private loans by replicating for them the rehabilitation program available to those with federal student loans, which helps people exit default and repair their credit.
Hedge funds using debt-trading strategies honed on Wall Street are expanding at a record pace as they profit from risks big banks are no longer taking, Bloomberg News reported yesterday. BlueCrest Capital Management LLP doubled its New York staff in the two years through December, while Pine River Capital Management LP increased its global workforce by one-third in 2012. Hedge-fund firms are hiring from companies such as Deutsche Bank AG, Barclays Plc and Bank of America Corp. as their credit funds have attracted $108 billion since 2009, data compiled by Chicago-based Hedge Fund Research Inc. show. The flow of funds and people is taking place as regulators demand banks curb proprietary trading and back riskier wagers with more capital to prevent another financial crisis. That has allowed so-called shadow-banking firms to expand in businesses contracting at the largest lenders, including distressed-debt trading and fixed-income arbitrage, a strategy that seeks to profit from short-term price differentials. Credit hedge funds, part of a less-regulated shadow-banking system that also includes money-market funds and real estate investment trusts, are still small compared with Wall Street’s largest lenders.
Fannie Mae said today that it would make a $59.4 billion payment to the U.S. Treasury next month after reporting a $58.7 billion first-quarter profit thanks to a big tax benefit the bailed-out mortgage-finance company booked after determining it would generate profits in the coming years, the Wall Street Journal reported today. Fannie recognized $50.6 billion in tax benefits during the first quarter, in addition to pre-tax income of $8.1 billion during the period. That compared to a $2.7 billion gain during the year-earlier period. The tax boost stemmed from reversing write-downs of its deferred-tax assets, which are unused tax credits and deductions that can offset future tax bills but which are worthless if a company is not expected to turn a profit and have taxable income. The mortgage-finance company began writing down the tax benefits in 2008 as rising mortgage defaults threatened to wipe out thin capital reserves.
MBIA Inc., the bond insurer that reached a $1.7 billion settlement with Bank of America Corp. this week, will pay $350 million to Societe Generale SA to resolve litigation, Bloomberg News reported yesterday. The agreement settles claims over the insurer’s 2009 restructuring, which Societe Generale and other banks had sought to reverse, saying that it exposed them to losses by transferring assets. Societe Generale is the last bank to settle with MBIA in the case following the accord with Bank of America, and the agreement will end the litigation against the insurer.
