Abu Dhabi fund seeks Citigroup deal scrapped or pay up $4 billion in damages
I think many were wondering when this was going to be addressed. If you remembered back when this deal was made was when we still had investment banks and people thought this crisis was just a mild recession and all these banks were buys and were temporarily impaired because of these pesky real estate decline. Abu Dhabi paid a handsome sum at the time to come help Citigroup out when they were in a pinch and since that investment or speculation depending on how you look at this, were burned pretty bad with Citi’s shares trading at $3.78 per share.
My thinking is that Citi will rework the terms of the deal to make sure that credit-line is their for them in the future if they need it in the future. It will be interesting to see how this turns out and I have been thinking about this for over a year now, glad to see its in the media and getting some traction.
Citigroup Inc said on Tuesday the Abu Dhabi Investment Authority filed an arbitration claim against it, accusing the U.S. lender of misrepresentation over a $7.5 billion investment by the sovereign wealth fund. The sovereign wealth fund, considered by some the largest in the world, bought securities from the U.S. bank in 2007. In the original deal, the Citigroup bonds must be converted into common stock at a price between $31.83 and $37.24 a share between March 2010 and September 2011.
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House votes against effort to kill consumer financial protection agency
Surprising that after the $38.7 billion dollars in overdraft fees and other programs to generate revenues for the banks other than their normal services such as lending and wealth management.
The industry did not self-regulate and the regulators did not see this practices as a problem so we need to have someone out their that is looking at these “innovations” and see if they are actually beneficial and honest or are they created to be predatory with no use to the public except as a extractive force to generate profits. Banks should really go back to the history books and read about what banks public utility is and go back to those prudent practices which are still highly profitable.
House lawmakers on Friday narrowly defeated an effort to destroy a proposed Consumer Financial Protection Agency and replace it with a weaker council. The council would have kept existing bank regulators in place but coordinated between them to write consumer protection and safety and soundness rules.
The measure to create a council was introduced by Rep. Walt Minnick, D-Idaho. It would have also give the council the authority to write rules for bank capital, but it would keep power over consumer protection at the Federal Reserve and other bank regulators, who have been charged with failing to identify problem mortgages in the build up to the financial crisis. The proposed consumer agency will regulate mortgage and credit card products for consumers. The vote was 208-223.
Source: Market Watch
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Fannie Mae Files $15.8 Billion in Claims in Lehman Brothers Bankruptcy
Now we are getting more information on the OTC derivative market and the different liabilities that the different players had with their counter-parties. The more I am reading about these products (got a nice book on the subject that was written in 1993) and the more I read the more derivatives sound like insurance.
You know what that means? It means they should be regulated like an insurance product and that means the companies issuing this insurance needs strict capital requirements and their capital can only be invested in the safest financial instruments which we used to call “AAA” before the quality rating became a backroom Wall Street joke.
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J.P. Morgan Securities Settles SEC Charges in Jefferson County Swap & Bond Case
Wall Street Journal, Washington - J.P. Morgan Securities Inc. and two of its former managing directors on Wednesday settled charges with the U.S. Securities and Exchange Commission for their roles in an unlawful payment scheme that enabled them to win business involving municipal-bond offerings and swap-agreement transactions with Jefferson County, Ala.
J.P. Morgan Securities, a unit of J.P. Morgan Chase & Co., will pay a penalty of $25 million, make a payment of $50 million to Jefferson County, and forfeit more than $647 million in claimed termination fees, the SEC announced.
The settlement comes as the SEC is examining several municipal investment contracts. Jefferson County has faced credit-rating downgrades and possible bankruptcy after its investments in over-the-counter derivatives.
J.P. Morgan said in a statement that the company is pleased to have settled the Jefferson County matter.
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CIT Group Files Bankruptcy Under Debt Reduction Plan
No surprise that CIT is finally restructuring their debt, hopefully they can become a viable business finance company that can rely more on long-term financing then the more short and medium term financing. According to Bloomberg, they are looking to refinance $10 billion dollars of debt. This bankruptcy makes it the 5th largest in U.S. history at $71 billion dollars in assets against which it has $64.9 billion in liabilities.
CIT Group Inc., the 101-year-old commercial lender that saw its funding dry up in the credit crunch, filed for bankruptcy in an effort to cut $10 billion in debt following a failed debt exchange and U.S. taxpayer bailout.
CIT listed $71 billion in assets and $64.9 billion in liabilities in a Chapter 11 petition yesterday in U.S. Bankruptcy Court in Manhattan. The Treasury Department said the government probably won’t recover much, if any, of the $2.3 billion in taxpayer money that went to CIT.
The lender, which funds about 1 million businesses such as Dunkin’ Brands Inc. and Eddie Bauer Holdings Inc., plans to exit court protection next month after bondholders voted in favor of a “prepackaged” plan. None of CIT’s operating subsidiaries, including Utah-based CIT Bank, were included in the filing, and operations will proceed as normal, CIT said in a statement.
“Short term, it’s going to cause some difficulties for startups and smaller borrowers,” said Jean Everett, a partner at Hiscock & Barclay LLP focusing on financial institutions and lending. “CIT lent across so many sectors, it’s sort of difficult to predict how it’ll affect each sector.”
Source: Bloomberg
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Bank of America to disclose details on Merrill Lynch purchase to SEC
No matter that the outcome of this investigation, it will be a good for Bank of America. This brings them one step closer to getting closure on this very curious situation. If I was a shareholder, I would be very frustrated to learn about these bonuses that were paid out before the merger. As a taxpayer I am very upset that will let taxpayer money in effect, go towards bonuses at a failed institution.
After this issue is resolved, we need to see a realistic repayment plan for the bailouts that both banks received. They can pay bonuses until they are blue in the face, just pay back the people who backed you up even in you should of had to face the music.
AFP, New York - Bank of America agreed to provide new information about bonus payments made to Merrill Lynch executives just before the bank acquired the troubled Wall Street firm last year, officials said Tuesday.
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U.S. Prosecutors May Indict Former Head of AIG’s Financial Products Unit
Reuters, New York - U.S. prosecutors are preparing to impanel a grand jury to consider indicting the former head of American International Group Inc’s AIG Financial Products unit for securities fraud, the Wall Street Journal reported.
The Department of Justice and the Securities and Exchange Commission have been investigating whether Joseph Cassano overstated the value of mortgage-related contracts and failed to disclose material facts about them to AIG’s outside auditor, the paper said, citing people familiar with the matter.
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