But for the Justice Department to truly start fresh, and fulfill their mission of stopping corporate fraud and preventing it from occurring again, they will have to compel JPMorgan to admit full liability for deliberately selling rotten mortgage securities. And here, federal agencies have revealed themselves as more interested in extracting public relations value by getting banks to admit something resembling wrongdoing, rather than forcing them to confess more widespread transgressions which would increase their legal exposure. Though agencies like the Securities and Exchange Commission (SEC) have announced “get-tough” procedures on extracting admissions of wrongdoings in financial fraud settlements, in practice they serve as nothing more than insincere apologies.
"What Happened to Goldman Sachs" is the second book in 12 months from a former employee that accuses the bank's management of not being sufficiently devout. Steven Mandis, who was an investment banker and proprietary trader from 1992 to 2004, is the latest to break the code of silence. Last year Greg Smith wrote a public resignation letter in the New York Times in which he complained that the company had a "toxic" culture and referred to its clients as "muppets."
It defies reason that we continue today to hear about major bank scandals, more than five years after the financial crisis. But if anything, the revelations are growing larger and more complex. Which is why I am now making a modest proposal to force them to come clean. The way that countries enveloped in patterns of interminable abuse often deal with the aftermath is through something called a Truth and Reconciliation Commission. We need one for global finance.
Nearly half of all home purchases in the month of September were paid for in cold hard cash, as tight lending conditions continue edge out traditional buyers and investors continue to scoop up inventory. All-cash deals accounted for 49% of sales across the U.S., according to a new report from RealtyTrac. That’s up from 40% in August and 30% in September of 2012.
But the most significant thing about JPMorgan's deal with the Department of Justice may be what it doesn't do. It doesn't resolve the ongoing federal criminal investigations of the bank's conduct in the residential mortgage securities business during the run-up to the 2008 financial crisis. That investigation is being handled by federal prosecutors in Sacramento. The money penalty may sound big, and a series of earlier big settlements produced the firm's first quarterly loss since Jamie Dimon took over as CEO at the end of 2006. (He became chairman a year later.) But to an enterprise the size of JPMorgan it's still chump change. The people who pay it are not the executives who managed the bank to this pass, but the shareholders. Until the responsible executives are held personally accountable--including Dimon--no financial penalty will have a deterrent effect.
While the media is all agog over the prospect of the “biggest settlement evah” with a single company, concentration has risen greatly in a lot of industries, particularly banking, so bigger companies and even mild inflation means settlements should get larger over time. So size is not a metric of accomplishment. The question is what was the actual liability and is the settlement an adequate remedy? We have the same problem here as with the mortgage settlement: save for a couple of types of bad conduct, it looks as if not enough discovery was done to know the extent of the conduct and hence what an appropriate remedy would be.
The possible accord with the agency, which originally asked for $6 billion from the firm, could be included in a broader deal the bank is seeking with federal and state authorities, according to a different person briefed on the settlement talks. If JPMorgan can’t reach a global settlement on pending mortgage bond matters, it may instead seek to settle claims such as the FHFA’s individually, said the person. Both people asked not to be named because the talks are private. JPMorgan is grappling with investigations in the U.S. and abroad, including probes into a trading loss last year of more than $6.2 billion and its hiring practices in Asia. The bank has tapped $8 billion of $28 billion in reserves set aside since 2010 to cover its legal costs.
On March 11, 2008, Christopher Cox, former chairman of the Securities and Exchange Commission, said he was comfortable with the amount of capital that Bear Stearns and the other publicly traded Wall Street investment banks had on hand. Days later, Bear was gone, becoming the first investment bank to disappear in 2008 under the watch of Cox’s SEC. By the end of the year, all five banks supervised by the SEC were either bankrupt, bought or converted to bank holding companies.
The problem, as these small financial institutions are just beginning to realize, is that the MBS instruments that were supposedly so safe, are not safe and may not be worth anything at all — especially if the trust that issued them was never funded by the investment bank who did the underwriting and sales of the MBS to relatively unsophisticated community banks and credit unions. In a word, these small institutions were sitting ducks and probably, knowing Wall Street the way I do, were lured into the most toxic of the “bonds.”
SunTrust has agreed in principle to pay a $468 million fine and offer $500 million worth of consumer relief as part of a settlement with the Department of Justice and the Department of Housing and Urban Development. SunTrust will pay housing finance giant Fannie Mae $228 million to repurchase loans that don't meet the government-supported firm's criteria. The Atlanta-based lender also reached a settlement with the Federal Reserve, the penalties for which will be subsumed by the DOJ deal.
Ally Financial Inc. (ALLY), the auto and home lender rescued by the U.S. government, said it reached a settlement tied to disputed mortgages with two federal agencies. The agreement with the Federal Housing Finance Agency and the Federal Deposit Insurance Corp. will result in a $170 million third-quarter charge, Detroit-based Ally said today in a statement. The accord ends all pending litigation and the agencies won’t object to the reorganization plan for the company’s money-losing Residential Capital mortgage lender, according to the statement.
The first thing you need to know about JPMorgan Chase’s long-awaited $13 billion deal with the Justice Department — to settle a number of civil lawsuits related to the fraudulent sale of mortgage-backed securities — is that it’s not a $13 billion deal. $4 billion of this figure, over 30 percent, was announced almost a month ago as the conclusion of a lawsuit between JPMorgan and the Federal Housing Finance Agency. Attorney General Eric Holder, wanting to stand at a podium and give out a really big settlement number, simply folded the FHFA settlement into the Justice Department’s.
Blackstone Group LP (BX), builder of the biggest single-family rental home business in the U.S., is using its experience to replicate the model in Spain, where property prices have dropped 40 percent.The world’s largest private-equity firm, which has spent $7.5 billion buying 40,000 homes in the U.S., agreed in July to purchase 18 apartment blocks from the city of Madrid for 125.5 million euros ($173 million). The firm is bidding against investors including Goldman Sachs Group Inc. for another 1,458 housing units being sold by Madrid’s regional government, according to three people with knowledge of the auction, who asked not to be identified because the information is private.
The nation's four largest banks are holding $57 billion of seriously delinquent loans that they've been slow to move into foreclosure over concerns that the Federal Housing Administration, the government mortgage insurer, will refuse to cover the losses and hit them with damages, according to industry sources. The banks — Bank of America (BAC), Citigroup (NYSE:C), JPMorgan Chase (JPM), and Wells Fargo (WFC) — have assured investors in the footnotes of quarterly filings that the loans are government-insured and therefore pose no threat to their bottom lines....
The toll of JPMorgan Chase's relentless lawbreaking under Chairman and CEO Jamie Dimon may finally be getting real for shareholders.According to the bank's third-quarter financial results, released Friday morning, its litigation expenses of more than $9 billion (pretax) more than wiped out its third-quarter profits -- and then some. The bank booked a loss of $380 million. In the year-earlier quarter it made a profit of $5.7 billion. More hits from legal and regulatory problems are coming. Federal regulators are seeking a settlement over JPM's misdeeds in the mortgage market that could be as high as $11 billion.
The number of initial foreclosure notices in Nevada spiked just before Oct. 1, the day a state law that adds more steps for lenders seeking to foreclose took effect.Tracking website LVDefault.com counted more than 3,700 notices of default in Clark County in September, more than triple the 1,149 the site counted in August, according to the Las Vegas Review-Journal. Notices reached a one-day high Sept. 30, when they hit 934, and then dropped to 25 on Tuesday, when the Homeowner’s Bill of Rights was enacted.
Blackstone Group LP (BX) raised more than $4 billion in 2009 to buy European property assets anticipating that cash-strapped banks would be forced to sell as the region’s debt crisis worsened. Almost all of it sat idle for two years. “Asset sales by banks have absolutely accelerated,” said David Abrams, a senior portfolio manager who oversees 3.9 billion euros in funds to invest in European loans for New York-based private-equity firm Apollo Global Management LLC. (APO) “We’re five years into the crisis, but it’s just the beginning of the disposition process.”
Just one day before a law kicked in making it easier to avoid foreclosure, banks unleashed a torrent of filings to seize homes from delinquent Las Vegas borrowers. A total of 934 notices of default were filed Monday in Clark County, the largest one-day total ever for the region, according to LV Default, a Las Vegas research firm. By comparison, 1,419 default notices were filed statewide in August, an average of 46 per day, according to RealtyTrac data. Notices of default start the foreclosure process.
A mortgage preapproval is a written commitment lenders give to buyers that states the maximum size home loan they can get as well as the likely interest rate. Buyers rely on preapprovals to make sure they’re shopping for a home that’s in their price range. But new federal data suggests lenders are scaling back on preapprovals.
More than a year after five large banks agreed to pay $25 billion and improve their foreclosure practices, the lenders are facing fresh criticism for failing to live up to their end of the bargain. The overseers of the February 2012 settlement on Wednesday rolled out a new set of rules designed to address what regulators and consumer advocates say are persistent problems in banks' handling of borrowers' loan-modificat