Financial Services Update

October 16, 2010

Authored by: Matt Jessee

Bernanke Indicates New Fed Actions

Speaking Friday, Federal Reserve Bank Chairman Ben Bernanke indicated the central bank would take new actions to fight the high rate of unemployment.  The Fed’s most likely next move will be to resume large purchases of government debt to lower long-term interest rates but weaken the dollar.  Bernanke argued that by making credit even cheaper it will encourage businesses and consumers to borrow and spend which would eventually lower unemployment.  Bernanke’s comments suggest that the Federal Open Market Committee, which sets monetary policy, is likely to take new steps at its next meeting taking place November 2nd through 3rd.  Bernanke also indicated the Fed intends to keep short-term interest rates at nearly zero for even longer than the markets now expect.

Former Countrywide Executives Agree to Settlement with the SEC

On Friday, in a settlement with the SEC over charges of misleading shareholders, former Countrywide Financial CEO Angelo Mozilo agreed to repay $45 million in ill-gotten profits and $22.5 million in civil penalties, former president David Sambol agree to repay $5 million in ill-gotten profits and $520,000 in civil penalties, and former CFO Eric Sieracki agree to pay $130,000 in civil penalties.  Mozilo and the others were scheduled to face trial on the charges next week.  The civil complaint also accused Mozilo of acting on his inside knowledge of the company’s precarious state when he sold shares between November 2006 and October 2007 ahead of its collapse, reaping more than $139 million.  Under the agreement, the three men did not admit wrongdoing.

Federal Regulators Order Lenders to Correct Foreclosure Errors

In response to recent media reports that lenders may have used fraudulent paperwork or “robosigners” to evict struggling borrowers, on Wednesday, the Federal Housing Finance Agency (FHFA), which was established during the financial crisis to regulate Fannie Mae and Freddie Mac, released a policy statement telling lenders to make sure that documents used as part of the foreclosure process were properly reviewed and signed.  On Tuesday, Sen. Robert Menendez (D-NJ) sent letters to three banks, JP MorganChase, Bank of America and Ally Financial, which have halted foreclosures in 23 states, after evidence surfaced that their employees or outside lawyers signed documents without reading them.  Sen. Al Franken (D-MN) joined Menendez in requesting that Congress’ investigative arm, the Government Accountability Office, examine whether federal regulators overlooked problems at mortgage companies.

More Information

If you have questions regarding any of these issues, please contact:

Matt Jessee, Policy Advisor
matt.jessee@bryancave.com
1 314 259 2463