New York Attorney General Eric Schneiderman said Monday he may sue Wells Fargo and Bank of America for allegedly violating the terms of last year’s multi-state mortgage settlement, despite questions over his authority to do so.
The agreement, reached by the Department of Justice, Department of Housing and Urban Development and 49 state attorneys general, called for the five largest mortgage companies to significantly revamp their procedures for dealing with distressed borrowers. It called on them to provide billions of dollars in aid to those borrowers and change the way they pursue home repossessions, in exchange for prosecutors dropping legal claims that the companies systematically violated borrowers’ rights when using faulty, so-called “robosigned” documents in foreclosure proceedings. read more
Britain’s new watchdog announced sweeping changes in financial regulation on Wednesday, telling banks they can no longer blame customers when products go wrong and promising to study how consumers behave to make sure they can make the right decisions.
The Financial Conduct Authority is one of two new agencies launched this month to replace the Financial Services Authority and rewrite the rules for a financial industry brought low by the 2008 crisis and years of costly misbehaviour.
The FCA’s main focus is on protecting consumers who have been ripped off in recent years by the selling of inappropriate products in a series of scandals that led to settlements costing banks billions of pounds.
Banks will no longer be permitted to claim the “caveat emptor” or “buyer beware” defence when selling complex products to customers with little knowledge of finance, the FCA’s managing director Martin Wheatley will say in a speech later on Wednesday.
It signals a shift from the principle that has long underpinned UK financial regulation, under which the risk of an investment decision usually falls on the buyer. read more
The U.S. Consumer Financial Protection Bureau is seeking public input on possible policies to ease repayment of student loans, the agency said in an e-mailed statement.
“Too many private student-loan borrowers are struggling with unwieldy debt that prevents them from climbing the economic ladder,” said Richard Cordray, the CFPB’s director, said in an e-mail. “We will be analyzing plans for policy makers to consider that might help avoid a repeat of the mortgage meltdown for today’s student-loan borrowers.” read more
WASHINGTON — International Monetary Fund chief Christine Lagarde says the threat of financial collapse in the global economy appears to have eased. But she is warning that developed economies still need to follow through on financial reforms and debt reduction.
“We stopped the collapse. We should avoid the relapse. And it’s not time to relax,” she said in a press conference on her outlook for 2013.
Lagarde said that big economic powers, including the United States and European countries, had taken important steps to shore up their financial systems but have a lot of work left to do. She warned that there are signs of a waning commitment to regulate the financial sector, despite the severe problems that began with the collapse of U.S. financial institutions in 2008. She said that reforms have been delayed and diluted, and she worries that banks are pushing back against necessary reforms.
On the United States, where President Barack Obama is locked in a standoff with congressional Republicans on how to lower the country’s deficits, Lagarde said any cuts should be aimed at allowing time for an economic recovery to play out. read more
Because such debt carried top credit ratings from firms such as Standard & Poor’s, few financial executives paid attention to the potential dangers.
“If someone had elevated to my level that we were putting, on a $2 trillion balance sheet, $40 billion of AAA rated, zero risk paper, that would not in any way have excited my attention,” Prince told the Financial Crisis Inquiry Commission, according to a transcript of his testimony released in 2011.
Mortgage securities granted top grades started souring in 2007, leading to ballooning losses. Citigroup required a $45 billion federal rescue, the largest of the bank bailouts that put taxpayer money at risk. The Justice Department sued New York-based S&P and parent McGraw-Hill Cos. last week over the damage caused by the practices allegedly behind the inflated rankings that contributed to the biggest financial crisis since the Great Depression. read more
Top U.S. bank regulators and lawmakers are pushing for action to limit the risk that the government again winds up financing the rescue of one or more of the nation’s biggest financial institutions.
Officials leading the debate, including Federal Reserve Governor Daniel Tarullo, Dallas Fed President Richard Fisher and Senator Sherrod Brown, share the view that the 2010 Dodd-Frank Act failed to curb the growth of large banks after promising in its preamble to “end too big to fail.”
Strategies under consideration range from legislation that would cap the size of big banks or make them raise more capital to regulatory actions to discourage mergers or require that financial firms hold specified levels of long-term debt to convert into equity in a failure.
The push for revisiting the law or writing new rules “is absolutely driven by a sense that Dodd-Frank did not end too big to fail,” said Mark Calabria, director of financial-regulation studies at the Cato Institute in Washington and a former aide to Senator Richard Shelby of Alabama when he was the ranking Republican on the Banking Committee. read more
Fifty-four House Republicans on Thursday reintroduced legislation that would terminate the IRS and replace the system of income taxes on people and corporations with a consumption tax.
The FairTax Act, from Rep. Rob Woodall (R-Ga.), would abolish the 16th Amendment, which was ratified 100 years ago this February. That amendment gives Congress the power to impose income taxes without having to spend the revenues evenly among the states.
Woodall’s bill, H.R. 25, would replace the current tax system with a 23 percent consumption tax on all new goods and services. He said Thursday that this change would eliminate the need for a complicated tax code, and would be the kind of tax reform that helps reinvigorate the economy.
“The FairTax would make it easier for businesses to grow and hire new workers by abolishing America’s corporate income tax, currently the highest in the world.” read more
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