Today's Top Stories Also Noted: Kaseya News From the Fierce Network:
Today's Top News1. Bank of America, other banks might face SCRA charges
Last month, the Department of Justice and Capital One settled charges that the bank had violated the Servicemembers Civil Relief Act (SCRA), which protects active duty service members from foreclosure, eviction and other activity that might result from financial hardship while serving their country. The bank agreed to pay $12 million to service members. The DOJ said at the time it had identified at least 4,000 victims in the Capital One case and that they expect that number to rise. That raises an obvious questions: Are other banks in line to face similar charges? One would think that other banks are vulnerable, especially now that the CFPB has signaled its intent to look into these issues. A GAO report recently found that banks illegally foreclosed on more than 300 active military members in recent years. I would not be surprised if settlements were soon announced with a host of other banks. The Huffington Post notes the case of one veteran of the war in Afghanistan who has recently alleged that Bank of America "began the trying to collect outstanding debts on his home and dinged his credit score during a period in which he was covered by SCRA. The vet's lawyer said that "others have come forward with similar stories since he filed class-action lawsuit in July," though he has yet to determine exactly how big the class will be. "Quite honestly I expect it to be a pretty large number of people," the lawyer was quoted. For more:
Read more about: Bank of America, SCRA
2. Standard Chartered fallout may hit U.S. banks
The New York State Department of Finance has accused Standard Chartered of conducting $250 billion in prohibited deals with Iranian banks over seven years, illicitly earning hundreds of millions of dollars in the process. The department said the bank worked to conduct secret transactions, about 60,000 of them, on behalf of Iranian banks, which are subject to U.S. economic sanctions. The department called Standard Chartered a "rogue institution" and ordered it "explain these apparent violations of law" from 2001 to 2010. According to the BBC, the department has uncovered incidents of falsified payment directions achieved by "stripping the message of unwanted data that showed the clients were Iranian, replacing it with false entries." The bank has said it has done nothing wrong. Deloitte has also been implicated in these alleged crimes. The department says it had "intentionally omitted critical information" in a report. Deloitte responded by saying it "performed its role as independent consultant properly and had no knowledge of any alleged misconduct by bank employees. Allegations otherwise are unsupported by the facts." While not active in U.S. banking, Standard Chartered is an agent bank for U.S. custody banks, providing "important access to central securities depositories in mainland Asia and Africa," notes Reuters. Bernstein Research analyst Brad Hintz in a research note said U.S. custody banks rely on extensive sub-custodian networks to pass on economies of scale and scope to big institutional clients. "If a sub-custodian were to be found guilty of an internal conspiracy to hide prohibited transactions from U.S. regulators, U.S. global custodial banks exposed to that sub-custodian may fall under increased scrutiny from their fiduciary clients," Hintz wrote. "Among the more severe consequences, exposure to Standard Chartered could result in reputational damage and potentially negatively impact the ability of a U.S. global custodian to win new mandates from public funds and other fiduciary clients." For more: Related articles: Read more about: Iran, Standard Chartered 3. Wells Fargo hit by higher costs of mortgage settlement
Wells Fargo says the costs of the much-ballyhooed $25 billion mortgage settlement signed in February by the big five mortgage companies will end up costing it more than it originally anticipated, according to a report by Bloomberg Businessweek. According to a filing, the settlement may cut annual interest income by as much $215 million, compared with an estimate of $100 million filed three months ago. The fair value of loans involved may be reduced by as much $1.7 billion, compared with a $700 million reduction previously forecast. As many as 40,000 borrowers, collectively owing $8 billion in unpaid principal, may end up refinancing their debts under the program, compared with an estimate of 20,000 borrowers and $4 billion three months ago. Such dynamics are likely to play out at the other signatories to the deal that ended a historic 16-month investigation of abusive foreclosure practices. It highlights the trend toward more customers than previously expected signing up for relief provided by the settlement. Bank of America has indicated in filings that its annual interest income will be reduced by about $130 million, with as many as 25,000 loans with unpaid principal of $6.8 billion in the mix. While these modifications proceed, the top banks face pressure from mortgage investors, public and private, to buyback mortgage loans. With the big GSEs opting not to reduce principal and instead seek putbacks and with private litigants pressing similar cases, the position of the banks continues to look more precarious. For more: Related articles:
Read more about: Foreclosures, Wells Fargo 4. Judge criticizes, then approves Morgan Stanley settlement
A federal district judge has approved a $4.8 million settlement between Morgan Stanley and the prosecutors that settles accusations that the bank used deritavites to help clients violate federal antitrust laws. But ruling Judge William H Pauley III, of Federal District Court in Manhattan, seemed unwhelmed in approving the settlement. "Given the government's stark allegations of manipulative conduct against Morgan Stanley, disgorgement of $4.8 million is a relatively mild sanction. There is a risk that a large financial services firm like Morgan Stanley could view such a modest penalty as merely the cost of doing business," he wrote in his decision. This opinion echoes what has become a familiar refrain in settlements between banks and prosecutors. The case against Morgan Stanley "was the first attempt by the Justice Department to penalize a bank accused of using derivatives to help clients violate federal antitrust laws. Morgan Stanley, the government said, aided the efforts of KeySpan Corporation, a major utility company in New York, to manipulate electricity prices. In 2006, the bank entered into a complex swap agreement with KeySpan that gave the company a stake in the profits of its competitor, Astoria Generating Company Acquisitions. Morgan Stanley also represented Astoria in the transaction. The government said that the deal allowed KeySpan to push up the price of electricity in New York, costing consumers about $300 million." But if Pauley was so concerned about such lenient treatment, why did he approve it? It would appear he was influenced to some degree by the harsh treatment an appellate court doled out to Judge Jed Rakoff, who had the temerity to reject an SEC-Citigroup settlement for similar reasons. It would have been interesting to see how the same appellate court reacted this time around. As of now, settlements would indeed appear to be a mere cost of doing business. For more:
Read more about: Judge, Morgan Stanley 5. Finra censures Wedbush Securities founder
Finra this week slammed Wedbush Securities, the sixth largest clearing firm, with a $300,000 fine and suspended the company's President and CEO for 31 days. It's rare for Finra to directly target financial executives, but the SRO's anger with company President and CEO Edward Wedbush, who also recieved a personal fine of $25,000, was palpable. The decision, as noted by Financial-Planning, was "a culmination of a range of offenses, inquiries and disciplinary actions dating back over a decade to February of 2002. The complaint charges Wedbush with three violations relating to the firm's failure to file reports on employment registration of registered representatives, customer complaints, and statistical reports in a timely and accurate manner; and in some cases failure to file them at all. A fourth violation accused the firm of inadequate supervision, and a fifth named Edward Wedbush specifically, alleging that he failed to fulfill his duties as president and supervise registration filings from August 2006 until July 2010." Finra noted that the firm has been repeatedly warned about its lapses, but still failed to remedy the situation. The decision noted that, "Mr. Wedbush knew of the firm's reporting issues," adding that "as president of the firm, Mr. Wedbush should have taken more steps to ensure that the firm addressed its problems, but he did not…" This is certainly embarrassing for the firm, which is in dire need of a compliance officer. You have to wonder about management given these sort of lapses. The board has to move aggressively now, as employees and customers undoubtedly begin to reassess their relationships with the company, which touts its "unparalleled dedication to your financial success." For more: Read more about: Wedbush Securities, FINRA Also Noted
SPOTLIGHT ON... Was that really Sandy Weill? On Bloomberg TV, Ace Greenberg, the beloved former CEO and chairman of Bear Stearns, said he didn't think it was really Sandy Weill who came out in favor of bank breakups. Greenberg said, "It was that guy Sacha Barry Cohen, or whatever his name is...Yeah, he was impersonating Sandy. I know Sandy." Regarding bank breakups, he also said: "That egg has been scrambled, so we can quit talking about it…In my opinion, they're not going to [break up big banks] here because it's gone too far. I think this is a huge country, we need big banks, we need banks that can make huge loans and I'm proud to be associated with a bank that can make the biggest loans in the world and they do. And that's great for the country and I think it's necessary to have banks that are that big." Article Company News: And Finally…Will you retire in poverty? Article
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Thursday, August 9, 2012
| 08.09.12 | Finra censures Wedbush Securities founder
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