Lehman Brothers was broke for almost two years before it ultimately collapsed. It was kept afloat only as a result of a series of improper and increasingly massive short-term loans from JPMorgan — loans that JPMorgan was able to make only by turning a blind eye to accounting and underwriting rules. Specifically, JPMorgan treated Lehman Brothers customer funds deposited at the bank as if they were collateral, something the rules of both trading and banking say you can never do. After the Lehman Brothers collapse, JPMorgan froze the customer funds for two weeks, again a violation of the same rules. The Commodity Futures Trading Commission (CFTC) announced a $20 million settlement with JPMorgan this week in connection with these violations. JPMorgan also agreed to change its operating practices so that it cannot make similar errors in the future. Separately, the CFTC is looking into similar lapses that may have occurred during the final week of MF Global.
Treasury has been selling off its TARP holdings, with smaller profits than it had predicted, but smaller losses than the skeptics had expected. CEO salaries at Treasury-owned businesses, including Ally Financial, are being capped around the $10 million level again this year.
A federal court has approved the mortgage practices settlement between five giant banks and 49 states. Under the terms of the settlement, the banks will institute operational changes including the requirement of a single point of contact at the bank for borrowers before and throughout the foreclosure process.
