A new report in Washington is placing blame on federal regulators and private consultants for a botched review of foreclosures. The Federal Reserve and the Office of the Comptroller of the Currency designed a flawed review process that the consultants mishandled, says a draft of the report by the Government Accountability Office, Ben Protess and Jessica Silver-Greenberg report in DealBook.
The Senate Banking Committee also plans to hold a hearing next week to examine the foreclosure review and other missteps at consultants like Promontory Financial and Deloitte & Touche, people with direct knowledge of the matter said. Regulators from the Fed and the Office of the Comptroller of the Currency are likely to testify at the hearing on April 11, according to DealBook. “Senator Sherrod Brown, the Ohio Democrat leading the inquiry, is expected to broadly question the quality and independence of consulting firms that are paid billions of dollars by the same banks they are expected to police.â€
The concerns emerged when the consultants, under orders from regulators to see if homeowners had been wrongfully evicted, conducted an inefficient review of only a small fraction of foreclosed loans, ultimately leading regulators to cancel the review. “The Senate hearing comes at a difficult time, particularly for the consultants. Regulators at the Fed and the Comptroller of the Currency’s office are questioning the prudence of relying on consultants so heavily, according to government officials briefed on the matter.†The consultants have long enjoyed a privileged status in Washington; Promontory announced this week that it had hired Mary L. Schapiro, the former chairwoman of the Securities and Exchange Commission.
COHEN ON HIS PICASSO  | It turns out that Steven A. Cohen’s purchase of Picasso’s “Le Rêve†from the casino magnate Stephen A. Wynn was completed in early November, before the insider trading case against Mr. Cohen’s hedge fund, SAC Capital Advisors, entered a serious phase. “The timing was bad,†Sandy Heller, Mr. Cohen’s art adviser, said on Wednesday. And what does the hedge fund titan himself think of the painting “When you stand in front of it, you’re blown away,†Mr. Cohen told DealBook.
The new details about the Picasso emerged as another legal headache developed for Mr. Cohen. A federal appeals court revived a lawsuit that Patricia Cohen, his ex-wife, had filed against him in 2009, accusing him of hiding millions of dollars in assets at the time of their divorce years earlier.
Without addressing the merits of the case, the United States Court of Appeals for the Second Circuit in Manhattan said the trial court judge had improperly dismissed it on the grounds that Ms. Cohen filed the suit after legal deadlines had passed. Among the allegations by Ms. Cohen is that SAC was a “racketeering scheme†that engaged in insider trading. A spokesman for SAC said that the “decades-old allegations by Mr. Cohen’s former spouse are patently false and entirely without merit.â€
CONCERNS WITH A RISE IN BUSINESS LENDING Â |Â
A recent surge in banks lending to businesses “is starting to flash some warning signs,†DealBook’s Peter Eavis says. “The concern is that banks are making loans to businesses at rates that are so low that they may end up being unprofitable. A recent survey by the Federal Reserve shows that American banks are charging an average of just 2.83 percent on so-called commercial and industrial loans. That’s down from 3.4 percent a year earlier.â€
ON THE AGENDA Â |Â
The Bank of Japan on Thursday announced an aggressive monetary easing effort. The European Central Bank and the Bank of England are also set to announce decisions on monetary policy. Janet L. Yellen, vice chairwoman of the Federal Reserve, speaks at an event of the Society of American Business Editors and Writers in Washington at 5 p.m. Steve Case, the AOL co-founder, is on CNBC at 2 p.m. Bill Gross of Pimco is on Bloomberg TV at 3:30 p.m.
A LEGAL SUCCESS FOR JPMORGAN Â |Â
A federal judge dealt a blow to a lawsuit accusing JPMorgan Chase of misleading investors in mortgage-backed securities. Judge Jed S. Rakoff dismissed claims from the Belgian-French bank Dexia, over losses on $1.6 billion of the investments, significantly limiting the potential legal bill in the case, Jessica Silver-Greenberg reports in DealBook. “The lawsuit was being closely watched on Wall Street, in part because it could provide a window into another high-stakes suit facing the industry. In 2011, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, accused 17 banks of selling $200 billion of dubious mortgage securities to the housing finance giants. At least 20 of the securities at issue were also included in the Dexia case, according to an analysis of court records.â
Dish Network Raises $2.3 Billion of Debt  | The company said it might use the proceeds for “wireless and spectrum-related strategic transactions.â€
REUTERS
TPG and Madison Dearborn Said to Vie for Wealth Manager  | The two private equity firms are “the two finalists†bidding for the wealth management company National Financial Partners, according to Reuters.
REUTERS
AstraZeneca Buys American Biotechnology Company  |Â
REUTERS
And Then There Were Two  | Gary Cohn, president of Goldman Sachs, says his firm and JPMorgan Chase are among the only big global banks that are not retrenching, Bloomberg News reports.
BLOOMBERG NEWS
Uncovering the Human Factor in Risk Management Models  | John Breit, the former top risk manager at Merrill Lynch, says that mathematical models fail because they don’t account for human frailty, Jesse Eisinger of ProPublica writes in his column, The Trade.
The Trade »
Moscow Tries to Reinvent Itself as Financial Hub  | Moscow is trying yet again to become a major financial center, but finds itself competing for business with other regional rivals like Warsaw. The city’s government faces an uphill challenge, as midsize companies in neighboring Ukraine or other former Soviet republics are turning elsewhere to tap the financial markets, Andrew E. Kramer reports in The New York Times.
NEW YORK TIMES
How to Measure a Successful Investor  | “All of us, even the old guys like Buffett, Soros, Fuss, yeah - me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience,†Bill Gross of Pimco writes in an Investment Outlook. “Perhaps, however, it was the epoch that made the man as opposed to the man that made the epoch.â€
PIMCO
JPMorgan Chase’s ‘Teflon C.E.O.’  |Â
BLOOMBERG VIEW
Bank of America and Citigroup Name Rate-Trading Executives  |Â
BLOOMBERG NEWS
Toronto-Dominion Announces C.E.O. Succession  | Bharat B. Masrani, the head of the bank’s U.S. operation, will take over as chief executive of the Canadian giant when William E. Clark retires as president and chief executive in November 2014.
DealBook »
Blackstone Said to Favor an I.P.O. for SeaWorld  | The Blackstone Group may begin marketing an I.P.O. of SeaWorld Entertainment in the last two weeks of April, “after rejecting takeover bids for the theme-park operator, said a person familiar with the matter,†Bloomberg News reports.
BLOOMBERG NEWS
Cerberus Said to Tap Banks for I.P.O. of German Property Assets  |Â
BLOOMBERG NEWS
Private Equity Giants Look to Attract Individual Investors  | The Carlyle Group, the Blackstone Group and K.K.R. are lowering an investment threshold or offering new products in an effort to attract individuals, Bloomberg News writes.
BLOOMBERG NEWS
Rubenstein Warns Over Cyprus  | “Cyprus is 0.2 percent of the E.U.’s gross domestic product so it’s insignificant. The real thing that has resonated around the world is that for the first time, people realized that governments could come in and wipe out their bank accounts,†David Rubenstein, co-chief executive of the Carlyle Group, said at a Thomson Reuters event.
REUTERS
As Assets Shrink, Investment Firm Moves to Liquidate  | Once managing $14.45 billion, Stark Investments, which is based in Wisconsin, is winding down its hedge funds, according to Absolute Return.
ABSOLUTE RETURN
Harvard’s Investment Chief Expresses Confidence  | Reuters reports: “Even as many investors move into index funds, Harvard University is confident that it can keep posting above-average returns with actively managed investments, the head of the school’s investment arm said on Wednesday.â€
REUTERS
With a Phone, Facebook’s International Push  | Facebook is expected to introduce a phone on Thursday, as part of an effort to make money from users in emerging markets, The New York Times reports.
NEW YORK TIMES
Zynga Introduces Gambling in Britain  | Zynga’s stock price rose substantially on Wednesday after the company began to allow residents of Britain to gamble with real money online.
TECHCRUNCH
Shares of Moleskine Fall Modestly in Trading Debut  | Shares of the vintage notebook company rose in trading in Milan on Wednesday as much as 3.9 percent before falling back slightly to close at 2.28 euros a share, down 0.87 percent from its offering price.
DealBook »
A League Table for Apps  | “The Billboard of the mobile era, the app charts are something all technology investors should follow to understand who is up and who is down in the smartphone age,†The Wall Street Journal’s Heard on the Street column writes.
WALL STREET JOURNAL
German Authorities Are Said to Investigate Deutsche Bank  | The Bundesbank is sending a team to New York next week to look into allegations that Deutsche Bank hid billions of dollars in losses to avoid a potential bailout during the financial crisis, according to people with direct knowledge of the matter.
DealBook »
Former Goldman Trader Pleads Guilty to Wire Fraud  | Matthew M. Taylor admitted to fabricating trades to conceal a risky position that led to about $120 million in losses for the bank.
DealBook »
Report Faults ‘at All Costs’ Attitude at Barclays  | The push to change Barclays from a predominantly British retail bank to a global financial giant created a culture that put profits before customers, an independent review has found.
DealBook »
Barclays’ Need for a Culture Change  | Changing the banking culture at Barclays will take time and will require perseverance, Dominic Elliott of Reuters Breakingviews writes. It will also require deftness of touch.
REUTERS BREAKINGVIEWS
In Russia, Searching for Irish Billionaire’s Assets  | The New York Times reports: “The Irish Bank Resolution Company is working with one of Russia’s largest banks to help find and seize assets in the former Soviet Union that belong to Sean Quinn, a bankrupt Irish billionaire who was once Ireland’s richest man.â€
NEW YORK TIMES
