Also Noted: Spotlight On... Goldman Sachs expands mentorship program News From the Fierce Network:
Today's Top News1. JPMorgan to be charged again over mortgages
For JPMorgan, the legal hits keep on coming. The latest is that federal prosecutors in California are expected to soon file charges against the bank for the fraudulent sale of mortgage securities. Prosecutors, according to Reuters, have been mulling both civil and criminal charges. The move may spark similar activity by prosecutors in other regions. Prosecutors in Philadelphia and in New Jersey are also working on cases, which may or may not come to fruition. One would think, however, that if California prosecutors move forward, it could grease the wheels. This compounds an already complex situation for JPMorgan Chase, which recently briefed its boards on the roughly $1 billion it has agreed to pay in settlements so far. That's sure to go higher soon, as a number of high profile cases remain outstanding. All told, the bank is under investigation by 7 federal agencies and a host of states, not to mention the U.K. As soon as it settles one -- as it did recently with federal regulators over London Whale-related losses -- others seem to crop up. The situation has deteriorated to the point that it is now considered in league with Bank of America and Goldman Sachs, which were also litigation magnets at various points post-crisis. The better analogy may be with tobacco companies, which suffered so much that litigation became the essence of their very existence for years. For more: Read more about: bad mortgages, mortgages 2. Chrysler's strange IPO filing
IPOs are usually regarded as good news -- emerging growth companies hitting a milestone, for example, or private equity portfolio companies returning to health. But every so often, an IPO comes along that isn't necessarily a cause for celebration. Such is the case with Chrysler. It has filed with the SEC to go public, but it has made clear that it would rather not take that step. But right now its hand is being forced by the UAW Retiree Medical Benefits Trust, which owns a 42 percent stake iChrysler's strange IPO filing. IPOs are usually regarded as good news -- emerging growth companies hitting a milestone, for example, or private equity portfolio companies returning to health. But every so often, an IPO comes along that isn't necessarily a cause for celebration. Such is the case with Chrysler. It has filed with the SEC to go public, but it has made clear that it would rather not take that step. But right now its hand is being forced by the UAW Retiree Medical Benefits Trust, which owns a 42 percent stake in the company. The trust exists to provide medical coverage to about 115,000 current and former employees and family members. The trust came by its large ownership stake by dint of the Obama Administration's task force that brokered a deal to ensure the survival of the once iconic car company in the wake of the financial crisis. The trust has the right to compel an IPO as a way to value their sharers. And that is precisely what seems to be going on. Chrysler CEO Sergio Marchionne prefers to take another route. He is hoping to engineer a deal for Fiat to buy the trust's stake in the company. Clearly, a private deal would aid his efforts to fully merge Fiat and Chrysler. The two sides unfortunately are far apart, with the trust maintaining that their shares are worth more than twice what Fiat has so far been willing to pay. Of course, an IPO would be one way to put the conflict to an objective test. You get the feeling that a lot is going on behind the scenes. It's still unclear if an offering is really likely. For more:
Read more about: IPO 3. Bank of America trial to get underway
I wouldn't exactly call this the trial of the century, but it will attract intense interest across the industry. Recall that Bank of America decided to take its chances in court to defend itself from charges that it defrauded GSEs. Barring a last minute settlement, jury selection will get underway early this week. Reuters notes that this is the first financial crisis case against a top bank over "defective mortgages." This issue has been percolating for ears. The amount of litigation, private and public, has been nothing short of phenomenal. And it will be almost refreshing to hear the issues distilled for a jury. The issues will be rather complex, but just like the recent trial of ex-Goldman Sachs executive Fabrice Tourre, the trial could nevertheless prove to be fascinating. In many ways, we will all be able to relive the crisis. Yikes. The government lawsuit "centers on a program called the 'High Speed Swim Lane' - also called 'HSSL' or 'Hustle' - that government lawyers say Countrywide initiated in 2007 as mortgage delinquency and default rates began to rise and Fannie and Freddie tightened underwriting guidelines." Countrywide, infamously acquired by Bank of America in the crisis, "pushed to streamline its loan origination business through the program, eliminating loan quality checkpoints and paying employees based only on the volume of loans they produced, according to the lawsuit. The result was "rampant instances of fraud and other serious loan defects," including in the mortgages sold to Fannie and Freddie, despite assurances Countrywide had tightened underwriting guidelines, the prosecution says. The bank says a lot of losses were caused by the economic downturn. It will be interesting. For more: Read more about: Bank of America, bad mortgages 4. Citigroup joins trend, pares mortgage jobs
Like other big consumer banks, Citigroup has been forced to lay off employees in its mortgage unit, to the tune of 1,000 jobs. Many of the Citi cuts are expected in Las Vegas. The total lost jobs amounts to about 8 percent of the 13,000 jobs in the unit, according to Dow Jones. The move comes after Wells Fargo made it known that it has cut 4,000 jobs. Bank of America has cut 2,100 jobs. The biggest cuts are expected over the short-term from JPMorgan Chase, which plans to eliminate up to 15,000 jobs in its mortgage unit by the end of 2014. Whew! The main culprit has been rising interest rates. Refinancings in particular were hot earlier this year. But then the markets started to fret about the beginning of tapering, and rates started to inch back up. That brought the momentum to a halt. But now that the Fed has decided not to embark on a tapering mission until later, one has to wonder if the market has been dealt a reprieve. In a bit of good news, applications (measured weekly) for home loans have bounced off their nearly five-year lows. The Mortgage Bankers Association announced its seasonally adjusted index of mortgage application activity soared 11.2 percent for the week ended Sept. 13. The news marks quite a reversal. Just the week before, applications fell 13.5 percent, taking the index to its lowest level since November 2008. For more:
Read more about: Citigroup, Layoffs 5. SAC Capital aims to settle all charges
It's hardly a surprise that Steven Cohen wants to settle the vast array of civil and criminal charges against his company. He'll pay whatever it takes, most likely, which will be a huge sum. Bloomberg Businessweek reports that the current discussions involve a $1 billion payment to the government. "One of the factors being considered in determining financial penalties is the desire to inflict monetary pain on Cohen personally without damaging other parties, such as his investors." But perhaps the biggest issue is whether Cohen will be allowed to continue in the industry. Running a massive company as a family office is one thing. But continuing on as a financial advisor able to accept client money to invest is quite another. For the prosecution, anything less than driving Cohen out of business would have to be considered a setback. This issue has cropped up before. As part of a previously filed civil proceeding, one possible penalty was a bar from the industry. One could argue that the government has already won, as nearly all of SAC Capital's limited partners have been forced out, leaving the firm a de facto family office. But going forward, Cohen would like nothing more than to settle all charges, even if it costs him a fortune, and get back to business. That's what he lives for. There would no doubt be plenty of investors ready to jump back into the ship with him. Would this be slap in the face of prosecutors, who are convinced Cohen runs a criminal enterprise? For more:
Read more about: insider trading, SAC Capital Also NotedSPOTLIGHT ON... Goldman Sachs expands mentorship program Goldman Sachs got a lot of PR mileage out of its 10,000 Small Businesses program, which was formed in 2009 to provide mentorship, management, lending and other services to small businesses. The program had been limited to just 15 cities, but the success of the program was such that the bank is now taking it nationwide. Small business owners from anywhere can now apply for courses to be taught at Babson College. Article Company News:
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Wednesday, September 25, 2013
| 09.25.13 | Chrysler's strange IPO filing
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