Wells Fargo will pay $1.2 billion to settle deceptive mortgage practices. The bank obtained federal insurance on thousands of defective mortgage loans by hiding risks and irregularities. The deal announced today had been in the works for about a year.
Did the $81 million stolen from the Bangladesh central bank’s account at the Fed end up in China? That’s what investigators in the Philippines believe after tracking down half of the money in the accounts of two Chinese citizens who were customers at casinos in Manila. The investigation continues.
There have been delays in the Greek bailout process, with the IMF leaking a document said to be critical of Greece’s efforts. The bailout terms called for the country’s biggest ports to be privatized, but the largest, Piraeus Port, will not end up in private hands after all. The high bidder is a Chinese state-controlled port operator, which will pay €368 million over 5 years for a 67 percent share in the port. The new owner will spend an additional €500 million to upgrade and expand the port, including a pier for larger cargo ships.
Years of austerity budgets in the United Kingdom, combined with low interest rates, has put the economy in a perilous state with excessive levels of both household debt and net imports. At best, this is a setup for years of stagnation as consumers pay down debts to a sustainable level.
Investigations are underway into the conduct of banks that did business with an offshore shell company agent in Panama, after details of asset-hiding, money laundering, and bribery arrangements came out in what are called the Panama Papers. U.K. banks have been asked to detail all business they may have done with the law firm at the center of the scandal. The U.K. prime minister has promised changes in the tax code but has to address his own conduct after being caught with unimaginable wealth stashed offshore and beyond the reach of tax authorities. In Iceland, the prime minister caught in a similar setup has already submitted his resignation. Switzerland has launched a criminal investigation because of the large number of agents based in Geneva who conducted transactions for shadow-money investors.
A change in U.S. tax rules on mergers took away the tax advantages of a pending big pharma merger, which would have been the second largest merger ever. With the tax avoidance strategy scuttled, the merger has been called off. As a result Wall Street banks lost an estimated $200 million in fees and surely millions more in securities bets. A similar European telecom merger plan fell apart last week, and a much smaller merger in U.S. office supplies, which would combine Staples and Office Depot, is being opposed by antitrust regulators and is now expected to be rejected in the end. Wall Street is likely to charge higher fees for future merger deals because of the risk of a failed deal. The higher fees, in turn, will make companies less eager to consider mergers and acquisitions. Investment banks have already made huge cuts because of recent declines in mergers and acquisitions, which hit a five-year low in the first quarter.
A parliamentary inquiry into the Malaysian state investment fund 1MDB found that managers at the fund improperly made deals without board approval. In other countries four giant banks are under investigation for their involvement in processing unexplained payment transactions which are thought to have been a combination of bribery and theft.
At least 4 percent of U.K. bank branches are likely to close this year according to a survey by Reuters. HSBC is expected to close 200 branches, with other banks together closing at least that many. Automation alone could cut bank staffing by 30 percent over the next 10 years, according to a Citigroup report, with most of those cuts taking place in branch offices. Adding to the pressure, banks could lose a significant part of their transaction business to technology companies in the coming years.
Banks are among the major corporations caught off guard by new discrimination laws passed this year by several southeastern states. Other corporations might complain about the laws, but can’t do much about them in practice. All giant banks, though, will be forced to close major facilities over the coming years in order to cut costs, and they may use those occasions to move operations out of the more hostile states.
Five Barclays employees are on trial for their role in rigging Libor rates. The evidence includes email messages that detailed traders’ speculation in interest rates and their influence on the Libor index to boost their trading gains. The defendants say that managers at the bank were actually at fault.
In a rare shadow-banking crackdown, police in China arrested 21 executives at Zhongjin Capital Management. The company has been closed ever since and client funds are frozen. The company is suspected of illegal fundraising, which could refer to any of a range of activities in selling securities in a deceptive, harmful, or otherwise prohibited way.
The NCUA liquidated six credit unions in the Philadelphia area. All were small workplace-oriented credit unions with operations provided by Service Center for Credit Unions, Inc., of Bensalem, Pennsylvania. The credit unions were Cardozo Lodge Federal Credit Union, Chester Upland School Employees Federal Credit Union, Electrical Inspectors Federal Credit Union, O P S EMP Federal Credit Union, Servco Federal Credit Union, and Triangle Interests % Service Center Federal Credit Union. Combined, they had 1,700 members.
Separately, last week in New York, Montauk Credit Union, which had been in conservatorship since October, was merged into Bethpage Federal Credit Union.
Also last week, state regulators in Michigan liquidated Veterans Health Administration Credit Union, and the NCUA transferred member accounts to Public Service Credit Union. The failed credit union had 1,300 members.