World's biggest banks fined nearly $6 billion

NEW YORK/LONDON - Four major banks pleaded guilty on Wednesday to trying to manipulate foreign exchange rates and, with two others, were fined nearly $6 billion in another settlement in a global probe into the $5 trillion-a-day market.

Citigroup Inc, JPMorgan Chase & Co, Barclays Plc, UBS AG and Royal Bank of Scotland Plc were accused by U.S. and UK officials of brazenly cheating clients to boost their own profits using invitation-only chat rooms and coded language to coordinate their trades.

All but UBS pleaded guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the FX spot market. UBS pleaded guilty to a different charge. Bank of America Corp was fined but avoided a guilty plea over the actions of its traders in chatrooms.

"The penalty all these banks will now pay is fitting, considering the long-running and egregious nature of their anticompetitive conduct," said U.S. Attorney General Loretta Lynch at a news conference in Washington.

The misconduct occurred until 2013, after regulators started punishing banks for rigging the London interbank offered rate (Libor), a global benchmark, and banks had pledged to overhaul their corporate culture and bolster compliance.

In total, authorities in the United States and Europe have fined seven banks over $10 billion for failing to stop traders from trying to manipulate foreign exchange rates, which are used daily by millions of people from trillion-dollar investment houses to tourists buying foreign currencies on vacation.

The investigations are far from over. Prosecutors could bring cases against individuals, using the banks' cooperation pledged as part of their agreements. Probes by federal and state authorities are ongoing over how banks used electronic forex trading to favor their own interests at the expense of clients.

The settlements on Wednesday stood out in part because the U.S. Department of Justice forced Citigroup's main banking unit Citicorp, and the parents of JPMorgan, Barclays and Royal Bank of Scotland to plead guilty to U.S. criminal charges.

It was the first time in decades that the parent or main banking unit of a major American financial institution pleaded guilty to criminal charges.

Until recently, U.S. authorities rarely sought criminal convictions against the parents of global financial institutions, instead settling with smaller foreign subsidiaries. That made it easier for the government and the banks to control any fallout on the financial system and bank customers.

Banks involved in the plea deals have been negotiating regulatory exemptions to avoid serious business disruptions that could be triggered by the pleas.

The U.S. Securities and Exchange Commission has granted waivers to JPMorgan and the other banks that pleaded guilty, allowing them to continue their usual securities business.

With prosecutors and the banks working out ways for the institutions to keep doing business, analysts worried that convictions would become more routine and costly for banks.

"The broader problem is that this now sets the stage for the Justice Department to try to criminally prosecute banks for all sorts of transgressions," said Jaret Seiberg, an analyst at Guggenheim Securities.

Lawyers said the guilty pleas would make it easier for pension funds and investment managers who have regular currency dealings with banks to sue them for losses on those trades.

"There is already a lot of work going on behind the scenes assessing how claims could be brought forward and those potential claimants will be looking to today's announcement for evidence to support their analysis," said Simon Hart, banking litigation partner at London law firm RPC.

CITI BEHAVIOR "EMBARRASSMENT" - CEO

Citicorp will pay $925 million, the highest criminal fine, as well as $342 million to the U.S. Federal Reserve.

Its traders participated in the conspiracy from as early as December 2007 until at least January 2013, according to the plea agreement.

Traders at Citi, JPMorgan and other banks were part of a group known as "The Cartel" or "The Mafia," participating in almost daily conversations in an exclusive chat room and coordinating trades and otherwise fixing rates.

The bank's behavior was "an embarrassment," Citigroup Chief Executive Officer Mike Corbat said in a memo to employees, which was seen by Reuters.

Corbat said an internal investigation should conclude shortly. So far nine people have been fired.

University of Virginia law school professor Brandon Garrett said the last case comparable to Citi or JPMorgan, involving a major U.S. financial institution pleading guilty to criminal charges in the United States was Drexel Burnham Lambert in 1989.

JPMorgan's share of the criminal fine was $550 million, based on its involved from July 2010 until January 2013. It also agreed to pay the Federal Reserve $342 million.

JPMorgan Chase said the conduct underlying the antitrust charge was "principally attributable to a single trader" who has been fired.

In New York, shares in JP Morgan and Citigroup were down 0.7 percent and 0.8 percent, respectively.

"IF YOU AIN'T CHEATING, YOU AIN'T TRYING"

Britain's Barclays was fined a record $2.4 billion. Its staff continued to engage in misleading sales practices despite a pledge by CEO Antony Jenkins to overhaul the bank's high-risk, high-reward culture.

Barclays' sales staff would offer clients a different price to the one offered by the bank's traders, known as a "mark-up" to boost profits. Generating mark-ups was a high priority for sales managers, with one employee noting, "If you ain't cheating, you ain't trying."

Barclays fired four traders in the last month. New York state's banking regulator Benjamin Lawsky ordered the bank to fire another four who had been suspended or placed on paid leave.

Barclays had set aside $3.2 billion to cover any forex-related settlement. Shares in the bank rose more than 3 percent to an 18-month high as investors welcomed the removal of uncertainty over the forex scandal.

UBS was the first firm to report the misconduct to U.S. officials. It pleaded guilty and will pay a $203 million criminal penalty for breaching a non-prosecution agreement over manipulation of the Libor benchmark interest rate, in part based on its forex practices.

UBS, Switzerland's largest bank, will also pay $342 million to the Federal Reserve over attempted manipulation of forex rates.

The Royal Bank of Scotland will pay a criminal fine of $395 million, and a $274 million penalty to the Fed.

The U.S. central bank fined six banks for unsafe and unsound practices in the foreign exchange markets, including a $205 million fine for Bank of America.

UBS's penalty was lower than expected, and helped its shares rise to their highest in six-and-a-half years.

The global investigation into manipulation of foreign exchange rates has put the largely unregulated forex market on a tighter leash and accelerated a push to automate trading. Authorities in South Africa announced this week they were opening their own probe.

source: www.abs-cbnnews.com

Why does Merrill Lynch have a wellness guru for brokers?

NEW YORK - At a retreat for Merrill Lynch financial advisers in a luxury Orlando hotel last month, a group of several dozen men and women in business attire swung their arms back and forth over their heads to Kid Rock's "All Summer Long" to get their circulation going.

The mild aerobics were part of a three-day event orchestrated by Chris Johnson, a wellness guru who has gained influence under John Thiel's leadership of Bank of America's Merrill Lynch wealth management business.

At Thiel's instruction, Johnson has for the last year been traveling the country teaching Merrill Lynch advisers how to lead healthier lives. He urges brokers - and, in some cases, their family members and clients - to include liver oil, wheatgrass, flax, chia and a type of algae called spirulina in their diets, and to take relaxing baths with Epsom salt to unwind.

"They're starting to go down the medication path. They have acid reflux. They don't sleep. They feel crummy. They're drinking too much. They gain too much weight," Johnson said of the Merrill employees who most need his advice. With that lifestyle, he said, "they're not going to be a good adviser. If I'm coming to my adviser, I want them to be healthy."

Thiel did not respond to requests for comment. David Walker, a spokesman for Bank of America's wealth management business, said that it was important for Merrill to focus on the health and wellness of its employees.

"We care that our advisers are taking care of themselves so they have the energy and capacity to best serve their clients and be present for their families," he said. "Any company that is not focused on wellness is behind. All of the most admired, most progressive companies with the most highly engaged employees are focused in this area."

He declined to comment on Johnson's description of health problems suffered by some members of Merrill's workforce.

NAP TIME

Known as the "thundering herd" because of their bull logo and their large numbers, Merrill's army of 14,000 brokers are not the only money-management employees being urged to take better care of themselves. Firms across Wall Street have been encouraging employees to eat right, sleep well and exercise. While Merrill is Johnson's biggest client, he has also done events with advisers at Morgan Stanley, Wells Fargo & Co and Raymond James Financial Inc.

Still, some Merrill employees have told Reuters in recent weeks that Thiel is so enthusiastic about healthy living that it has caused some hard-charging, long-time advisers to bristle.

These employees have been annoyed to receive advice about health and wellness from Thiel when they would prefer to discuss business concerns with him, several sources said.

One Bank of America executive said brokers have complained about tofu burgers served at a retreat for top producers. Another cited a message recently sent to some advisers encouraging them to take an afternoon nap to increase productivity.

Thiel has brought in another expert, Tony Schwartz, CEO and founder of The Energy Project, who has been advising Merrill employees to take a short afternoon nap to restore their energy.

Schwartz, who started working with Merrill after meeting Thiel at a conference 14 months ago, gives that advice as part of a broader curriculum aimed at pushing Merrill advisers to get the most out of their days. He said he has not convinced Merrill to implement a nap program, but that productivity increases dramatically for those who take his advice on resting, deep breathing and eating right, among other things.

"What makes Merrill Lynch special is that John is an unusually open and interested senior leader to champion this kind of work," said Schwartz. "When there is a leader like that, the power of the work is much higher."

BONGO DRUMS

Complaints by Merrill employees who are irritated by Thiel's wellness campaign come at a time when a number of high-profile brokers have left, causing some concern among top Bank of America Corp executives. Reuters found no evidence of a direct link between the focus on health and wellness and the departures.

The health advice has gone over well with some advisers who are happy their boss is encouraging them to take better care of themselves.

One high-producing broker who spoke on the condition of anonymity said "telling employees to stay fit mentally and physically - that's responsible leadership" and called Thiel the best manager he has ever had in over three decades with the firm.

In a testimonial on Johnson's website, Scott Schropp, a vice president in Merrill's wealth management business, wrote that his clients like being included in wellness events. "They come in with preconceived notions of what this program may be like and leave the program with excitement, determination and a fresh take on 'healthy living'," he wrote.

Thiel, a former American football player at college, met Johnson at an event in Arizona some time ago. Soon after, he went to Johnson's home in rural Michigan for a one-on-one training session. At such events, Johnson teaches corporate executives how to sleep better, shop for "super foods" and cook things like healthy chili. (Johnson declined to comment on Thiel's culinary talent.)

People who know Thiel say he has wholeheartedly embraced the New Age lifestyle that Johnson, Schwartz and another guru called davidji advocate. Davidji (pronounced david-gee and spelled with a lowercase "d") describes himself as a former banker on his web site, and specializes in wellness of the mind. Davidji said he was not immediately available for an interview.

People familiar with his Merrill training sessions say they feature bongo drum playing and meditation. A video on his web site - http://www.davidji.com/ - shows davidji sitting on the beach with his pet dog, named peaches, whom he says he meditates with every day.

"The next time you sit down to meditate, if your pet - your cat, your dog, your lizard, your parrot - feels like meditating with you, create a space," he says. "Close your eyes. Drift into stillness and silence, and you'll notice that your pet gravitates toward you."

Johnson said Thiel's embrace of health and wellness helps balance out his more rugged work on Wall Street.

"He's got a big job and wanted to have energy and stamina," Johnson said "The corporate world beats you up."

source: www.abs-cbnnews.com

Three Unique Ways to Pay Your Mortgage

If you’re a homeowner, you know the importance of making regular monthly payments. This protects your credit score, and helps maintain a good relationship with your mortgage lender. However, if you start to experience payment problems, or if you want to pay off your mortgage sooner, options are available to you. The truth is, there are many creative, unique ways to pay your mortgage — and most ways are financially beneficial. 

1. Rent a room in your home as office space
Maybe you’re not comfortable with the idea of getting a roommate. However, if you have free space or an empty room on the property, consider renting this space as office space.

Some home-based business owners seek a separate office space for work, especially if they have young children at home and find that it’s too difficult to concentrate. They might not be able to afford space in an office building, but they may have resources to rent space in a converted garage, a finished basement or a detached room on your property that’s suitable for an office.

You can rent your extra space on a monthly basis, and then use funds to help cover your mortgage payment if you’re having difficulties. Since this money counts as rental income, set aside about 20 percent to 25 percent for income taxes.
 
2. Use a credit card to pay your mortgage

The idea of using a credit card to pay your mortgage may sound scary, but this method has its benefits. It’s an opportunity to accumulate credit card reward points faster.

If you have a credit card with a rewards program, then you probably know that you can earn miles or points for every dollar you spend. Once you’ve earned enough points, you can redeem these for flights, hotels, gift cards, merchandise, cash or statement credit. However, to benefit the most from a rewards program, you have to use your card often.

Some banks do not accept credit card payments, such as Bank of America. So, speak with your mortgage lender to see if this is an option. If you use a credit card to pay your mortgage, make sure you immediately pay off this charge. Don’t charge your mortgage and then carry the balance from month-to-month.

3. Pay half your mortgage every two weeks

You might be unable to afford a 15-year or a 20-year mortgage. Even so, if you’re adamant about paying off your home sooner, consider a bi-weekly payment schedule.

Speak with your lender to see if they’ll accept bi-weekly payments. If so, you’ll pay one half of your mortgage payment every two weeks. This is the equivalent of one extra mortgage payment a year — which may not appear to make a difference. However, one extra mortgage payment a year reduces your total interest charges and reduces your mortgage term by seven or eight years.

Bottom Line:
Getting creative with your mortgage is one of the fastest ways to eliminate the debt sooner. And if you’re having payment problems, creativity can help you drum up cash and keep your mortgage loan in good standing.

source: totalmortgage.com

Some Homeowners Will Receive Permanent 2% Interest Rates Thanks to Bank of America Mortgage Settlement

Today, Bank of America reached a historic agreement with the U.S. Department of Justice to pay the largest settlement in U.S. history related to toxic mortgage loans it knowingly sold to investors.

In short, the company admitted that it misrepresented the quality of the loans it packaged and sold to investors via its Merrill Lynch and Countrywide Mortgage brands, as well as through Bank of America.

Additionally, the bank has taken responsibility for its faulty loan origination practices that resulted in Fannie Mae, Freddie Mac, and the FHA taking on countless bad loans that eventually hurt American taxpayers (not to mention homeowners).

The bank also settled a case with the SEC in which it knowingly “shifted the risk” of wholesale loans originated by mortgage brokers that were described internally as “toxic waste.”



Simply put, the bank and its affiliates made trillions of very bad loans that they tried to pawn off, and now they must pay.

Speaking of payment, the company has agreed to pay $9.65 billion in cash, including $5.02 billion in civil monetary penalty and $4.63 billion in compensatory remediation payments.

Additionally, BofA will provide $7 billion in consumer relief, which will come in the form of loan modifications, including principal balance reductions, forbearance, and second mortgage extinguishments.


 How Does a 2% Interest Rate Sound?

Most significantly, some lucky homeowners will receive principal reductions that lower their loan-to-value ratio to 75%. But that’s not all. They’ll also receive a 2% interest rate on their mortgage that is fixed for the life of the loan.

The Department of Justice provided an example where a homeowner with a $250,000 mortgage balance would see it fall to just $112,000 on a property worth only $150,000 today.

That’s a pretty good deal, regardless of what may have happened to the homeowner.

Let’s be honest, a lot of borrowers knew they weren’t providing proper income documentation either, or that their home appraisal was a tad bit steep. But I’m sure they looked the other way, just like everyone else at the time.

The DoJ also negotiated a tax break for those who receive relief under the settlement assuming the Mortgage Forgiveness Debt Relief Act isn’t extended.

They created a so-called 25/25 Tax Relief Fund where 25% of the value of the relief will be made available to offset any tax liability, up to $25,000. But the amount of money set aside is limited, so not all homeowners will be able to take advantage.

During his speech, Associate Attorney General Tony West called on Congress to extend the Act so homeowners won’t be on the hook for phantom income.

Bank of America will also be required to provide more low- to moderate-income mortgage originations, expand affordable housing initiatives, and provide community reinvestment for neighborhoods experiencing or at risk or urban blight.

The settlement is expected to reduce the company’s third quarter pre-tax earnings by $5.3 billion and reduce earnings per share by 43 cents.

Obviously the stock was up on the news, because that’s how the stock market works. But really, investors are probably happy to see the bank move forward from the mortgage mess once and for all.

And its current price of under $16 a share is still just a fraction of what it was during the previous housing boom when shares traded in the low $50 range.

source: thetruthaboutmortgage.com

Home Prices Are Expected to Peak in 2016, Then Do Pretty Much Nothing Through 2022

Are you still looking to buy a place before time runs out? Don’t want to miss out on the next big housing boom?

Well, it might already be too late, assuming you’re looking to turn a big profit, or any profit at all.

A new report from two bond strategists at Bank of America Merrill Lynch, whose merger was a direct result of the latest financial crisis, predicts little upside from current levels.

In fact, after a couple years of modest growth, home prices are basically expected to go nowhere for the foreseeable future.

Home Prices Are Nearly 10% Overvalued Today

The pair, Chris Flanagan and Gregory Fitter, contends that U.S. home prices are now 9.7% overvalued relative to household incomes, using the S&P/Case-Shiller Home Price Index as the measuring stick.

Simply put, incomes haven’t done a whole lot lately, but home prices (as we all know) have surged since the crisis abated.

In fact, even after chalking double-digit gains from 2012 to 2013, asking prices in many hot markets are still more than 10% above year-ago levels.

According to their math, home prices were about six percent below fair value at the end of 2011. So it looks as if we overshot the mark once more.

Unfortunately, after stellar gains like that it’s pretty difficult to keep the momentum going, even with limited supply and low mortgage rates available.

After all, affordability has its limits, and it’s finally being tested after a few silly good years.


Not Much to Look Forward to Now

While they noted that their outlook is “well out of consensus,” Flanagan and Fitter only see home prices rising another three percent annually each year for the next two years.

That would push home prices to a level that is around 12% above fair value as determined by household income, compared to six percent below fair value when home prices bottomed in late 2011.

Then from 2016 to 2022, their model forecasts modest declines followed by an eventual recovery resulting in flat net annualized home price gains over that period.

In other words, after this current seller’s market spits out a few more nominal gains, home prices are going to settle into a range and stay there. Of course, that’s not necessarily a bad thing.

In fact, the pair thinks it’s a “fantastic outcome” and just what policymakers had in mind when establishing new regulatory framework and lending laws.

Their research echoes that of Trulia’s Bubble Watch, which revealed that home prices were still about three percent undervalued, but expected to be just right by the end of the year, or early next year.

The takeaway here is that no one wants another housing bubble just years after the worst financial crisis in recent history.

So yes, it’s a bummer that home prices aren’t going to continue flying higher and higher, but it should mean a more sustainable market for years to come.

Of course, these are all just assumptions and predictions. Economists are often wrong (and typically never right), so taking their word for it is a bit of a stretch as well.

Additionally, I doubt any model predicted home prices would rise as much as they did during the last boom, so assuming they won’t deviate from “normal levels” this time around is also hard to swallow.

Lastly, remember that this is the national picture, and that home prices can and will vary tremendously from metro to metro.

I’m just curious what will happen after 2022…

source: thetruthaboutmortgage.com

Bank of America to Pay $500M to Settle Investor Lawsuit

NEW YORK -- As soon as Bank of America puts one mortgage-related lawsuit behind it, another always seems to rear its head.

The bank announced Wednesday that it would pay $500 million to settle a class-action lawsuit led by pension funds and other investors who say they were misled about $350 billion worth of mortgage-backed investments they bought from Countrywide, a mortgage lender Bank of America Corp. (BAC) bought in 2008. The bank portrayed the settlement as good news because it resolved the bulk of securities claims related to residential mortgage-backed securities.

But financial analysts, in a conference call to discuss the bank's first-quarter results, peppered bank executives with questions about another pending settlement. Bank of America is still waiting for court approval for a similar settlement it made with Bank of New York Mellon Corp. (BNY) almost two years ago. If it doesn't get the go-ahead, Bank of America could have to spend more to resolve the claims.

Bank of America's stock slumped nearly 5 percent to $11.70. While its earnings were just shy of what analysts expected, it was the bank's latest liability from mortgage lawsuits that "seems to be the big question for investors," banking analyst Meredith Whitney said on the conference call.

Chief Financial Officer Bruce Thompson told analysts that the bank felt "very good" about settling the pension funds' lawsuit. But he acknowledged the uncertainty of potential lawsuits and declined to predict how much the bank might have to spend on litigation in the future.

"I don't think anyone is going to ever, at this point, declare complete victory," Thompson said, though he added that the bank was moving through "this pipeline of items" in "a pretty meaningful way."

 Bank of America's current troubles are the latest fallout from its decision to buy Countrywide, which was known for making exotic mortgages that later went bad as borrowers defaulted. The purchase catapulted the bank into a spot at the top of the nation's mortgage scene, but it's been an albatross ever since, bringing lawsuits, investigations and quarterly losses. Hard-to-predict legal expenses have been a bane to Bank of America and throughout the banking industry.

It was just last quarter that two mortgage-related settlements overshadowed the bank's results. In early January, the bank took a charge of $2.7 billion to settle a dispute with Fannie Mae, which forced Bank of America to buy back mortgages it had sold to the agency before the crisis. It also took a $1.1 billion charge to settle government accusations that it and other banks had wrongfully foreclosed on some homeowners. The charges sent fourth-quarter earnings down sharply.

Brian Moynihan has been wading through issues dating back to the financial crisis ever since he became CEO in 2010, and would very much like to put them behind him. Asked on the conference call about a report that he was pushing for revenue growth, Moynihan replied that it wasn't a new strategy, just a bigger focus as "legacy" issues get resolved.

"As the other issues go away," Moynihan said, "this is what the team has to be focused on."

More on the bank's results:

• The new settlement: Bank of America is paying $500 million to settle a lawsuit brought by the Maine state retirement system and other investors. They bought mortgages that Countrywide had made and bundled together into securities. The investors say they were misled about the quality of the loans. The settlement still needs court approval.
• The pending settlement: Bank of America agreed in 2011 to pay $8.5 billion to settle claims brought by Bank of New York Mellon, which made similar accusations about mortgage-backed investments owned by institutional investors for which it acted as trustee. That settlement also still needs court approval, and if the judge doesn't accept it, Bank of America could be exposed to more potential claims and litigation expenses.
• What happened this quarter: Results from the different business units were mixed. "We feel like we made a lot of progress this quarter," Thompson said on a call with reporters, "and there's a lot more to do."

Charge-offs, or loans the bank doesn't expect to collect on, were down, and the bank set aside less money for loans that might go bad. The unit that handles troubled mortgages continued to shrink. Revenue and profits were up in wealth management as clients shifted more assets to Bank of America. Commercial loans were up.

The investment bank advised more companies on deals and underwrote more bond offerings, but it had to set aside more money for potential loan losses. Revenue from trading bonds and commodities slipped. Consumer loans also slipped.

• The mortgage market: The bank funded $25 billion in home loans, up 56 percent from a year ago. Bank of America has been changing the way it thinks about mortgages. It's been adding workers to drum up new business, but instead of cranking out as many mortgages as possible -- a common strategy before the financial crisis -- now it's focused on making mortgage loans to people who are already customers. It has stopped buying mortgages made by other lenders.

The overall mortgage unit, however, continued to lose money. The bank sold some of its rights to service mortgages, which crimped revenue, and the profit margins for making mortgages are lower across the industry. Legal expenses also weighed it down.

• Cost cutting: Bank of America has been focused on slashing expenses. It trimmed nearly 16,000 jobs over the year, or nearly 6 percent of its workforce, reducing its headcount to 263,000.

Bank of America has closed 260 branches, or 5 percent of its total, leaving it with roughly 5,400 locations. Moynihan said the bank is responding to the preferences of its customers, many of whom are comfortable banking via cell phone and don't need the branch as often.

• By the numbers: The bank reported earnings after paying preferred dividends of $2.3 billion in the first quarter, soaring from the $328 million it earned a year ago. However, the 2012 results were also obscured by an accounting rule that forced the bank to record a charge because the value of its debt had risen.

Per-share earnings amounted to 20 cents. That missed the expectations of analysts polled by FactSet, who had expected 22 cents a share.

Revenue was $23.9 billion after stripping out an accounting charge. That was down 8 percent from last year, but it beat analysts' expectations of $23.3 billion.

source: dailyfinance.com

$10-billion settlement of foreclosure abuse cases said to be near

Banks and regulators worked late Sunday to finalize a nearly $10-billion settlement that would halt a much-maligned program to review foreclosures from the height of the housing crisis, according to four people familiar with the talks.

At least 14 banks are involved. Since the reviews began in late 2011, the banks have paid $1.5 billion to consultants examining foreclosure records -- but not a penny to aggrieved borrowers. Both bankers and regulators found that result untenable, officials have said.

The new agreement could be announced as early as Monday morning by the Office of the Comptroller of the Currency, the arm of the Treasury Department that regulates banks with national charters, four people familiar with the negotiations said.

The people spoke on condition of anonymity because the discussions were sensitive and incomplete. The principal negotiators included six big banks that provide customer service on 90% of all U.S. home loans: Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., U.S. Bancorp and PNC Financial Services.

Regulators were presenting the deal late Sunday to eight smaller mortgage servicers that had agreed to the reviews in 2011 but were less involved in the settlement negotiations.

The regulators were prepared to announce a settlement even if some of the smaller banks declined to accept it, three of the people with knowledge of the talks said, in part because of pressure from bankers wanting to report a settlement when they announced fourth-quarter financial results.

Other efforts to help troubled borrowers and address foreclosure abuses include a $26-billion settlement last February among five giant banks and a coalition of federal agencies and state attorneys general.

The reviews of individual cases were distinctive, however, because they represented a chance to gauge the extent of the legal shortcuts, lost paperwork and abusive fees that had prompted widespread complaints.

Consumer advocates fretted that abandoning that process could mean there would be no such definitive accounting of the foreclosure mess. And they called for detailed disclosure of how the consultants had conducted reviews and how the nearly $10 billion would be spent.

“Unlike the AG settlement, which had a huge amount of scrutiny, there’s been a real lack of transparency in the foreclosure reviews and this settlement,” said Paul Leonard, California director of the Center for Responsible Lending.

The proposed settlement includes $3.75 billion in cash payments to borrowers eligible for reviews, two people familiar with the proposed agreement said.

Under the original plan devised by the comptroller and the Federal Reserve in April 2011, 4.4 million Americans whose homes were in foreclosure proceedings in 2009 and 2010 could  request a free review. Only about half a million have done so.

Borrowers who never requested a review would get only a few hundred dollars under the proposed settlement. Those who requested reviews would get bigger payments. And those determined to have definitely or likely suffered harm from flawed foreclosures could be in line for much larger payments.

Another $6 billion in "soft" aid would assist delinquent borrowers, mainly through loan modifications, relocation assistance and short sales, in which homeowners are allowed sell their home for less than they owe on their mortgage. Some, but not all, of those borrowers are among those who had been eligible for the foreclosure reviews.  

 

Payments will be allocated according to the share of the homes in foreclosure in 2009 and 2010. That would mean Bank of America, which at the time was the biggest servicer of the loans, would pay the most.

After the initial agreement was reached with the 14 banks accused of improper foreclosures, the Federal Reserve filed enforcement actions accusing the giant Wall Street investment banks Goldman Sachs and Morgan Stanley of similar abuses. Those cases are pending and it couldn't be determined if those banks would sign on to a similar settlement.

source: latimes.com

Bank of America to cut 16,000 jobs

U.S. financial giant Bank of America has plans to cut 16,000 jobs by the end of the year in an effort to become a sleeker company, an in-house document says.

The document sent to top managers at the bank indicate that BofA is ready to give up its bragging rights as the country's largest financial company in terms of the number of employees.

The Wall Street Journal reported Thursday that BofA would end the year with 260,000 employees, which would mean JPMorgan Chase, Citigroup Inc. and Wells Fargo would each have more people on their payrolls.

BofA plans to cut back on its mortgage business in favor of the investment business it purchased when it bought Merrill Lynch in January 2009 during the financial system meltdown.

BofA has already sold off several businesses under the leadership of Chief Executive Officer Brian Moynihan, who has broken away from the bank's previous track record of expansion.

source: upi.com

Bank of America-ML Sees Gold At $2,400/oz by End-2014

The price of gold should reach $2,400 a troy ounce by the end of 2014 as a result of the U.S. Federal Reserve's latest round of quantitative easing, Bank of America-Merrill Lynch said Tuesday.

"Given the new open-ended nature of QE3, the upward pressure on gold prices should continue until employment is strong enough to warrant a change in policy. In our view, this is unlikely to happen until the end of 2014," the bank said.

Gold is often sought as a hedge against inflation and currency weakness at times of loose monetary policy.

The bank maintains its view that gold will reach $2,000/oz in the second quarter of 2013.

At 1041 GMT, spot gold was down 0.3% on the day at $1,756.32/oz, weighed down by profit-taking after a strong rally in the wake of the Fed's easing policy announcement last week. The yellow metal has never traded higher than $2,000/oz, hitting a record high at $1,920.94/oz in September last year.

source: foxbusiness.com

Bank of America targeted for protests at political conventions

"Occupy"-style protesters will have both political and corporate targets at hand next week when the Democratic National Convention is held in Charlotte, N.C, Bank of America Corp.'s hometown.

A group organized under the March on Wall Street South banner planned to demonstrate beginning Sunday at BofA's headquarters and at Wells Fargo & Co.'s regional headquarters in Charlotte.

Protests also were planned at the Charlotte headquarters of Duke Energy Corp. Environmental protesters have targeted Duke because of its reliance on coal-powered generators.

The environmentalists also have criticized BofA for funding companies that produce and burn coal. The Rainforest Action Network hung an enormous "Bank of Coal" banner on Bank of America Stadium, home to the Carolina Panthers of the NFL, a week before the bank's annual meeting in May.

"People who have been directly impacted by these banks and corporations — who are having their homes foreclosed, who have thousands of dollars of student loan debt, who are having their communities destroyed by dirty energy practices, and whose communities are targeted by the prison industrial complex — will speak out and put the banks on trial,” organizer Yen Alcala said in a news release.

Banks have proved a major target for protesters from the Occupy movement and other causes. Wells Fargo & Co.'s annual meeting in April was disrupted by demonstrators in the streets of San Francisco and inside the meeting itself.

Demonstrators arrived this weekend in Tampa, Fla., as Republicans gathered for their convention.

Dozens of officers using bicycles as shields faced off Sunday in front of a BofA building with chanting protesters who scribbled slogans on walls and sidewalks. One carried a sign that read: "You stole our money; we want it back."

Sara Flounders, co-director of the International Action Center, was demonstrating in Tampa this week with plans to move on to Sunday’s March on Wall Street South in Charlotte.

“Charlotte ... is the banking and financial center of the country after Wall Street,” Flounders told the Charlotte Observer. “That’s where the policies are set.”

source: latimes.com

We're not too big to fail - top banks

Nine of the largest global banks on Tuesday expressed confidence they can be salvaged or dismantled without taxpayer bailouts if they became insolvent, as U.S. regulators released public portions of these banks' "living wills".

The documents, required by the 2010 Dodd-Frank financial reform law, aim to end too-big-to-fail bailouts by mapping out ways that, in theory, mortally-wounded banks could go out of business without wrecking the financial system.

If regulators find that the resolution plans are not credible, they could force the banks to sell off business lines and restructure to become less complex.

But some experts doubt how hard regulators will push the banks for changes or how useful hypothetical resolution plans will be in major financial crisis.

The public portions released on Tuesday and are a few dozen pages per bank summarizing thousands of pages submitted confidentially to regulators.

The banks argued in the public documents that their resolution plans will work, with no cost to taxpayers or great consequence to the financial system. They used technical generalities in their conclusions without specifically addressing the unpredictable and vicious nature of a credit crisis.

Bank of America Corp, for example, said in its plan that "certain assets and liabilities would be transferred to a bridge bank that would, subject to certain assumptions, emerge from resolution as a viable going concern."

JPMorgan Chase & Co concluded that its plan "would not require extraordinary government support, and would not result in losses being borne by the US government." And, Goldman Sachs Group Inc said it would find a broad range of potential buyers for its assets, including global financial institutions, private equity funds, insurance companies or sovereign wealth funds.

The other banks which submitted wills were Barclays , Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley and UBS.

The Federal Reserve and Federal Deposit Insurance Corp released the plans without commenting on them.

Other large banks will have until July and December of next year to hand in their plans, according to the FDIC. Eventually about 125 banks are expected to submit plans.

The first plans come almost four years after the financial crisis unleashed a panic in which no institution seemed safe from a bank run and markets withdrew credit in what appeared to be inexplicable fashion. The U.S. government, in quick order, arranged a fire sale of investment bank Bear Stearns to JPMorgan and then allowed Lehman Brothers to fail, touching off a global market meltdown. Blanket government guarantees for the financial system and a $700 billion taxpayer bailout followed to ease the panic.

The disclosures on Tuesday give a glimpse of the kind of the kind of interconnections and complicated corporate structures that could still make governments fear letting big banks fail.

JPMorgan named 25 "material" legal entities and 30 "core business lines," as required by Dodd-Frank and listed 18 clearing or financial settlement systems in which it is a member or participant, half of which are outside of the United States.

The full-length plans are believed to include the most comprehensive maps of the insides of bank holding companies ever created. They are intended to give regulators confidence that they understand enough of the consequences of bank failures to allow more to happen.

WOULD PLANS WORK?

Bert Ely, a banking consultant in Alexandria, Virginia, said he is skeptical that the overall process could work because there would likely be a lot of turmoil in the markets when the plans were needed, raising doubt about who might buy any assets.

"The presumption of a one-off event is not realistically valid," he said. "You can have one company blow itself up, but more often than not there are systemic problems."

Banks emphasized that they did not believe the resolution plans would ever have to be used. Morgan Stanley said that its "hypothetical failure" would have to be caused by "an idiosyncratic stress" that might occur while the economy and financial markets are under severe stress.

Guggenheim Partners financial policy analyst Jaret Seiberg said he doubts regulators will use their reviews of the plans to force big changes on the institutions.

"Our initial review suggests there is little real risk that regulators could reject one of these plans," Seiberg said in a note. "That is important because regulators could break up a financial firm that fails to submit a credible plan."

The regulators plan to give feedback to the banks on the initial plans by September.

Congress called for the plans in Dodd-Frank to ease concerns that some banks are so big and interconnected that taxpayers will inevitably bail them out to avoid a threat to global markets.

The FDIC gained new powers in Dodd-Frank to use the plans to dismantle failing financial giants if the bankruptcy process would not work.

Citigroup found a special reason to argue that its resolution planning would work: its wrenching experience in the 2007-2009 financial crisis.

To recover from the crisis, Citigroup separated businesses to be sold or gradually liquidated from those it is keeping as its "core" pursuits. The company said that process meant its "personnel would be well equipped to assist regulators" if the company had to be divided up into pieces to be sold or closed.

"Citi is today a fundamentally different institution than it was before the crisis: smaller, leaner, safer, sounder, and completely focused on our core mission," it said in the summary of its resolution plan.

Bank of America, used its 42-page public document to emphasize steps it has taken in recent years to streamline the company, build capital and improve risk management.

"Bank of America has strengthened its risk culture as evidenced by improvements in consumer and commercial credit quality and decreases in market and counterparty risk," it said.

Bank of America has lagged its rivals in recovering from the financial crisis, largely due to mortgage losses tied to its 2008 Countrywide Financial purchase.

INTERNATIONAL FRAMEWORK

Some of the foreign banks outlined resolution strategies for both home and U.S.-based regulators.

Deutsche Bank imagined high levels of international cooperation, noting it could be dismantled "in an orderly manner with minimal systemic disruptions, and that any cross-border issues arising from financial, operational or other interconnections could be adequately addressed without significant difficulties," it said.

Barclays said effective resolution plans are "an integral component of eradicating 'too big to fail' for the largest global financial institutions."

It also noted how critical cooperation will be among international regulators.

Barclays submission, dated July 2012, was already out of date. It listed Marcus Agius as chairman and Robert Diamond as CEO. Both have resigned in response to a Libor interest rate rigging scandal.

Mitchell Glassman, a director at Deloitte Consulting who has worked with big banks on the living will issue, said he was impressed how much senior executives and directors were involved in preparing the plans. Still, he said, the question remains whether the plans on paper would work effectively in real-life.

"Will this help Main Street? Will we be better off with this approach than we were in the last crisis?" Glassman said.

source: abs-cbnnews.com