financial crisis

Detroit's future is in the hands of U.S. Bankruptcy Judge Steven W. Rhodes, the New York Times reports: If the judge "approves a blueprint drawn up by Detroit officials to eliminate more than $7 billion of its estimated $18 billion in debts and to invest about $1.5 billion into the city’s now dismal services, it will mark the beginning of the end of the nation’s largest-ever municipal bankruptcy. The outcome will set this troubled city’s new course for the coming decades, perhaps longer." Rhodes must decide if the plan is equitable, feasible and in the best interests of creditors, the Times also reports.

The Wall Street Journal reports that Bank of America is going to pay a record settlement of $17 billion over its mortgage lending: "The deal will resolve a government investigation that stems largely from the bank's purchases of Merrill Lynch & Co. and Countrywide Financial Corp. as they teetered in the housing crisis." More than $9 billion is expected to be in cash, WSJ further reports.

Judge Steven W. Rhodes of United States Bankruptcy Court blocked Detroit's plan to "pay $165 million to two big banks to extricate itself from some long-term financial contracts that have been costing the bankrupt city tens of millions of dollars a year," The New York Times reports. The judge said that the payment is too expensive.

The judge's rejection of the payout was a surprise, The Times further reports. The judge said that, instead of paying the $165 million to Bank of America and UBS to get out of interest-rate swap contracts (that are using Detroit's tax dollars earned from local casinos as collateral), Detroit could sue to get out of the contracts.

Wall Street banks are being investigated by federal authorities on whether they "deliberately mispricing a type of mortgage bond that was central to the economic turmoil," The Wall Street Journal reports. Its the first "known wide-ranging examination of mortgage-bond sales by banks in the years that followed," The Journal reports. The investigation could upset the financial recovery those institutions have made, but it also could bring some accountability regarding the mortgage-sparked 2008 financial crisis.

In another financial development, JPMorgan has agreed to settle for $2 billion criminal charges that it failed to alert the government about Bernie Madoff's Ponzi scheme, The Washington Post reports.
 

Five financial regulatory agencies approved the Volcker rule Tuesday, The Wall Street Journal reports. The rule could "lop as much as $10 billion total in yearly pretax profit from the eight largest U.S. banks through lower revenue and higher compliance costs, according to estimates from Standard & Poor's," The Journal further reports. On the other hand, the rule aims to prevent another financial crisis by curbing proprietary trading through curbing "banks' ability to bet with their own capital" and forcing "them to draw bright lines separating trades for clients from trades to limit their risks and so-called proprietary bets," The Journal also reports. 

"Proprietary trading helped fuel the financial-services industry's climb to dizzying heights in the years leading up to the financial crisis—and created millionaires within the biggest banks," The Journal further reports.

The rule goes into effect April 1.

Five regulatory agencies are going to be voting today on the Volcker rule, which limits the ability of banks to invest in hedge funds or trade the money they hold for their own gain, The New York Times reports. Meanwhile, "lobbyists for Wall Street banks and business trade groups," including the U.S. Chamber of Commerce, are hinting that they will litigate to undercut the rule, The Times further reports.

At the same time as the financial sector plans to fight the rule to some extent, "Wall Street is also throwing resources into compliance.  Banks are writing new compliance manuals, training their traders and rewriting computer programs that effectively automate whether a trade is out of bounds under the Volcker Rule," The Times also reports.

The five agencies are the Federal Reserve, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation and the Comptroller of the Currency.

The Justice Department has asked the U.S. Supreme Court to take up a case involving Argentina and its defaulted debt, Global Post reports. Lawyers for the federal government argue Second Circuit precedent giving "hedge fund bondholders the power to pursue the country's non-US assets was wrong," Global Post further reports.

The Justice Department's brief increases the chance the justices will grant certiorari, Global Post also reports.

JPMorgan Chase and federal govermental officials have finalized a $13 billion settlement, which is the largest settlement with the goverment on record, The Wall Street Journal reports. The settlement resolves much of the legal liability JPMorgan faces for its role, or the role played by companies it bought up, in the economic crisis after mortgage-backed securities went south despite promises of their strength as an investment vehicle. Part of the settlement includes $4 billion in aid for distressed homeowners, the WSJ also reports.

Gretchen Morgenson, a columnist for The New York Times, writes that the approval of a $8.5 billion settlement between Bank of American and 22 investors in mortgage-backed securities could set the standard for what duty trustees have to protect investors. Morgenson writes: "Trustees for asset-backed securities have a duty to ensure that the companies administering them, known as servicers, do right by the investors who own them. But testimony in the case, known as an Article 77 proceeding, indicates that during months of settlement talks, Bank of New York Mellon did not do all it could to ensure that all investors holding the Countrywide securities got the best deal possible from Bank of America. If the settlement is blessed by the justice, Barbara R. Kapnick, the standard for acceptable behavior by a trustee on behalf of investors will be low indeed. Her ruling will undoubtedly be cited as a precedent for other similar mortgage matters waiting to be heard."

JPMorgan has struck a tentative $13 billion deal to resolve civil claims related to various alleged financial wrongdoings, including paying for homeowner mortgage relief, Bloomberg reports. U.S. Attorney General Eric Holder refuses to release the investment bank for any criminal liability. "The settlement would amount to more than half of JPMorgan’s record $21.3 billion profit last year, or 1.5 times what the firm’s corporate and investment bank set aside to pay employees during this year’s first nine months," Bloomberg also reports.

Bloomberg's data shows America's six largest banks have spent $100 billion in legal costs since the 2008 financial crisis.