Hubris

These cases don’t have much in common, but they do illustrate the arrogance of our Moron Masters of the Universe.

JPMorgan Bribe Probe Said to Expand in Asia as Spreadsheet Is Found

By Dawn Kopecki, Bloomberg News

Aug 28, 2013 11:51 PM ET

A probe of JPMorgan Chase & Co.’s (JPM) hiring practices in China has uncovered red flags across Asia, including an internal spreadsheet that linked appointments to specific deals pursued by the bank, people with knowledge of the matter said.

The Justice Department has joined the Securities and Exchange Commission in examining whether JPMorgan hired people so that their family members in government and elsewhere would steer business to the firm, possibly violating bribery laws, said one of the people, all of whom asked to not be named because the inquiry isn’t public. The bank has opened an internal investigation that has flagged more than 200 hires for review, said two people with knowledge of the examination, results of which JPMorgan is sharing with regulators.

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The spreadsheet, which links some hiring decisions to specific transactions pursued by the bank, may be viewed by regulators as evidence that JPMorgan added people in exchange for business, according to one person with knowledge of the review.

Merrill Lynch in Big Payout for Bias Case

By PATRICK MCGEEHAN, The New York Times

August 27, 2013, 9:02 pm

Merrill Lynch, one of the biggest brokerage firms on Wall Street, has agreed to pay $160 million to settle a racial bias lawsuit that wound through the federal courts for eight years, including two appeals to the United States Supreme Court.

The payout in the suit, which was filed on behalf of 700 black brokers who worked for Merrill, would be the largest sum ever distributed to plaintiffs in a racial discrimination suit against an American employer.

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Among the many twists in the case was the admission in a deposition by Merrill’s first black chief executive, E. Stanley O’Neal, that black brokers might have a harder time because most of the firm’s prospective clients were white and might not trust their wealth to brokers who were not.

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Class actions are the only way around the custom on Wall Street of making all employees agree to resolve any disputes through arbitration. But to persuade a court to certify a class, the plaintiffs must prove that a sufficient number of workers are in a similar situation.

Mr. McReynolds and his lawyers gradually persuaded more brokers to sign on as representatives of the class. Early on, as the accusations in the case drew attention from the news media, Merrill executives rushed to hire more blacks into the firm’s training program and met with the plaintiffs to try to reach a settlement.

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Three years ago, a judge in Chicago denied their motion to be certified as a class. They appealed to the United States Court of Appeals for the Seventh Circuit, but were denied. That could have been the end of the road, especially after the United States Supreme Court ruled in 2011 against female employees of Wal-Mart who tried to sue the retailer for sex-discrimination as a large class.

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Even though the Wal-Mart decision was considered a serious setback for class actions like the McReynolds case, Ms. Friedman went back to the Seventh Circuit last year.

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In a decision that surprised many observers, an appellate panel accepted that argument and reversed the lower court’s denial of class certification. Merrill appealed that decision to the Supreme Court but was denied a hearing. A trial date was set for January 2014, but Merrill decided to settle rather than drag the fight on any longer.

Goldman Sachs’ Jason Lee Indicted on Rape Charge

By Chris Dolmetsch, Bloomberg News

Aug 28, 2013 6:07 PM ET

Goldman Sachs Group Inc. (GS) managing director Jason Lee was indicted by a grand jury on a rape charge stemming from the alleged assault on a 20-year-old woman at a Long Island, New York, home, court records show.

Lee, 37, was arrested and charged with first-degree rape on Aug. 21 in the town of East Hampton after police went to his Clover Leaf Lane vacation home and learned that a woman had been sexually assaulted inside the residence, where several people had gathered, according to a police statement.

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The alleged assault occurred at a home of the defendant, police said. A description of a 4-bedroom, 3-bathroom 2,700-square-foot house on the street where Lee was arrested, posted on the website of Douglas Elliman Real Estate, said it was available from Aug. 1 until Labor Day for $33,000.

U.S. Bank Legal Bills Exceed $100 Billion

By Donal Griffin & Dakin Campbell, Bloomberg News

Aug 28, 2013 12:02 PM ET

That’s the amount allotted to lawyers and litigation, as well as for settling claims about shoddy mortgages and foreclosures, according to data compiled by Bloomberg. The sum, equivalent to spending $51 million a day, is enough to erase everything the banks earned for 2012.

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Legal fees and litigation costs accounted for $56 billion of Bloomberg’s $103 billion tally, with $7.2 billion incurred just for the first six months of this year. The rest, $47 billion, was for payments to mortgage investors.

Bank of America, led by Chief Executive Officer Brian T. Moynihan, 53, increased its legal costs by $3.3 billion in the first half to a total of $19.1 billion. JPMorgan added $1.5 billion in the period. The other four lenders added about $2.4 billion combined in the six months.

Jamie Dimon, 57, JPMorgan’s CEO, is contending with criminal probes into his New York-based bank’s energy-trading and mortgage-backed securities operations while grappling with investigations into anti-money-laundering safeguards, foreclosures, credit-card collections, and the $6.2 billion London Whale trading loss last year.

A U.S. housing regulator is seeking at least $6 billion to settle claims JPMorgan sold bad mortgage bonds to government-backed finance companies Fannie Mae (FNMA) and Freddie Mac, a person briefed on the matter said this week. The bank is fighting the request, the person said.

Penalties in the London Whale episode, named for a U.K. trader whose big bets moved markets, may reach $600 million, the Wall Street Journal reported yesterday. Regulators also are preparing enforcement actions against JPMorgan for its treatment of consumers during the recession that could result in fines of about $80 million, the New York Times reported, citing people briefed on the matter.

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The totals would be billions of dollars higher if U.S. cases involving the biggest European banks were counted. HSBC Holdings Plc, Europe’s largest lender, agreed last year to pay $1.92 billion to settle U.S. money-laundering probes. UBS AG, the largest lender in Switzerland, said in July it would pay $885 million to Fannie Mae and Freddie Mac (FMCC) on claims that it improperly sold them mortgage-backed securities.

Barclays Plc, UBS and Royal Bank of Scotland Group Plc were fined a combined $2.5 billion to settle allegations by regulators in the U.S. and elsewhere that that they helped rig the benchmark London interbank offered rate.

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Citigroup, the third-biggest U.S. bank, added $1.4 billion in legal expenses so far this year, almost double its costs for the first half of 2012. The New York-based lender is facing “legacy issues” tied to mortgage products, Chief Financial Officer John Gerspach said last month.

The bank also boosted its estimate for possible future legal losses not covered by reserves to $5 billion as of June from $4 billion a year earlier. JPMorgan raised the upper end of its estimate to $6.8 billion from $5.3 billion. Bank of America reduced its figure to $2.8 billion from $4.1 billion after settling some of its biggest pending cases.

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The top four banks added $1.4 billion to their reserves in the first half to cover repurchases of bad home loans, filings show. These cases typically involve demands for refunds from investors who bought mortgages or mortgage-backed securities and later uncovered flaws in the paperwork, such as incorrect data about the borrowers and properties. Banks typically sell the mortgages with a promise to buy them back if such defects arise.

Bank of America has set aside $28.6 billion for repurchases since 2008, more than half of the total for the four lenders, according to filings. When added to legal costs, the firm’s combined tally is about $48 billion.

Those reserves probably aren’t enough to cover more recent cases, according to Peabody, the Portales analyst. Bank of America is facing a multibillion-dollar settlement with the Federal Housing Finance Agency tied to mortgage-backed securities, he wrote in an Aug. 6 note that recommended “aggressively” selling Bank of America shares.

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“It’s likely the financial institutions don’t yet know of some of these lawsuits,” said Walter J. Mix III, head of financial-institutions consulting at Berkeley Research Group LLC and a former commissioner of the California Department of Financial Institutions. “The litigation can go on for 10 years or more.”