Bloomberg News

FHFA Home Sales, EU Trade Rules, ‘Gekko’ Returns: Compliance

February 28, 2012

The Federal Housing Finance Agency will begin inviting bids from investors to buy packages of foreclosed properties to be offered as rentals.

The agency yesterday said it will send detailed information to investors who qualify to participate in the bulk-sales pilot program. Foreclosures will be marketed in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and parts of Florida, according to a statement posted by the agency on its website yesterday.

The program is limited to properties owned by Washington- based Fannie Mae, which sells and guarantees home loans. The subprime lending collapse left the company with more than 122,000 foreclosed homes, also known as real-estate-owned or REO, when loans that it guaranteed failed. Fannie Mae and its smaller rival, Freddie Mac, were taken under government conservatorship in 2008 amid mounting losses. Freddie Mac will not participate in the pilot programs.

Under the pilot program, the first large-scale bulk sales effort by FHFA, investors will agree to be equity partners with Fannie Mae. (FNMA)

The agency announced its intent to commence the program and invited investors to apply on Feb. 1.

To participate, investors must show that they have the experience and financial capacity to purchase and manage the properties, the agency said. Once they qualify, they’ll receive detailed information about the properties. To bid on the homes, qualified investors must post a security deposit and sign a confidentiality agreement to gain access to detailed information, according to the news release.

Compliance Policy

EU Seeks Power to Ban Firms From Its Public Procurement Market

The European Union’s executive will seek the power to block companies based outside the EU from bidding for public procurement contracts in Europe as part of plans to boost the bloc’s arsenal against trade discrimination.

The EU’s top financial-services and trade officials plan to propose next month that the European Commission in Brussels should have the power to ban companies from winning public procurement contracts in the region if they are based in countries that “repeatedly discriminate” against European firms, Chantal Hughes, a spokeswoman for the commission, said today in an e-mail.

The measure will be part of a broader proposal that will also clarify what access foreign companies get to EU public procurement markets through free-trade agreements and other accords, Hughes said. The aim of the initiative is to “re- establish a fair competition on the European market,” Hughes said.

The measure will be presented on March 21 by Financial Services Commissioner Michel Barnier and Trade Commissioner Karel De Gucht. It comes as the EU clashes with China over possible subsidies for Chinese steel exports.

Barnier Says EU Should Stop Bank-Lending Cuts Amid Capital Boost

Michel Barnier, the European Union’s financial services chief, called on national regulators to take “all necessary measures” to stop banks reducing loans to businesses and households in order to boost their capital.

Barnier made the remarks in a written response to a parliamentary question.

The European Central Bank’s decision in December to provide longer term loans to banks has “released some of the funding tensions” in the interbank-lending market, Barnier said in the response, which is dated Feb. 27. This should limit the risk of a “disruptive” reduction in lenders’ activities.

Regulators at the European Banking Authority are forcing some banks in the 27-nation region to boost their core capital to 9 percent of their assets, weighted for risk, to boost market confidence, in anticipation of capital rules agreed on in 2010 by the Basel Committee on Banking Supervision.

Thai Regulator to Tighten Rules on Bill of Exchange Sales

Thailand’s Securities and Exchange Commission will tighten rules on bill of exchange sales to help protect individual investors.

Companies must sell a minimum of at least 10 million baht for each bill of exchange, Vorapol Socatiyanurak, the regulator’s secretary-general, told a press briefing in Bangkok today. The new rule will take effect from July 1, he said.

The rule change came after commercial banks raised funds for loan expansion through short-term securities, which are not covered by deposit insurance, he said.

Compliance Action

California Seeks Fannie Mae, Freddie Mac Foreclosure Halt

California Attorney General Kamala Harris is seeking to suspend foreclosures on Fannie Mae and Freddie Mac (FMCC) loans.

In a letter to Edward DeMarco, acting director of the Federal Housing Finance Agency, Harris requested a suspension of foreclosure sales in California for the more than 60 percent of loans owned or guaranteed by Fannie Mae and Freddie Mac.

Harris wants the sales halted until “your agency has completed a thorough, transparent analysis of whether principal reduction is in the best interests of struggling homeowners as well as taxpayers,” according to the Feb. 24 letter.

More than 500,000 Californians have lost their homes to foreclosure since 2008, and another 500,000 homes are in the process, or at “imminent risk,” of foreclosure so far in 2012, Harris said in the letter.

Stefanie Johnson, a Federal Housing Finance Agency spokeswoman, didn’t immediately return a call seeking comment on the letter. The FHFA regulates Fannie Mae and Freddie Mac.

Separately, the Federal Reserve released documents showing how U.S. mortgage servicers pledged to overhaul faulty foreclosure practices that led to this month’s $25 billion settlement with state and federal authorities.

For more, click here.

Douglas’s Gordon Gekko Is FBI’s Latest Insider-Trading Crusader

Gordon Gekko, the character played by actor Michael Douglas in the movie “Wall Street,” is the New York FBI office’s newest weapon in its arsenal to combat insider trading.

The message from Douglas in a public service announcement set to be unveiled yesterday won’t be “Greed, for lack of a better word, is good.” In a first for the Federal Bureau of Investigation, Douglas, reprising his role in the 1987 film, will urge fund managers and Wall Street analysts to avoid taking the same route to the federal penitentiary as his character does, FBI Special Agent David Chaves said in an interview on Feb. 24.

Chaves, a supervisor of one of the FBI’s securities and commodities fraud units in New York, said some television stations have agreed to broadcast the spot.

Chaves and his fellow agents in New York are behind the insider-trading initiative called “Perfect Hedge,” in which they teamed up with the Manhattan U.S. Attorney’s office and the U.S. Securities and Exchange Commission to investigate the sources of inside tips and those profiting from them.

The five-year enforcement effort has yielded criminal charges against more than 60 people. More than 50 have either pleaded guilty or been convicted after trial in New York.

For more, click here.

China Baoan Says Under Regulator Probe for Disclosure Breach

China Baoan Group Co. (000009) received a notice yesterday from the China Securities Regulatory Commission which said the company will be investigated for infringement of disclosure rules, according to a statement the company filed to the Shenzhen Stock Exchange.

BPCE Unit Fined 800,000 Euros on Risk Controls, Les Echos Says

Groupe BPCE’s biggest regional banking unit was fined 800,000 euros ($1.1 million) by French regulators for inadequate market-risk controls, Les Echos reported, citing unidentified sources.

BRED, a unit of BPCE’s Banque Populaire, introduced increasingly complex products without beefing up its risk controls, the regulators found, according to the newspaper report. The regulators disclosed the penalty on Jan. 2 without naming the bank that was sanctioned, Les Echos said.

BRED spokeswoman Nathalie Avril wasn’t available for immediate comment.

SEC’s Ex-Top Lawyer to Repay $556,000 in Madoff Ponzi Funds

The family of David M. Becker, the former top lawyer for the U.S. Securities and Exchange Commission, agreed to pay $556,017 to settle claims over inherited money that was linked to Bernard Madoff’s Ponzi scheme.

The payment is equal to the entire amount of profits that Becker and his brothers inherited from a Madoff account held by their mother, who died in 2004, according to a statement yesterday by Amanda Remus, a spokeswoman for Irving H. Picard, the trustee liquidating Madoff’s firm.

Picard, in a November 2010 lawsuit filed in bankruptcy court in New York, had originally claimed that the Beckers received $1.5 million in fictitious profits.

Becker, who left the SEC in 2011 to return to private legal practice, faced criticism last year after Picard’s lawsuit was made public, suggesting he may have had a personal financial interest in policies he worked on at the SEC related to how Madoff customers should be compensated.

William Baker III, Becker’s attorney, said in an e-mailed statement yesterday that Becker made full disclosure of his mother’s account while he was at the SEC and followed the agency’s ethics procedures. Federal prosecutors declined to open a case on the matter.

Japan’s FSA to Start Nationwide Probe of Asset Managers

Japan’s Financial Services Agency will undertake a nationwide investigation of asset management companies, Financial Services Minister Shozaburo Jimi said.

Investment firms will be required to submit status reports, Jimi said at a news conference in Tokyo today. The FSA is probing 263 asset managers after it suspended AIJ Investment Advisors Co. (0202964D) for a month for incurring possible losses.

The agency is considering all possible preventative steps following AIJ’s case, Jimi said.

Courts

Speculation Limits Judge Says He’s ‘Skeptical’ of CFTC Rule

U.S. Commodity Futures Trading Commission arguments in support of the agency’s limits on speculation are being questioned by the judge presiding over a challenge to the rule by two Wall Street groups.

U.S. District Judge Robert Wilkins said during a hearing in Washington yesterday that he is “kind of skeptical” about mandated position limits.

The International Swaps and Derivatives Association Inc. and the Securities Industry and Financial Markets Association urged Wilkins to put the rule on hold while he considers their legal challenge. The groups argue that the CFTC never studied whether the regulation was “necessary and appropriate” or quantified the costs tied to implementing the rule.

The groups, in one of the financial industry’s highest- profile efforts to weaken 2010’s Dodd-Frank law, filed lawsuits in two federal courts in Washington in December challenging the rule setting caps on the number of contracts a trader can have.

Jonathan Marcus, a lawyer for the CFTC, said the harm some of the groups’ members claim they’ve incurred seeking to comply are “miniscule” when compared to the companies’ annual revenue and income.

Wilkins said he will issue a ruling “quickly.”

The agency voted 3-2 at an Oct. 18 meeting to approve the final regulation.

The case is International Swaps and Derivatives Association v. U.S. Commodity Futures Trading Commission, 11-02146, U.S. District Court, District of Columbia (Washington).

HSBC Says U.S. Money-Laundering Enforcement Measures ‘Likely’

HSBC Holdings Plc (HSBA), Europe’s largest bank, said U.S. prosecutors are likely to take criminal or civil enforcement measures involving the bank amid a money laundering probe.

The bank has been sent subpoenas and other requests for information by U.S. agencies including the U.S. Department of Justice and the U.S. Senate Permanent Subcommittee on Investigations relating to the Bank Secrecy Act, London-based HSBC said in a filing yesterday.

“The change in disclosure reflects the fact that some form of formal enforcement action is likely,” London-based spokesman Brendan McNamara said by phone yesterday. “We take compliance matters extremely seriously.”

The bank said on Jan. 25 it would cooperate with the U.S. Senate Permanent Subcommittee on Investigations probe and repeated its support of efforts to combat money laundering.

Ex-Nigerian Delta Governor Pleads Guilty to Money Laundering

Former Nigerian Delta State Governor James Ibori pleaded guilty in London to stealing millions of dollars from the West African nation while he was in power.

Ibori, who governed the state for eight years, entered the guilty pleas to 10 charges including money laundering and conspiracy to defraud yesterday, when his trial was scheduled to begin. Police estimate he embezzled $250 million to live “a life of luxury,” the U.K.’s Department for International Development said in a statement.

Interviews/Speeches

Levitt Praises Proposed Changes to Money Market Funds

Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission, said the money market mutual fund industry is “absolutely frantic” about proposed S.E.C. changes to bring fair value accounting to the industry.

Levitt talked with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”

For the audio, click here.

Geithner on EU Crisis, Iran Oil, U.S. Financial Reform

U.S. Treasury Secretary Timothy F. Geithner talked in Mexico City about Europe’s sovereign debt crisis following a meeting Group of 20 finance ministers and central bankers.

He also discussed the impact of new sanctions against Iran on oil, and changes in the U.S. financial-service industry.

For the video, click here.

Barnier Confident U.S. to Follow EU Basel 2.5 Implementation

Michel Barnier, the European Union’s financial services chief, said that he is confident that the U.S. will follow the EU’s lead in boosting how much capital banks must hold against assets they intend to trade and against securitizations.

The EU’s move was in line with an agreement in the Basel committee, Barnier told reporters yesterday in Brussels.

Separately, Barnier said that creating a public EU credit- ratings company would be a “costly matter.”

Lawmakers in the European Parliament are weighing including the establishment of an EU ratings company in a draft law on boosting competition to offer credit-rating assessments.

To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.


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