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Foreclosures, Private Capital, Deutsche Post: Compliance

U.S. states probing foreclosure practices revised a nationwide settlement proposal after banks and eight Republican attorneys general objected to mortgage loan principal cuts, two people familiar with the talks said.

The provision of the original 27-page term-sheet submitted by the states and Justice Department would encourage defaults, the banks and eight attorneys general said, with four of them calling the requirement a “moral hazard.” Revisions of the proposal reflect earlier talks with the banks, one of the people said, without disclosing terms of the new accord.

The new terms were sent last week to lenders including Bank of America Corp. and JPMorgan Chase & Co. Republican attorneys general were expected to meet yesterday in Atlanta to discuss the issue, said Adam Temple of the Republican State Leadership Committee. A representative of the American Bankers Association will address them, he said.

The seven-month probe by all 50 states was triggered by claims of faulty foreclosure practices after the housing collapse, which state officials said may violate their laws.

In addition to Bank of America and JPMorgan, Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. are involved in talks with the states. The five banks control more than half of the mortgage-servicing market, Iowa Attorney General Tom Miller, who leads the state probe, has said.

Miller, a Democrat, didn’t return a call seeking comment on the new proposal. Jumana Bauwens, a spokeswoman for Bank of America, didn’t immediately respond to an e-mail. Thomas Kelly, a spokesman for New York-based JPMorgan, declined to comment.

For more, click here.

Compliance Policy

Schapiro Says SEC Reviewing Rules on Stakes in Nonpublic Firms

The U.S. Securities and Exchange Commission is studying whether growth of closely held companies is being hindered by limits on the number of shareholders they can have, SEC Chairman Mary Schapiro said.

The agency’s staff is reviewing a rule that requires firms with more than 499 shareholders to disclose financial information, as well as other restrictions on how private firms can solicit investors, Schapiro said yesterday in remarks prepared for a House Oversight and Government Reform Committee hearing on the future of capital formation. The SEC is forming a committee on small and emerging firms to contribute to the review, she said.

“Companies seeking access to capital should not be overburdened by unnecessary or superfluous regulations,” Schapiro said in her statement. “At the same time, while we have an important responsibility to facilitate growing companies’ access to America’s investment capital, we must balance that responsibility with our obligation to protect investors and our markets.”

The SEC sharpened its focus on how unlisted companies raise money after Goldman Sachs Group Inc. halted a planned offering of as much as $1.5 billion in Facebook Inc. to U.S. investors over concerns that “immense media attention” could violate SEC rules that limit marketing of private securities. That decision showed the increasing difficulty in raising private capital, Representative Darrell Issa, the California Republican who leads the House panel, said in a statement May 9.

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Lawmakers Press Apple, Google on Smartphone Users’ Privacy

Apple Inc. and Google Inc. defended their use of customers’ location data gathered from millions of smartphones in responding to questions from U.S. lawmakers about how the two companies protect consumer privacy.

Representatives of Apple and Google, makers of software used in millions of smartphones, appeared in Congress yesterday as lawmakers consider new online privacy rules that could alter how they operate. The hearing was called by Senator Al Franken, a Minnesota Democrat, to review whether use of location-based data violates consumers’ privacy after an April report that Apple’s iPhone was logging certain location information.

Lawmakers are trying to determine what rules are needed to be put in place in the new era of mobile devices that are as powerful as earlier personal computers. The iPhone was introduced in 2007 and Google’s Android software is used by companies including Samsung Electronics Co. and Motorola Mobility Holdings Inc.

Apple, Google and other companies use location data to deliver targeted advertising and help customers find nearby businesses. The U.S. market for location-based services, including applications and advertising, is expected to increase to $4.7 billion by 2015 from $1.6 billion in 2010, according to ABI Research, an Oyster Bay, New York-based research firm.

For more, click here, and see Interviews section, below.

U.K. Plans Stronger Media Regulation, Reviews Privacy Laws

U.K. Culture Secretary Jeremy Hunt said he plans to expand regulation of all media amid controversy over the use of the Internet to override super-injunctions used by prominent people to prevent adverse publicity.

Celebrities who won court orders blocking British newspapers from publishing stories about their private lives are finding their legal protection invalidated after an anonymous user of Twitter Inc. posted a series of messages May 8 making allegations detailing the activities they sought to keep out of the public eye.

Hunt said he plans to start a public consultation next week on the contents of a new bill on communications regulation. It might entail bringing Web-based media into line with laws governing newspapers and broadcasters.

At the same time, Justice Secretary Kenneth Clark is awaiting the results of an inquiry by a senior judge before deciding how to proceed with reforming privacy laws. That report by the Master of the Rolls, David Neuberger, is scheduled to be published this month. Hunt said he and Clark will work together on the future of the law on privacy.

For more, click here.

Insurance Solvency Rules May Hurt Bonds, Fitch Survey Says

Solvency II rules governing the amount of capital insurers must hold against investments will hurt corporate bonds, according to 46 percent of respondents in Fitch Ratings’ quarterly European fixed-income investor survey.

Forty-two percent said there would be “no real impact” and 12 percent said the regulations would be positive for bonds, Fitch said in a statement.

Solvency II is a regulatory framework for European insurers that is expected to come into effect in January 2013, Fitch said in the statement.

Singapore to Lure More Hedge Funds on Asia Growth, MAS Says

Singapore is attracting more global hedge funds that are drawn to Asia’s economic growth as the regulator seeks to further develop the industry, including building up fund administration services.

Global managers including Fortress Investment Group LLC and Algebris Investments LLP have set up in Singapore as Asia’s economic growth outpaces the world. The region now has as many millionaires as Europe and they are set to increase allocations to alternative investments, including hedge funds, to 8 percent of their portfolios this year, from 5 percent in 2009, according to a Capgemini SA and Merrill Lynch & Co. report.

“We continue to see interest from fund managers as well as alternative investment managers, including global and indigenous hedge funds, which add diversity to the broader asset management industry,” Ng Nam Sin, assistant managing director of the Monetary Authority of Singapore, wrote in an e-mailed response to questions.

Improved fundamentals in emerging Asian economies and the search for higher yields, with low interest rates in advanced economies, have fueled capital flows into the region, Ng said.

Singapore has made it easier for hedge funds to set up shop on the island than in other Asian cities such as Hong Kong, where hedge-fund managers face the same licensing requirements as mutual-fund managers. While Singapore is introducing new rules to increase oversight of the industry, small funds can keep operating without a license. Hong Kong and Singapore are the two biggest centers for hedge funds in Asia.

Compliance Action

FDIC Seeks Comment on Rule Governing Retail Forex Transactions

The Federal Deposit Insurance Corp. will seek comment on a measure that would govern banks’ off-exchange foreign currency transactions with retail customers, part of the agency’s rulemaking under the Dodd-Frank Act.

FDIC board members voted 5-0 at a meeting in Washington yesterday to seek comment on the proposal, which would impose requirements for foreign currency futures and options that would be prohibited as of July 16 in the absence of a rule. The FDIC proposal would cover retail transactions involving individuals with $10 million or less to invest, the agency said.

The measure wouldn’t apply to foreign currency forwards or spot transactions that banks engage in with business customers to hedge foreign exchange risk, according to the FDIC’s notice of proposed rulemaking.

Yesterday’s vote by the FDIC board approves sending the measure out for public comment for 30 days after its publication in the Federal Register.

Deutsche Post Faces Wider EU State-Aid Probe Over Pensions

Deutsche Post AG, Europe’s largest mail carrier, faces an expanded state-subsidy investigation by European Union regulators over payments from the German government to cover workers’ pension costs.

Subsidies and an increase in regulated postage prices to cover pensions for workers with civil-servant status may harm rivals that may pay 10 percent to 15 percent more in contributions, the European Commission said in an e-mailed statement yesterday.

Deutsche Post called the EU allegations “baseless” and said there have been no new facts since a related 2002 decision was dismissed, Dirk Klasen, a spokesman for the Bonn, Germany-based company said by phone. Deutsche Post said yesterday that it contributed 542 million euros ($778 million) to a pension fund for the company’s civil servants in the first quarter.

The probe broadens the scope of an investigation that started in 2007 into “all public measures, such as transfers of public money and tariff income” granted to Deutsche Post and its predecessor Postdienst since 1989.


Calderon Says Mexico Must Fix Monopolistic Practices

Mexican President Felipe Calderon said big companies, including ones in the telecommunications industry owned by billionaire Carlos Slim, need to be better regulated for anti-competitive behavior.

Calderon, who spoke with Julianna Goldman on Bloomberg Television’s “InBusiness With Margaret Brennan,” also discussed President Barack Obama’s efforts to revamp U.S. immigration laws.

For the video, click here.

ECB’s Bini Smaghi Says Debt Restructuring Would Be ‘Wrong’

European Central Bank Executive Board member Lorenzo Bini Smaghi said allowing a euro-area member state to default on or restructure its debt would create more problems than it solves.

“Default or debt restructuring is a dramatic economic and social event for the country which experiences it -- I would call it political ‘suicide’ -- which leads many into poverty, as experience has shown,” Bini Smaghi said in a speech in Florence yesterday. While at first sight it might seem reasonable and fair to ask investors to bear the consequences of their decisions, “it is wrong not only in theory but also in practice,” he said.

Bini Smaghi’s comments come after Greece’s credit rating on May 9 was cut two levels to B from BB- by Standard & Poor’s, which said further reductions are possible as the risk of default rises. Euro-region officials said after an unscheduled May 6 meeting in Luxembourg that Greece needs “a further adjustment program.”

Bini Smaghi said large investors who bought insurance against sovereign default “stand to benefit greatly from the default and lobby in favor of it.”

For more, click here.

Sullivan Says Google Disclosed Location Data Gathering

Danny Sullivan, editor-in-chief at Search Engine Land, talked about yesterday’s Senate Judiciary subcommittee hearing into Apple Inc. and Google Inc.’s handling of mobile-phone user-location data.

He spoke with Cory Johnson on Bloomberg Television’s “Bloomberg West.”

For the video, click here.

Barnier Says European Union Needs to Examine Bank Pay, Bonuses

Michel Barnier, the European Union’s financial services commissioner, said EU regulators need to examine “shortcomings” in banks’ policies for pay and bonuses.

“We have to look at pay and bonuses at the moment and the shortcomings of that,” Barnier said at the European Parliament in Strasbourg, France, yesterday.

EU regulators approved laws to curb incentives for excessive risk-taking last year, imposing limits on cash payouts and the size of bankers’ bonuses. The rules allow bankers to receive about 25 percent of their bonuses in immediate cash payouts and require the rest to be deferred or held in shares for a minimum of three years.

Barnier told the EU Parliament last month that bonuses required further action.

Comings and Goings

JPMorgan Hires Citigroup Compliance Head for Home Lending

JPMorgan Chase & Co., the second-largest U.S. bank by assets, hired Citigroup Inc. Chief Compliance Officer Cindy Armine to step up oversight of its home-lending unit.

Armine is leaving Citigroup after 31 years to become chief control officer of the mortgage division at New York-based JPMorgan, according to internal memos from both companies confirmed by Kristin Lemkau at JPMorgan and Shannon Bell at Citigroup.

Dow Jones Newswires reported the appointment early in the day yesterday.

The bank is among the 14 largest U.S. mortgage servicers in negotiations to end regulators’ probes into the use of faulty documents in foreclosure proceedings. JPMorgan also agreed last month to pay $56 million and to reduce mortgage rates for all deployed military personnel to settle claims it overcharged service families for their home loans.

Armine will oversee a consent agreement the bank reached with the Office of the Comptroller of the Currency and Federal Reserve over its foreclosure practices, the JPMorgan memo said.

Merkel ‘Could Back’ Draghi as Trichet’s Successor at ECB

German Chancellor Angela Merkel agreed to back Mario Draghi as the next president of the European Central Bank, leaving the Bank of Italy governor unopposed by Europe’s political leaders.

“I know Mario Draghi,” Merkel told the Die Zeit newspaper in an interview published today. “He’s a very interesting and experienced person. He’s very close to our ideas of the stability culture and solid economic policy. Germany could support his candidacy for the office of the ECB president.”

Merkel’s remarks, her first on the ECB succession, were confirmed by the Chancellery and her chief spokesman, Steffen Seibert. “That’s exactly what she said,” Seibert said in a text message.

Germany is the last of the four biggest euro-region countries to endorse Draghi after France, Italy and Spain signaled their support. Draghi became the frontrunner for Germany’s support when Germany’s contender, then-Bundesbank President Axel Weber, pulled out in February.

The eight-year term of the ECB’s current president, Jean-Claude Trichet, ends in October, creating an opening at the top of the world’s second-most powerful central bank after the U.S. Federal Reserve. While Germany alone cannot dictate who wins the post, its status as Europe’s largest economy and biggest guarantor of aid to peripheral euro countries make it the dominant voice in the appointment.

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