Wall Street Journal
Over the past couple of years, federal officials have extracted billions of dollars from banks for mortgage-related issues and other various misdeeds. Now it appears banks may be fighting back a little bit harder, at least in the area of probes into alleged bribing of foreign officials. Unnamed sources say JPMorgan Chase is defending itself against the U.S. government's probe into whether it bribed foreign officials in China by giving jobs to "relatives of managers of state-owned companies and other well-connected officials" in exchange for work on deals. JPMorgan is telling government investigators they are overreaching in attempting to prove the bank violated the Foreign Corrupt Practices Act and that the bank is only engaging in traditional business practices. JPMorgan is preparing a "white paper" it will submit to the Justice Department and to the Securities and Exchange Commission arguing its position. Other banks are making similar arguments to federal officials, although the article does not specify which banks. Also of note: The Federal Reserve Bank of New York "in recent months" joined the bribery investigation, unnamed sources said. The New York Fed's late entry "complicates the formal negotiations needed to resolve the probe." One has to wonder if the New York Fed's decision to investigate JPMorgan in this matter came before or after the whistleblower Carmen Segarra called attention to alleged lax enforcement at the New York Fed.
Now banks are rolling out the ping pong tables. The Journal looks at the technology research lab MasterCard has established near Union Square in Manhattan. Plenty of other banks and financial-services companies have set up tech labs, including Boston's Eastern Bank, the country's largest mutual. What's new, according to this article, is banks are allegedly late to the game; and only high-tech startups are supposed to open offices where employees can wear T-shirts, do push-ups on the office floor and play ping pong during the middle of the work day. The article helpfully includes this sentence that nearly borders on a cliché: "The thinking of [MasterCard] officials as they explained it: A vibrant tech center in a hip urban neighborhood with edgy tech firms allows them to quickly tap into new ideas and to hire from one of the country's richest talent pools." The article also includes a quote from commercial real-estate professional Bruce Mosler of Cushman & Wakefield, who says the same thing: "These bigger businesses have understood that to attract the best tech talent they have to be in an urban environment and in locations where young millennials want to be." Other banks are following in line and setting up Manhattan tech labs, including Capital One Financial, JPMorgan Chase and Barclays.
Bank of America will pay $180 million to settle a private lawsuit brought by pension funds and other investors that alleged the bank manipulated foreign-exchange rates. JPMorgan Chase and UBS have already settled with the same group of plaintiffs and Citigroup and Barclays are expected to settle soon. B of A said its settlement will be covered by existing reserves. The settlement with B of A had been previously announced by the plaintiffs' law firm, but the amount had not been disclosed.
Former Fed Chairman Ben Bernanke has joined Pacific Investment Management Co. as an adviser. Bernanke this month also joined the hedge fund Citadel. Bernanke's only two advisory relationships will be with PIMCO and Citadel, an unnamed source said. Bernanke will "provide guidance on PIMCO's investment process and Fed policy and sometimes meet with clients." PIMCO hopes hiring Bernanke will help them get past the loss of Bond King Bill Gross, who departed for Janus Funds.
New York Times
Goldman Sachs is leading a $50 million investment in Circle Internet Financial, a company that is trying to use Bitcoin's technology to improve consumer payments. The paper said Goldman is the first major bank to make an investment in a Bitcoin-related company. Goldman did not utter the word "bitcoin" in its press release: the company sees "significant opportunities in companies and solutions that have the promise to transform global markets through technical innovation."
The Times' editorial page includes an unsigned piece that criticizes legislation pending in Congress that it says will weaken rules against predatory mortgage lending. The rules, enacted via Dodd-Frank, are designed to prevent lenders from pushing deceptive and high-cost loans on unsophisticated borrowers. The column points out one of the largest lenders to use these tactics is Clayton Homes, the manufactured-housing company owned by Warren Buffett's Berkshire Hathaway. A recent report alleged that Clayton Homes uses high-pressure sales tactics, huge fees and exorbitant interest rates. The Times called for opposition to the bills that would allow Clayton Homes to continue using those tactics.
Elsewhere ...
Charlotte Observer: A former Wachovia banker, who later called attention to questionable dealings at the bank, is now facing foreclosure on his home by Wells Fargo. Robert Kraus, who was fired in 2006 after he raised concerns, said he fell behind on his mortgage because he couldn't find another job in financial services. Kraus said other banks won't hire a whistleblower. "When a would-be whistleblower calls me, I tell them: Check your bank account, check your mortgage, check your marriage, check your religion, because all of these will be put under a tremendous strain," Kraus said. "You're not just going to blow the whistle and go find another job." Kraus called attention to what he said were "problematic practices" in Wachovia's booking of trades, reporting of losses and other areas in its investment bank. Kraus later sued the bank, but a judge dismissed the case because Kraus had accepted a severance package from Wachovia that barred him from suing the company. Kraus and another whistleblower later filed a False Claims Act lawsuit against Wells Fargo, as the successor to Wachovia, and the case remains pending.
The Oregonian: The Portland, Ore., newspaper has a series of stories on Bank of Oswego in Lake Oswego, Ore., including one about a former executive who is under criminal investigation. The former vice president, Geoff Walsh, is under indictment for allegedly operating a lending side-business, not owned by the bank, that was "bewildering in its complexity," which bank executives were either unaware of or ignored. The community bank is also being investigated for other alleged misdeeds, such as underreporting nonperforming loans that had the institution on the brink of failure; and pulling funding for customers that the borrowers said put them out of business. The bank's CEO, Stephen Andrews, wrote a column for the Lake Oswego Review claiming the problems were related to the former employee (Walsh) and that Bank of Oswego now is profitable and has a strong capital position.
