Royal Bank of Scotland could be poised to sue Goldman Sachs for hundreds of millions of dollars after the American investment bank paid out $550m (£358m) to settle fraud charges brought by the US Securities and Exchange Commission.Read More......
Goldman neither admitted nor denied the SEC's charges. However, as part of the settlement it did admit that it should have told investors in a controversial mortgage derivative known as Abacus that a hedge fund client which helped with the portfolio was betting on it failing.
RBS will receive $100m as part of the settlement but has the option of pursuing Goldman for more after the SEC said the case opened the door for civil claims. Another $150m will be paid to IKB Industrie Bank of Germany, which was the other big loser on the Abacus bond, with the rest going to the US government.
The banks, through the British Bankers' Association (BBA), intend to tell the chancellor that when the Bank of England pulls the plug on these liquidity programmes some £400bn will be withdrawn from the UK's banking system. The schemes were put in place to help get money flowing between banks after the credit crunch, but are due to end in 2012.Read More......
The banks have also calculated that demands by international banking regulators in Basle that they bolster their capital will require the UK's banking industry to hold an extra £600bn of capital that might otherwise have been deployed as loans to businesses or households.
The banks are drawing on research conducted by PricewaterhouseCoopers, some of which was used to appeal to G20 leaders ahead of last month's meeting to delay regulatory changes, in setting out their concerns to the chancellor. The research claims that two percentage points would be sliced off UK economic growth because of proposed regulations, driving the country into a double-dip recession.
Bankers in Europe will not be allowed to take home more than a third of their bonuses in cash from the start of next year, under planned new rules, a leading EU lawmaker told Reuters on Tuesday.Read More......
The new regime, which goes further than American rules agreed on last week, would be the first cap on how bankers are paid and a victory for EU lawmakers who have otherwise become bogged down in efforts to regulate banking.
"The bankers have shown that despite the crisis, they are not able to show self-restraint. This law will do it for them," said Arlene McCarthy, the Labour-party lawmaker who negotiated tougher rules on behalf of parliament with European countries.
The BIS has previously said that the ultimate calamity - payments systems freezing and cash machines running out of money - was only narrowly avoided when the US investment bank Lehman Brothers collapsed in 2008. A deeper economic slump was averted by nationalising other banks and making loans amounting to $10trn (£6,620bn).Read More......
But the BIS report implies that governments may not be able to repeat such a bailout in the event of a second crisis, which some commentators fear could be triggered by another economic shock.
Despite the warnings, the G20 nations significantly eased the pressure on banks this week by delaying the introduction of tougher rules on the amount of capital they must hold to deal with potential crises. The new regulations were planned for the end of this year but are not now due until 2012. Countries will also be given far more leeway inhow the rules must be applied. Critics say this amounts to a watering down of the reforms needed to stave off the sort of disaster the BIS fears.
The BIS alsowarned that the "fragility" of public and private balance sheets in the UK,France, Germany, Spain and the US "severely limits the scope for fiscal policy intervention if another bailout is needed". It added: "The side effects of the financial and macro-economic supportmeasures, combined with the unresolved vulnerabilities of the financial sector,threaten to short-circuit the recovery; the reforms necessary to improve the resilience of the financial system [have] yet to be completed.
Giant banks, while bracing for a wave of tougher regulation in Washington, will not have to face a new set of global rules on capital and liquidity anytime soon.Read More......
The world’s biggest economies have been developing rules that would require banks to hold more capital and be better equipped to absorb losses when financial conditions sour. But it became clear on Sunday at the meeting of the Group of 20 countries that it could be years before they take effect.
The rules are to be finished at the next G-20 leaders’ summit talks, in Seoul, South Korea, in November.
While the participants here said they aimed to adopt the rules by the end of 2012, they cautioned that the standards would be “phased in over a time frame that is consistent with sustained recovery and limits market disruption.”
A 20-hour marathon by members of a House-Senate conference committee to complete work on toughened financial regulations culminated at 5:39 a.m. Friday in agreements on the two most contentious portions of the financial regulatory overhaul and a host of other provisions. On a party-line vote, the House conferees voted 20-11 to approve the bill; the Senate conferees voted 7-5 to approve.I expect we'll get some other perspectives on the legislation from key players later today. Read More......
Members of the conference committee approved proposals to restrict trading by banks for their own benefit and requiring banks and their parent companies to segregate much of their derivatives activities into a separately capitalized subsidiary.
The agreements were reached after hours of negotiations, most of it behind closed doors and outside the public forum of the conference committee discussions. The approvals cleared the way for both houses of Congress to vote on the full financial regulatory bill next week.
The bill has been the subject of furious and expensive lobbying efforts by businesses and financial trade groups in recent months. While those efforts produced some specific exceptions to new regulations, by and large the bill’s financial regulations not only remained strong but in some cases gained strength as public outrage grew at the excesses that fueled the financial meltdown of 2008.
Bank of America and other U.S. banks may introduce new fees on basic services and eliminate free checking to replace revenue lost to new banking regulations, the Wall Street Journal said.Read More......
The move is expected to hurt retail clients who could be asked to pay new monthly maintenance fees on the most basic accounts that do not generate a lot of activity, the paper said.
To avoid a fee, customers will have to maintain certain account balances or frequently use other banking services, such as credit and debit cards, automated teller machines and online accounts, the Journal said.
More than 90 U.S. banks and thrifts missed making a May 17 payment to the U.S. government under its main bank bailout program, signaling a rising number of lenders are struggling to meet their obligations.Read More......
The statistics, compiled by SNL Financial from U.S. Treasury data, showed 91 banks and thrifts skipped the May dividend payment under the Troubled Asset Relief Program, or TARP. It was the first missed payment for 23 of the banks; for the others, it was at least their second miss.
The number of banks missing their TARP payments rose for the third straight quarter. In February, 74 banks deferred their payments; 55 deferred last November.
Risk-free "safe haven" accounts guaranteed by the government should be set up as part of a "profound reform of the banking system", a report says.Read More......
The cross-party Future of Banking Commission wants improvements in saver protection and restructuring of banks.
It was set up to put the interests of society at the heart of any reforms.
Other suggestions include the creation of an ethical culture in financial services, which would see banks stop paying commissions to front-line staff.
This is most definitely not a market outcome.Read More......
"Based on these considerations, coupled with studies suggesting severe limits to economies of scale in banking, it seems that mostly as a result of public policy -- and not the competitive marketplace -- ever larger banks have come to dominate the financial landscape. And, absent fundamental reform, they will continue to do so. As a result of public policy, big banks have become indestructible. And as a result of public policy, the industrial organization of banking is slanted toward bigness."
This is an unfair, nontransparent, and dangerous taxpayer subsidy at work.
"Big banks that took on high risks and generated unsustainable losses received a public benefit: TBTF ["too big to fail"] support. As a result, more conservative banks were denied the market share that would have been theirs if mismanaged big banks had been allowed to go out of business. In essence, conservative banks faced publicly backed competition."
Nancy Willmes paid cash for her Tuolumne home in 2001. So she was quite surprised when Bank of America send her a notice of default on the property in February.Read More......
"I honestly felt like Bank of America was trying to steal my property," Willmes said.
She contacted Bank of America to try to find out why the bank believed it could foreclose on property she had purchased outright.
Willmes has chain-of-ownership records, which show Bank of America had sold the property to Fannie Mae years earlier. Fannie Mae foreclosed on the previous owner, and Willmes purchased the property with cash from Fannie Mae.
But Willmes said Bank of America did not care about the documentation.
Bank of America and Citigroup incorrectly accounted for billions of dollars in debt over the past three years, according to a report from the Wall Street Journal.Read More......
The report highlights a form of corporate borrowing increasingly under scrutiny since the financial crisis began. The loans, known as "repos," or short-term repurchase agreements, allow banks to increase the amount of risk they can take in securities trading.
Both BofA and Citigroup disclosed in filings with the Securities and Exchange Commission that they have over the last three years accidentally classified some repos as sales when they should have been classified as borrowings, the newspaper reported. The amounts involved were small for the banks, though they totaled billions.
Leaked in advance of the fund's meeting this weekend, the blueprint emerged as the investment bank Goldman Sachs released better than expected first quarter revenues and admitted its bonus and pay pool had reached $5.5bn (£3.3bn) in the first three months of 2010.Read More......
The anticipated study called for a financial stability contribution (FSC), which should be paid by all financial institutions, not just banks, and used to bail out weak and failing firms. It would initially be paid at a flat rate but eventually be tailored to suit institutions' size and riskiness.
While banks had been braced for the FSC plan, they were caught unawares by the proposal for a financial activities tax (FAT), which would be based on the profits and the pay structure of the firms.
The Securities and Exchange Commission is examining whether any of the 19 largest U.S. banks are using an accounting trick that a bankruptcy examiner has said led to the collapse of Lehman Brothers, SEC Chairman Mary Schapiro said Tuesday.Read More......
Schapiro testified at a congressional hearing that the SEC is scrutinizing Lehman's use of the accounting move, known as Repo 105, that allowed it to mask its weakness before it failed. She said the agency has sent letters to the 19 banks, seeking information about any such transactions.
In its half-yearly health check on the financial sector, the Washington-based fund said there was an urgent need for international co-operation to tackle the systemic risks posed by banks deemed "too big to fail".Read More......
"The future financial regulatory reform agenda is still a work in progress, but will need to move forward with at least the main ingredients soon", the IMF said in its Global Financial Stability Review. "The window of opportunity for dealing with too-important-to-fail institutions may be closing and should not be squandered, all the more so because some of these institutions have become bigger and more dominant than before the crisis erupted.
"Policymakers need to give serious thought about what makes these institutions systemically important and how risks to the financial system can be mitigated."
State Treasurer Timothy Cahill said the state has removed Bank of America, Citi and Wells Fargo from a list of institutions approved for new state investments. Massachusetts, which is the only state to make such a move, is also beginning to divest $243 million in funds held at those banks, though the process could take up to six months.Read More......
"We want to bring some fairness into the issue," said Cahill, who is running for governor. "I don't think what we're asking is . . . out of line."
The announcement -- made at a raucous rally on Capitol Hill organized by the Metro Industrial Areas Foundation, a network of religious and citizen advocacy groups -- is part of a wave of consumer backlash over the banking industry's role in the worst financial crisis since the Great Depression. Congress has enacted sweeping credit card reforms that limit how and when issuers can raise rates and is in the midst of debating the creation of an agency dedicated to protecting consumer rights.
James G. Vanasek, who was WaMu's chief risk officer from 1999 to 2005, told a Senate committee that "at times borrowers were coached to fill out applications with overstated incomes or net worth adjusted to meet the minimum underwriting policy requirements."Read More......
Asked if he ever warned top executives of his concerns, Vanasek replied, "Constantly."
"I stood in front of thousands of senior Washington Mutual managers and executives at an annual management retreat in 2004 and countered the senior-executive speaker ahead of me on the program who was rallying the troops with the company's advertising tag line, 'The Power of Yes,' " he said.
"The implication of this statement was that Washington Mutual would find some way to make a loan. The tag line symbolized the management attitude about mortgage lending more clearly than anything that I can tell you," Vanasek said.
In return for obstructing Democratic legislation to hold Wall Street CEOs accountable, Republican lawmakers are pressing bankers for financial help heading into the November elections.But, you really don't need to listen to McConnell or any other GOPers rants against the reform bill. All you need to do is read Frank Luntz's memo to GOPers titled, The Language of Financial Reform, which can be found here.
FoxBusiness.com reported that Senate Minority Leader Mitch McConnell (R-KY) and National Republican Senatorial Committee chairman John Cornyn (R-TX) had a "private meeting" with "25 Wall Street executives, many of them hedge fund managers." After listening to "numerous complaints the executives have with the bill," the GOP lawmakers reportedly assured the bankers that Republicans would be their ally in the fight. After discussing likely Republican electoral gains this November, "McConnell and Cornyn made it clear they need Wall Street's help."
A day after the story broke about McConnell's "private meeting" with Wall Street bigwigs, he stormed onto the Senate floor to spout false attacks on Democratic efforts to hold those bankers accountable. The timing was no coincidence.
Luntz: If there is one thing we can all agree on, it’s that the bad decisions and harmful policies by Washington bureaucrats that in many ways led to the economic crash must never be repeated.According to Luntz, these are the "words to use" so expect to hear a lot of them from Republicans as the Senate begins the debate:
McConnell: But if there’s one thing Americans agree on when it comes to financial reform, it’s this: never again should taxpayers be expected to bail out Wall Street from its own mistakes. We cannot allow endless taxpayer-funded bailouts for big Wall Street banks.
Luntz: Taxpayer-funded bailouts reward bad behavior. Taxpayers should not be held responsible for the failure of big business any longer. If a business is going to fail, not matter how big, let it fail.
McConnell:The American people have been telling us for nearly two years that any solution must do one thing — it must put an end to taxpayer funded bailouts for Wall Street banks. This bill not only allows for taxpayer-funded bailouts of Wall Street banks; it institutionalizes them.
Luntz: “The legislation is filled with lobbyist loopholes that exclude certain wealthy, powerful industries from regulations.”
McConnell: So a new government board based in Washington would determine which institutions would qualify for special treatment — giving unaccountable bureaucrats and self-appointed wisemen in Washington even more power to protect, promote, or punish companies at whim.
“These favored firms would then have a funding advantage over their competitors, leading to outsized profits and the extension of enormous additional bailout risk for taxpayers even beyond the largest banks.
Luntz: Taxpayer-funded bailouts reward bad behavior. Taxpayers should not be held responsible for the failure of big business any longer. If a business is going to fail, not matter how big, let it fail.
McConnell: We need to end the worst abuses on Wall Street without forcing the taxpayer to pick up the tab. That’s what Republicans are fighting for in this debate. The taxpayers have paid a high enough price already. We’re not going to expose them to even more pain down the road. The way to solve this problem is to let the people who make the mistakes pay for them. We won’t solve this problem until the biggest banks are allowed to fail.”
ACCOUNTABILITY, TRANSPARENCY & OVERSIGHT, LOBBYIST LOOPHOLES, ENFORCEMENT OF CURRENT LAWS, BUREAUCRATS, WASTEFUL WASHINGTON, SPENDING, NEVER AGAIN, GOVERNMENT FAILURES AND INCOMPETENCE, LET’S HELP SMALL BUSINESSES, BIG BANK BAILOUT, BILL BLOATED BUREACRACY, FINE PRINT, UNINTENDED CONSEQUENCES, SPECIAL INTERESTS, HARD WORKING TAXPAYERS, ANOTHER WASHINGTON AGENCY, UNLIMITED REGUATORY POWERS, DEVIL IS IN THE DETAILS, RED TAPEThese are words meant to distort, obfuscate and confuse.
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