Death Star Economics



Eric Schneiderman’s war on finance

Today seems to be a wild day for financial regulation and banking scandals…

In New York, Attorney General Eric Schneiderman hit again, entangling J.P. Morgan in a lawsuit over mortgage-backed securities underwritten by Bear Sterns, which was acquired by J.P. Morgan in 2008 for about $5. According to Schneiderman’s office, Bear Sterns has “committed multiple fraudulent and deceptive acts in promoting and selling” mortgage-backed securities. As evil as that sounds, it is really much more a claim about Bear Sterns being bad at its job, saying that poor evaluation of loans led to the $22.5bn of losses for investors. Schneiderman wants the unidentified profits of those MBS sales to be handed over by J.P. Morgan. The bank, of course, is outraged at being held accountable for historic actions of an acquired subsidiary. This case is not part of the SEC’s roundhouse-kick against i-banks involved in the subprime mortgage crisis that was announced in February and could involve Wells Fargo and Goldman Sachs besides J.P. Morgan. Schneiderman’s charges are the result of a presidential investigation into mortgage fraud. read FT read WSJ

The SEC on the other hand, is meeting with unnamed companies today to discuss the future of high-frequency trading regulation, after the industry had called for more defined rules in response to Knight Capital’s $440m loss in August. read article

But back to mortgages, which have been in the news a lot in general lately. Europe has seen its first commercial mortgage bond issuance since 2007 yesterday, the lion share of which has been bought by no other bank than J.P. Morgan for €565m. In the UK, a new lender, Castle Trust, with an alternative approach to profit and cost sharing has emerged out of the collaboration of various former and current FSA advisors and the US private equity form J.C. Flowers.

Schneiderman is also fighting the good fight on behalf of Barack Obama’s election campaign. A recent investigation is looking into tax avoidance by a number of big American private equity houses, including Romney’s Bain CapitalKKR and Apollo GroupA very candid comment from an anaymous tax avoider:

“This is shamelessly political, but it’s to be expected and I’m surprised it hasn’t happened sooner,” said one private equity executive. “You have a right to privacy, but you don’t have a right to be president. If Bain and Mr Romney saved themselves tens of millions of dollars in taxes, then you would expect that to be examined.”

Meanwhile, the Liikanen report has arrived in Brussels, where it is entirely supported by Michel Head-Overregulator Barnier. The report advises that retail operations should be shielded from other bank activities, capital reserves should be higher and bonuses should be paid out as debt to redistribute risks of possible losses. read article

In more commercial legal news, Samsung filed a lawsuit against Apple over patent infringement in the iPhone 5. Here we go again. read article

So long.


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2 Responses

  1. princess1960 says:

    hello .. to day is differnt theme from others time samsung for me all is the same ..they do the same work now how every company use this for profit good for them .i like technology ..but not exagitation every 3-6 month a new gadget..and what is differnt jusT a small think so this is why some company MAKE PROFIT with out deserve and others comp who have much work spend (not to much profit) examble all the Machine Industry ..SO here needed DIFFRENT TAX …

  2. […] of those ambitious savings, however, will need to be put towards the legal costs: Eric Schneiderman, New York’s Attorney General, strikes again and filed a civil lawsuit against Credit […]

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