Monday, December 20, 2010
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Receiving Wide Coverage ...
B of A Under Fire: The Times said attorneys general in Arizona and Nevada have sued Bank of America over the company's alleged misleading of customers about potential mortgage modifications. "In withering complaints filed in state courts in both states, the attorneys general accused Bank of America of assuring customers that they would not be foreclosed upon while they were seeking loan modifications, only to proceed with foreclosures anyway; of falsely telling customers that they must be in default to obtain a modification; of promising that the modifications would be made permanent if they completed a trial period, only to renege on the deal; and of conjuring up bogus reasons for denying modifications."
The Journal said B of A became the latest U.S. company to stop processing payments for WikiLeaks, which published a cache of secret State Department documents last month. The papers noted that investors are worried that WikiLeaks is preparing to release some unflattering data about B of A as well. Wall Street Journal, New York Times
BMO's Deal for M&I: BMO Financial Group, the parent of Bank of Montreal, agreed to buy Marshall & Ilsley in a $4.1 billion stock swap that triggered speculation about further consolidation. "With the U.S. economy showing signs of life, bank takeover speculation has rarely been as active since the subprime-mortgage meltdown hit," the Journal said. "Banks that haven't repaid government aid under the Troubled Asset Relief Program have been a focus of investors." The Times' DealBook blog noted that Canadian banks have been a critical source of capital for U.S. lenders. But they haven't been that successful at expanding in this market. At least that was the assessment of a money manager the blog asked to explain the drop in BMO's share price. Wall Street Journal, New York Times
The Journal's "Heard on the Street" column said the deal "may signal the start of a hoped-for wave of regional bank consolidation." But other potential targets may not fetch the same price. "Many regional banks are seen as vulnerable because they are finding the road to recovery tough. With demand for loans still tepid, there may be few opportunities, outside mergers, to boost growth," it said.
Wall Street Journal
New York State Attorney General Andrew Cuomo is close to filing civil fraud charges against Ernst & Young for its alleged role in the collapse of Lehman Brothers, unnamed sources told the paper.
The Journal said the White House's pick to head the Federal Housing Finance Agency, Joseph A. Smith, "appears unlikely to win Senate confirmation before Congress adjourns."
Investors shouldn't expect too much from new steps proposed by regulators to make Finra arbitration of disputes with their brokers less of an ordeal. "They may be more like baby steps than giant leaps," the paper said. It compared Finra arbitration to "a medical-malpractice case heard in a court run by the American Medical Association, with a jury made up partly of doctors."
In "Common Sense," James Stewart said the recent steepening of the yield curve is good news for banks, meaning investors may want to reconsider bank shares, particularly JPMorgan Chase and Wells Fargo. (Weekend)
"Heard on the Street" looked at one reason investors might not want to jump back into bank stocks. "The global banking system hasn't finished its detox. It still has further to go in curbing its addiction to leverage." (Weekend)
New York Times
A front-page story said many back-office employees and mid-level traders, bankers and brokers on Wall Street may not get a bonus this year. Even though some have seen their base salaries rise, "the psychological blow of not getting a bonus is substantial, especially in a Wall Street culture that has long equated success and prestige with bonus size," the paper said.
"Investment bankers should prepare for a surge in mergers and acquisitions. If deal activity follows a pattern similar to previous cycles, 2011 ought to be a considerably better year."
An editorial criticized the Federal Reserve for proposing to allow lenders to sell financial products to those taking out reverse mortgages, as long as 10 days have passed since the loan. Critics claim this violates Dodd-Frank and a 2008 law prohibiting “cross selling” where loan proceeds are used for other financial products.
In "Your Money," Ron Lieber wrote that card issuers are planning to drop currency conversion fees for transactions that begin outside of the U.S. — but so far only on high-end cards. (Saturday)
Sandy Spring Bank in Olney last week became the largest community bank in the greater D.C. area to pay off TARP when it redeemed the remaining $41.5 million of the total $83 million owed. CEO Daniel J. Schrider, told the paper that his $3.6 billion billion-asset bank garnered enough in a July stock offering to settle up its debt in full, but regulators wanted to see another quarter of improved credit metrics.
An article described the conversation among employees at the Consumer Financial Protection Bureau's first Christmas potluck. "There's so much to know," one female staffer said to a younger male colleague. "There's so much to figure out. You walk out every night thinking, 'What did I miss?'" (Saturday)
, with contributions from Sean Sposito and Rachel Witkowski.