Banking

Citi slammed in Revlon loan blunder; Biden extends foreclosure freeze

Receiving Wide Coverage …

Finders keepers

A U.S. District Court judge “denied Citigroup’s request to claw back roughly $500 million it mistakenly paid out of its own pocket to investment firms that made loans to cosmetics giant Revlon,” the Wall Street Journal reported. Judge Jesse Furman, who called the mistake “one of the biggest blunders in banking history,” said “Brigade Capital Management and other Revlon lenders can keep the money they collected from Citi when the bank wired them the full amount they were owed instead of the small interest payment that was due.”

“The August blunder by Citi, Revlon’s loan agent, satisfied a nearly $900 million debt that Revlon wasn’t due to pay until 2023 and delivered an unexpected windfall to lenders on what had become an increasingly risky investment.” Citi said it “strongly disagreed with this decision and intends to appeal.”

The judge said Citi “indisputably transferred [the money] by mistake,” but said “he was bound by precedent to rule in favor” of the lenders, the Financial Times said. “New York law is explicit, he found: a recipient may keep funds transferred by mistake if they pay off a debt, the recipient did not know of the mistake and the recipient did not trick the sender into making the payment.”

Charged

The U.K.’s Financial Conduct Authority charged a former Goldman Sachs analyst and his lawyer brother “with fraud and insider trading after allegedly profiting from information about deals Goldman worked on,” the Journal reported. “Mohammed Zina was an analyst in the conflicts resolution group at Goldman Sachs when he allegedly used confidential information at the bank to make the equivalent of almost $200,000, or £142,000, with his brother on stock trades. He pleaded not guilty to the charges.”

“The alleged insider trading offences took place between July 2016 and December 2017 and involved trading in” six different companies, the FT said.

Another new high

Bitcoin “topped $50,000 for the first time Tuesday” and has now doubled in price less than two months, the Journal said. The digital currency’s “total market value in circulation [is now] close to $909 billion.” Washington Post

Wall Street Journal

More relief

The White House “extended a ban on home foreclosures for federally backed mortgages for another three months, through June 30. President Biden had earlier extended the moratorium, which had been set to expire at the end of January, until the end of March. The Biden administration also said it would give homeowners more time—through June 30—to enroll in a program to request a pause or a reduction in mortgage payments.”

“Homeowners will now be able to receive up to six months of additional mortgage payment forbearance, in increments of three months, for those borrowers who entered forbearance before June 30, 2020. Borrowers who enter into such plans can skip payments if they suffer a pandemic-related hardship but have to make them up later.”

See you, raise you

CoStar Group has made an offer to buy CoreLogic for about $6.9 billion, or nearly $96 a share. The proposed deal “would combine CoreLogic, one of the largest residential real-estate data companies, with CoStar, among the biggest providers of commercial real-estate information and analytics.”

Earlier this month, Stone Point Capital and Insight Partners offered $6 billion in cash to buy CoreLogic for $80 a share.

Test case

Wells Fargo wants to cut at least $8 billion from expenses “while also spending billions of dollars to remake the vast risk-and-control systems that regulators have said were inadequate to catch the fake-account scandal that got it in hot water more than four years ago.”

“How Wells Fargo fixes its back-end systems—and whether that clashes with other priorities—might hold clues for competitors as well. Wells came into the pandemic in worse financial shape than most large banks, but others must also modernize their controls while managing through the recession.”

Financial Times

Helping hand

The former head of Deutsche Bank’s Asian business and a member of its executive board “helped Wirecard forge business relationships in Asia until just months before its collapse, underlining the close ties between corporate Germany and the payments group at the heart of the country’s biggest accounting scandal in decades.”

Quotable

“To believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $1 billion, would have been borderline irrational.” — U.S. District Court Judge Jesse M. Furman, ruling against the bank, which accidently wired $500 million of its own money to Revlon lenders.



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