Foreclosure Starts Down on Annual Basis in October
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Bank of America Offers to Buy MBIA Bonds to Block Amendment
Bank of America Corp. is seeking to buy the majority of $329 million of MBIA Inc. bonds to block the insurer’s efforts to distance itself from a cash-strapped unit that sold products protecting the lender from losses on more than $6 billion of debt, Bloomberg News reported yesterday. Bank of America's bid follows a move by MBIA last week to persuade bondholders to change the terms governing almost $900 million in bonds, which would prevent a regulatory seizure of its MBIA Insurance Corp. unit from dragging the parent into bankruptcy. That would leave policyholders including Bank of America holding guarantees from an insurer that cannot make good on claims. Bank of America units bought credit-default swaps backed by MBIA that protect the lender from default on $6.2 billion of debt, the bank said.
Small Banks Battle Regulators on Capital Requirements
Community banks say that they may be pushed out of the residential mortgage market, leaving it in the hands of a few lending giants, because of an effort by global regulators to make banks hold more in their reserves in the event of a crisis, the Washington Post reported today. The move will hit smaller banks harder than big ones, lessening their ability to provide mortgages and other loans to consumers, community bank advocates say. Their complaints, which will be aired during a hearing on Capitol Hill today, follow long-standing concerns that out of the crisis a few behemoths, such as JPMorgan Chase and Wells Fargo, are dominating banking. Read more: http://www.washingtonpost.com/business/economy/small-banks-battle-regul…
For more information on the Senate Banking Committee's hearing today at 2:30 p.m. ET, please click here: http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&….
SEC Expands Knight Probe
The Securities and Exchange Commission has deepened its probe into whether Knight Capital Group Inc. did enough to police its trading systems before computer errors nearly destroyed the brokerage, the Wall Street Journal reported today. The inquiry, which began after Knight's errant Aug. 1 trades saddled it with more than $450 million in losses, initially focused more narrowly on what caused the errors. The probe has broadened to look further at the company's risk-control procedures and Knight's compliance with a rule implemented last year—called the market-access rule—that requires brokerages to guard against these sorts of problems.
Storm Cities Debt Costs Could Rise
More than two dozen New Jersey, New York and Connecticut communities hit hard by superstorm Sandy are facing a new threat—higher borrowing costs, the Wall Street Journal reported today. The devastation caused by last week's storm has brought renewed investor focus on the financial strength of local governments in the region and their heavy reliance on debt that must be repaid within a year or less. Many investors are particularly focused on New Jersey, given its dependence on short-term debt: 39 percent of the debt issued in the state in 2011 was short-term bonds, according to Thomson Reuters. In New York and Connecticut, short-term bonds accounted for about 16 percent of last year's borrowings.
Citigroup Sued by Sealink over Mortgage-Backed Securities
Citigroup Inc., the third-biggest U.S. bank by assets, was sued by Sealink Funding Ltd. for damages tied to an investment in $513 million worth of residential mortgage-backed securities, Bloomberg News reported today. Sealink, in a suit filed yesterday in New York State Supreme Court, accused Citigroup of misrepresenting and omitting information on the underwriting standards used to issue loans pooled to create the securities. Sealink is seeking more than the principal amount of the securities in damages.
JPMorgan Chase Nears SEC Settlement over Mortgage-Backed Securities
JPMorgan Chase & Co. is close to a settlement with the Securities and Exchange Commission that would end one probe into how the company's Bear Stearns Cos. unit packaged and sold home loans to investors, the Wall Street Journal reported today. A pact with the nation's largest bank by assets would be the first tangible victory in a wide-ranging SEC investigation into Wall Street's sale of mortgage-backed securities before the onset of the financial crisis. JPMorgan's payment is not expected to exceed the $550 million paid in 2010 by Goldman Sachs Group Inc. to settle claims by the SEC that it misled investors in a collateralized debt obligation called Abacus 2007-AC1.
Global Regulators to Cut List of Too-Big-To-Fail Banks to 28
Global regulators will publish a list of 28 too-big-to-fail banks that must hold additional capital, one less than the 29 identified last year, Bloomberg News reported today. The list will be published today in advance of a Nov. 4 meeting in Mexico of finance officials from the world’s biggest economies. The Financial Stability Board last year published a list of 29 banks that should hold more capital than required by other international agreements because of their importance to the global financial system. Citigroup Inc., JPMorgan Chase & Co., BNP Paribas SA, Royal Bank of Scotland Group Plc, and HSBC Holdings Plc were provisionally earmarked to face the top level of surcharges, set at 2.5 percent of risk-weighted assets. The most likely bank to drop off the updated list is Dexia SA, the Franco-Belgian lender that is being broken up after losing access to unsecured funding, Karel Lannoo, chief executive officer of the Centre for European Policy Studies in Brussels, said last month.
Lehman Affiliates Had 14.3 Billion in Restricted Cash
Defunct Lehman Brothers Holdings Inc. and its affiliates had $14.3 billion in restricted cash on Sept. 30, including $10.9 billion of reserves for claims, Bloomberg News reported yesterday. Free cash and investments totaled almost $11 billion, according to a court filing. The claim reserves include $5.8 billion held for disputed amounts, Lehman said. The former investment bank plans two payments to creditors every year. The last payment was Oct. 1. Lehman, which four years after filing the biggest U.S. bankruptcy continues to sell assets to pay creditors, made a first payment of $22.5 billion in April and a second installment of $10.2 billion this month.
JPMorgan Sues Boss of London Whale
JPMorgan is suing Javier Martin-Artajo, the manager who directly supervised Bruno Iksil, the so-called London Whale, according to a lawsuit made public yesterday, the New York Times DealBook blog reported. Iksil gained that now infamous moniker after reports emerged in April that he had built up an outsize position in an obscure corner of the credit markets. That position ultimately proved devastating for the bank, resulting in a $6.2 billion loss. The lawsuit, which was filed in a London court, did not disclose the details of JPMorgan's claims against Martin-Artajo.