Financial Crisis News Center

Chairman Towns' Statement on Bank of America Decision Regarding Documents

This story appeared in Bank Digest.

Government Reform Committee Chairman Edolphus Towns, D-N.Y. released a statement on Bank of America's decision regarding documents related to the Committee's investigation of the Bank of America-Merrill Lynch merger.

Fed Grants Regulatory Reporting Relief

This story appeared in Bank Digest.

The Federal Reserve Board has granted temporary relief from the agency’s regulatory reporting requirements for bank holding companies to CIT Group Inc., New York, N.Y. The bank holding company sough the relief so as to include information regarding its debt restructuring process in its regulatory reports and filings with the Securities and Exchange Commission.

Frank Circulates Draft Legislation on Consumer Financial Protection

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

House Financial Services Chair Barney Frank is circulating draft legislation establishing a new independent federal consumer financial protection agency with power to prohibit unfair and deceptive practices in connection with a consumer financial transaction for a product or service and to mandate disclosure to consumers of the costs, benefits, and risks associated with any financial product or service. Broadly, the Director of the new agency would have a legislative mandate to promote transparency, simplicity, fairness, accountability, and equal access in the market for consumer financial products or services.

Kucinich Questions Bank of America

This story appeared in Bank Digest.

“There is considerable evidence that Bank of America violated securities law in withholding from its shareholders information known to Bank of America about mounting losses at Merrill Lynch. Shareholders did not receive this information until after they voted to approve the merger. The question remains whether Bank of America executives willfully chose to violate securities laws, or received advice from outside counsel to violate the law. Resolving this question is critical to restoring the accountability of corporate management to its investors,” stated Domestic Policy Subcommittee Chairman Dennis Kucinich, D-Ohio, after Bank of America failed to meet a deadline to submit documents to the Oversight and Government Reform Committee. The Oversight Committee has requested documents about internal discussions concerning Bank of America's acquisition of Merrill Lynch.

SEC Chair Outlines Efforts Promoting Sound Corporate Governance in Line with Global Principles

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

Noting that poor corporate governance contributed to the current financial crisis, SEC Chair Mary Schapiro detailed steps the Commission is taking to enhance transparency and accountability in the governance of public companies. In her keynote address at the Transatlantic Corporate Governance conference, the SEC official said that the Commission is working to improve the accountability of corporate managers to the owners of the company. She emphasized that the SEC is operating with an invigorating sense of urgency.

SEC Adopts New Credit Rating Agency Rules, Proposes Additional Rules

This story appeared in SEC Today

The SEC yesterday unanimously approved six initiatives aimed at strengthening the regulatory framework for nationally recognized statistical rating organizations. The SEC adopted rules to require NRSROs to provide more information about their rating histories and to allow competing credit rating agencies to offer unsolicited ratings for structured finance products by giving them access to the same data. The SEC also adopted amendments to certain rules and forms to remove a number of references to credit ratings.

In opening remarks, SEC Chair Mary Schapiro noted that investors often consider credit ratings in deciding whether to purchase or sell a security. These ratings did not serve them well over the last few years, she said. The SEC's rule adoptions and proposals are intended to improve the reliability and integrity of the ratings process. Schapiro reported that there are currently 10 NRSROs registered with the Commission. Commissioner Kathleen Casey noted that more are "waiting in the wings."

Court Disapproves Proposed Settlement of SEC Action Against Bank of America

This story appeared in Jim Hamilton's World of Securities Regulation

A federal judge has disapproved the proposed consent settlement of an SEC enforcement action against Bank of America upon finding that the settlement was neither fair, nor reasonable, nor adequate. It was not fair because it did not comport with the most elemental notions of justice and morality in that it proposed that the shareholders who were the victim’s of the bank’s alleged misconduct now pay the penalty for that misconduct. It was inadequate because the injunctive relief is pointless and $33 million is a trivial penalty for a false statement that materially infected a multi-billion-dollar merger. Finally, the court emphasized that a proposal asking the victims to pay a fine for their having been victimized is unreasonable. SEC v. Bank of America, SD NY, 09 Civ. 6829.

SEC Brief Defends BoA Consent Settlement before Federal Judge

This story appeared in Jim Hamilton's World of Securities Regulation

The SEC has filed a reply memorandum in federal court defending its consent settlement in the Bank of America enforcement action. The Commission believes that the proposed disposition is reasonable and in the public interest. The charges comport with the evidence as applied against the applicable legal standard and the proposed relief, including the penalty amount, takes full account of the seriousness of the violation and the need for deterrence, while giving serious consideration to all other relevant factors.

House Set to Pass Legislation Requiring SEC, PCAOB and FASB Annual Testimony

This story appeared in Jim Hamilton's World of Securities Regulation

The House is expected to pass this week bi-partisan legislation requiring the Chairs of the PCAOB, the SEC, and the FASB to testify annually before Congress on accounting and auditing issues, beginning this year. The Promoting Transparency in Financial Reporting Act was passed in the 110th Congress as part of the Securities Act of 2008 (HR 6513), but was never taken up by the Senate. The current version, HR 2664, is stand-alone legislation introduced by Rep. Christopher Lee.

Fed Must Produce Documents on Securities Relating to Its Lending Programs; FOIA Exemptions Not Available

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

Rejecting claims of FOIA exemption privileges, a federal judge has ordered the Federal Reserve Board to produce documents about the Federal Reserve System’s extraordinary actions taken in early 2008 during one of the worst financial crisis in the nation’s history. The information, requested by two financial reporters, involves securities posted as collateral to, among other things, the Primary Dealer Credit Facility, the discount window, and the Term Securities Lending Facility, as well as documents on the portfolio securities, listed on a security by security basis, supporting the loan extended by the Fed in connection with the proposed acquisition of Bear Stearns by JP Morgan Chase.