C&L; Opening Bell, 12-23-10

Learning from Fannie and Freddie's Role in Foreclosuregate
Fannie and Freddie, the largest Mortgage companies, shaped the practices being challenged in courtrooms around the country. They picked Law Firms that could foreclose fast and paid them based on how many Foreclosures they could process. Speed was essential because delays cost the companies money - and, after they were taken over by the government two years ago, meant losses for Taxpayers, too. Not only did the companies urge swift foreclosures, but in at least one case Fannie executives also gre...

Wall St. watchdog
Attorneys-general of New York state have a record of demagoguery in bringing ill-founded Lawsuits for political gain. The important civil suit outgoing Attorney General Andrew Cuomo has filed against the auditors of the collapsed investment bank Lehman Brothers is entirely different. What the auditors (the big firm of Ernst & Young) did simply smells. A serious lawsuit on an accusation of aiding a Fraud is an excellent place to get answers. The facts are not disputed. Ernst & Young approved Leh...

Florida Home Sales and Prices Slide in November
Existing Home Sales fell 15 percent in November compared to a year ago, and prices dipped along with them, according to a report released Wednesday by the Florida Association of Realtors. The median sales price for a home was $132,700 last month, down 5 percent from November 2009. The voluntary Moratorium on Foreclosure filings imposed by Mortgage companies in recent months delayed closings on some properties and impacted sales activity, the FAR report states. Companies like JP Morgan Chase and ...

Senate fails to confirm Fannie and Freddie regulator
WASHINGTON (Reuters) - The nomination of North Carolina bank commissioner Joseph Smith to head the agency that oversees Fannie Mae and Freddie Mac died on Wednesday as the U.S. Senate adjourned without acting on it. While President Barack Obama could renominate Smith to head the Federal Housing Finance Agency after the new Senate convenes on January 5, he may be reluctant to do so, given Republican opposition. The Republicans' hand will be even stronger next year because they will gain five more...

Deutsche Makes Deal In Tax Case
Deutsche Bank agreed to pay $553 million and admit to criminal wrongdoing on Tuesday, settling a long-running investigation into tax shelter Fraud that prosecutors say generated billions of dollars in bogus tax benefits. In an agreement with the United States Attorney’s Office in Manhattan, Deutsche Bank will avoid prosecution for helping 2,100 customers evade taxes through 2,300 Financial Transactions. The arrangements, which took place between 1996 and 2002, helped wealthy Americans repo...

Senate fails to confirm Fannie and Freddie regulator
WASHINGTON (Reuters) - The nomination of North Carolina bank commissioner Joseph Smith to head the agency that oversees Fannie Mae and Freddie Mac died on Wednesday as the U.S. Senate adjourned without acting on it. While President Barack Obama could renominate Smith to head the Federal Housing Finance Agency after the new Senate convenes on January 5, he may be reluctant to do so, given Republican opposition. The Republicans' hand will be even stronger next year because they will gain five mor...

Ernst & Young accused of hiding Lehman troubles
Giant Accounting Firm Ernst & Young is being sued by New York prosecutors over allegations it helped to hide Lehman Brothers' financial problems, in the first major government legal action stemming from the Wall Street firm's 2008 downfall. The civil Fraud case contends that Ernst & Young stood by while Lehman used Accounting gimmickry to mask its shaky finances. The Lawsuit says Lehman ran "a massive Accounting Fraud," but it did not name as defendants any former top executives at the i...

New York AG sues Ernst & Young in Lehman probe
NEW YORK: New York's Attorney General is suing Accounting giant Ernst & Young, accusing it of helping defunct Investment Bank Lehman Brothers hide billions of dollars in Debt from investors even as it teetered on the brink of financial collapse. The civil Lawsuit, filed by Attorney General Andrew Cuomo on Tuesday, days before he's due to be sworn in as the state's Governor, marks the first government legal action stemming from the collapse of Lehman Brothers, one of the first milestones of Wall ...

Cuomo suit: Ernst & Young hid Lehman losses
As predicted by several news outlets yesterday, AG Andrew Cuomo has filed suit against the Accounting Firm of Ernst & Young, charging that the outfit helped Lehman Brothers conceal the fact that it was on the verge of collapse. From the AG’s news release: The Attorney General’s Lawsuit claims that for more than seven years leading up to Lehman’s Bankruptcy filing in September 2008, Lehman had engaged in so-called “Repo 105” transactions, explicitly approved by E&Y. Th

Ernst & Young faces suit over Lehman
New York state prosecutors filed a civil Lawsuit against Ernst & Young alleging the auditing firm helped Lehman Brothers “engage in an Accounting Fraud” and deceive the public by using an Accounting move that reduced Debt at quarter end. The Lawsuit filed by Andrew Cuomo, New York Attorney General, in New York state court, alleges that Ernst & Young was “fully aware” of the Accounting treatment, known as Repo 105, which gave investors the impression that Lehman had less Deb

Ernst & Young's jujitsu defense
Ernst & Young's jujitsu defense Posted by Colin Barr December 23, 2010 6:42 am Can an embattled Accounting Firm turn the New York Attorney General's greatest strength against him? Ernst & Young may try to do just that as it braces against a civil Fraud suit claiming it helped conceal Lehman Brothers' Accounting games in the years before its 2008 collapse. In the best shape of his life? Ernst promised in a statement this week to defend itself vigorously in the complaint, which seeks ...

Ernst & Young's jujitsu defense
Can an embattled Accounting Firm turn the New York Attorney General's greatest strength against him? Ernst & Young may try to do just that as it braces against a civil Fraud suit claiming it helped conceal Lehman Brothers' Accounting games in the years before its 2008 collapse. In the best shape of his life? Ernst promised in a statement this week to defend itself vigorously in the complaint, which seeks at least $150 million in damages. The firm said it believes there is "no factual o...

New York state AG sues Ernst & Young
Cuomo sues Ernst & Young Posted by Colin Barr December 21, 2010 11:31 am New York sued the giant Accounting Firm Ernst & Young Tuesday, saying it helped Lehman Brothers deceive investors about its true health for seven years. The complaint, filed in state Supreme Court, seeks the repayment of at least $150 million in fees the audit firm collected between 2001, when Lehman's aggressive Accounting began, and 2008, when the venerable bank collapsed, precipitating a global bank run. Se...

Unrealized Losses on Payment Option Arms are still projected to be 46%
No banks haven't written all this off yet. They still have yet to write off some of this. In fact, most of the losses have yet to be realized. Yes, some tranches of this crap was sold to Fannie Mae, Freddie Mac, after which the Federal Reserve teamed up with the treasury to give the banks a "fair" price for their payment option arms. It's called Maiden Lane. When we were originating this crap at GMAC, we would often speak of the big "what if" scenario. What if POA blows up, what do we do? We ma...

CBO on Fannie, Freddie and Mortgage Finance Options
Just in time for the holidays, the Congressional Budget Office has released its analysis of the costs and benefits of various alternatives to our current system of Mortgage finance, particularly the role of Fannie Mae and Freddie Mac. A fully private model in which there would be no special federal backing for the secondary Mortgage market. The report doesn’t really push one option over another, but simply lays out the advantages and disadvantages of each.  Some highlights worth keepi...

Deutsche Bank to pay over $550M in fraud probe
NEW YORK (AP) - Federal authorities say Deutsche Bank has agreed to pay more than $550 million to resolve a Federal Tax shelter Fraud investigation. Authorities announced Tuesday that the bank also admitted criminal wrongdoing in connection with its participation in Financial Transactions that aided tax shelters. The government says the transactions generated billions of dollars in U.S. tax losses. Federal Prosecutors and the Justice Department's tax division announced the deal. They say the n...

Deutsche Bank to pay $550 million in tax fraud
NEW YORK (CNNMoney.com) -- Deutsche Bank AG agreed Tuesday to pay more than $550 million for taking part in fraudulent Federal Tax shelters, according to federal Regulators. The German bank admitted wrongdoing "in connection with its participation in Financial Transactions which furthered fraudulent tax shelters that generated billions of dollars in U.S. tax losses," the United States Attorney of the southern district of New York said in a statement Tuesday. Email Print Comment The $5...

Deutsche Bank to pay 550 million dollars over US fraud
Deutsche Bank headquarters in Frankfurt, Germany. Deutsche Bank has agreed ... Deutsche Bank has agreed to pay nearly 554 million dollars and admit criminal wrongdoing in a Tax Fraud case that generated billions of dollars, the bank and New York prosecutors said Tuesday. The German bank admitted taking part "in Financial Transactions which furthered fraudulent tax shelters that generated billions of dollars in US tax losses," the office of a New York Attorney General said in a statement. The d...

Hooray? Higher mortgage rates spurred home sales uptick
The country's economic engine seems to be running in reverse as more expensive borrowing spurs Home Sales, and an uptick in borrowing sends Mortgage rates back down. The recent surge in Mortgage rates, by all rational calculations, should have made America's already troubled Housing Market worse off. Instead, higher borrowing costs modestly boosted homes sales in November. Before slipping down slightly this week, Mortgage rates had risen for several weeks in a row as yields on 10-year Treasury ...

How higher rates boosted home sales
Hooray? Higher Mortgage rates spurred Home Sales uptick Posted by Nin-Hai Tseng, writer-reporter December 23, 2010 3:18 pm The country's economic engine seems to be running in reverse as more expensive borrowing spurs home sales, and an uptick in borrowing sends Mortgage rates back down. Image by magro_kr via Flickr The recent surge in Mortgage rates, by all rational calculations, should have made America's already troubled Housing Market worse off. Instead, higher borrowing costs modestly b...

Wells Fargo agrees to modify California ARM loans
Wells Fargo Bank has agreed to make $2 billion in loan modifications for California Homeowners with risky pay-option, adjustable-rate Mortgages that Wells purchased from other banks, and to pay $32 million to 15,000 borrowers who had similar loans and lost their homes to Foreclosure, according to an agreement with the California Attorney General's office. "Customers were offered adjustable-rate loans with payments that mushroomed to amounts that ultimately thousands of borrowers could not aff...

Deutsche Bank Will Pay $554 Million For Illegal Tax Shelter Activity
Deutsche Bank, Germany’s biggest bank, helped rich Americans report $29.3 billion in bogus tax benefits, mostly losses, on their tax returns and evade $5.9 billion in U.S. individual income taxes, according to a non-prosecution agreement filed in Manhattan’s Federal Court on Tuesday. Deutsche Bank admitted that it committed criminal wrongdoing in helping to construct fraudulent tax shelters known as Flip, Blips, Cards and Cobra, as well as others, and will pay $554 million in penalti...

William H. Gross
President John Malvey’ s Hall of Fame Induction of William (Bill) H. Gross, Founder and Managing Director, Pacific Investment Management Company. I’m Jack Malvey of Lehman Brothers, President of the Fixed-Income Analysts Society. On behalf of our Board, all of my member colleagues, and our many sponsors, I want to welcome our guests and the financial media to the highlight of our 17th Annual Bond Conference, today’s second annual Fixed Income Analysts Society "Hall of Fame" ind...

Write-Offs: 12.20.10
$$$ Ernst & Young: We Didn’t Topple Lehman Brothers [Deal Journal] $$$ SEC Probes China Stock Fraud [TSC] $$$ Deutsche Bank to Pay $554 Million in Tax Shelter Case [Bloomberg] $$$ Cerberus, Recouping Costs, Will Sell Chrysler Financial [Dealbook] $$$ ‘Spider-Man’ musical to reopen after fourth actor is injured during Monday’s show [NYP] ...

Speaking Ill of the Best and the Brightest
Richard Holbrooke in Afghanistan. One of “the best and the brightest” died last week, and in Richard Holbrooke we had a perfect example of the dark mischief to which David Halberstam referred when he authored that ironic label. Holbrooke’s life marks the propensity of our elite institutions to turn out alpha leaders with simplistic world-ordering ambitions unrestrained by moral conscience or intellectual humility. Fresh from Brown University, Holbrooke marched off as a foreign...