EIC/Wall Street investigations
Matthew's Feed
Jul 16, 2012

JPMorgan disclosed possible misconduct to feds ahead of earnings

NEW YORK (Reuters) – In a matter of days, the two-month-old criminal investigation into a $5.8 billion trading loss at JPMorgan Chase & Co. — known as the “London Whale” blunder — was transformed from dormant to potentially explosive.

Last Thursday, the day before JPMorgan reported its highly anticipated second-quarter earnings, the bank informed U.S. authorities that an internal investigation had found evidence that three London traders may have tried to hide the losses in some of their positions, said people familiar with the matter.

Jul 15, 2012
via Unstructured Finance

Eminent Domain reader

Jenn Ablan and I have done a lot reporting on Mortgage Resolution Partners’ plan to get county governments and cities to use eminent domain to seize and restructure underwater mortgages. As we’ve reported, it’s an intriguing solution to the seemingly intractable problem of too much mortgage debt holding back the U.S. economy. But it’s also a controversial one that threatens to rewrite basic contractual rights and the whole notion of how we view mortgages in this country.

And then there’s the issue of just who are are the financiers behind Mortgage Resolution Partners and whether they’ve gone about selling their plan in the right way.

Jul 13, 2012

California county began eminent domain talks in secret

By Matthew Goldstein and Jennifer Ablan

(Reuters) – Officials in California’s San Bernardino County began talking with a private investor group about a controversial proposal to condemn distressed mortgages back in January, some five months before the investor group’s involvement became public, county records show.

And after an initial telephone conference call on January 31, the investor group, Mortgage Resolution Partners, and the county signed an agreement to keep their communications secret, according to a copy of the February 9 agreement.

Jul 7, 2012
via Unstructured Finance

UF Weekend Reads

It’s Libor all the time, just not for me.

Earlier I blogged about how the Libor scandal just isn’t getting me as worked up as it is for other journalists (see Joe Nocera’s column today in the NYT). It’s not that I don’t think allegations of market manipulation aren’t important. And this is nothing to take away from the groundbreaking reporting by my Reuters colleague Carrick Mollenkamp did on the matter back in 2008 while he was at the WSJ.

It’s just that in the scheme of things, the allegation that bankers may have conspired to keep Libor artificially low to make their institutions seem more solvent during the height of the financial crisis doesn’t chill me to the bone. Did anyone really believe those institutions were solvent during the crisis? Does anyone really believe banks with hundreds of billions of second-liens on their books and other poorly reserved loans are really solvent today?

Jul 5, 2012
via Unstructured Finance

Hedge funds vs. darts

By Matthew Goldstein

The Wall Street Journal used to run a feature in which some of its staffers would periodically pick stocks by throwing darts against a target. The idea was to see how many times stock picking by pure chance could outperform the picks of a bunch of experts.

The WSJ ended the popular feature several years ago but maybe it’s time from someone to bring it back and this time use darts to try to outperform some of top hedge funds managers. That’s because with the average hedge fund up about 1.2% during the first-half of the year, it would seem an investor on his or her own could do just as well picking stocks blindfolded.

Jul 5, 2012
via Unstructured Finance

Libore? The real scandal is still CDOs

By Matthew Goldstein

There is an opaque financial market where pricing is determined by a cadre of Wall Street banks and private emails show that behind the scenes¬† many in the market don’t even believe in what they are doing.

The Libor price fixing scandal?¬† Sure. But what I’m talking about here is the market for the CDOs, which at the end of the day you can still argue did more harm to the world financial system than the allegations now emerging from the Libor scandal.

Jul 3, 2012
via Unstructured Finance

The Green Mountain saga: a cup of joe to go

By Matthew Goldstein

In some ways, the story of Green Mountain Coffee Roasters is one of those quirky only in Vermont business stories, with a founder who made a small fortune in the 1970s selling rolling papers to potheads and a board member who helped invent the sports bra. Yet at the same time, Green Mountain is very much a Wall Street saga, with all the requisite highs and lows for its stock and questions about where the fast-growing company is going.

And right now, with shares of Green Mountain trading around $20–down sharply from the all-time high of $115 reached last September–it’s the Wall Street story that matters most.

Jun 30, 2012
via Unstructured Finance

The eminent domain brush fire

By Matthew Goldstein

It didn’t take long for the powerful voices on Wall Street to rise up in protest over an intriguing and controversial idea to condemn distressed mortgages through local government’s power of eminent domain.

Two weeks after Jenn Ablan and I first reported that officials in San Bernardino County, Calif. were giving serious consideration to the novel idea being pushed by financier-backed Mortgage Resolution Partners, 18 financial trade groups are voicing strong objections. The groups, led by the Securities Industry and Financial Markets Association, are concerned that if local governments can seize underwater mortgages it might discourage bank lending. Why? The argument is that if it can happen now, who knows when local governments might move to condemn mortgages again–crisis or not.

Jun 29, 2012

U.S. investor groups oppose “condemn” mortgage fix

By Jennifer Ablan and Matthew Goldstein

(Reuters) – Some of the most powerful mortgage investors in the United States are lining up against a plan by several California local governments to forcibly purchase distressed mortgages to keep struggling residents in their homes.

Eighteen investment trade groups – including the Association of Mortgage Investors, Securities Industry and Financial Markets Association, American Bankers Association and the Investment Company Institute – sent a letter late Thursday warning the plan could prove counterproductive by scaring away future mortgage financing in those areas.

Jun 19, 2012
via Unstructured Finance

Eminent domain for underwater mortgages could have biggest impact on banks

By Matthew Goldstein

A controversial idea of using the power of eminent domain to seize underwater mortgages may hurt some of the nation’s biggest banks more than investors in mortgage-backed securities.

The reason is the process of condemning a mortgage in which a borrower owes more money than their homes are worth will likely result in a seizure of any home equity loan–or second lien–on that property as well. And that could spell trouble for many U.S. banks, which at the end of the first quarter had $700 billion in second liens on their books, according to SNL Financial.