In a dark cranny of the mortgage-servicing world a “force-placed insurance” scandal is brewing. When a homeowner’s insurance lapses, the servicer steps in and buys them a new one, at a price several factors higher than their original. And the company they buy it from is essentially themselves with a different name. Now investors are finding out about the incestuous self-dealing and kickbacks and they’re pissed. [More]
“Waterfall” provisions of asset backed securities are the rules that explain the flow of funds in the transaction, and they are are very hard to read. Blogger/professor Jayanth Varma calls them “horrendously complicated,” leading trustees to make mistakes or pull stunts that investors never expected. To remedy this, the SEC is proposing that the provisions be written in a programming language, filed on EDGAR, and made available as downloadable Python source code. [More]
The trustee who’s liquidating Bernie Madoff’s firm has released $534.2 million in repayments to some of his victims, reports Bloomberg. The half-billion is a drop in the bucket of total verified losses, which are now more than $21 billion. But hey, those 1,558 victims whose claims were approved for this partial payout are probaby pretty happy—which is more than you can say for the 2,500+ Madoff customers who may be sued to return fake profits.
Forget the bulls and bears. According to a recent news report, anthropologists are looking at a different group of animals for hints about how our “investor brains” evolved. Monkeys are the worst, as they get “easily excited at the next big investment opportunity in hopes of making a killing. Not much thought goes into what they do.” We assume anyone involved in flipping condos or speculating on dot-com stocks would qualify as a monkey.
Hey, this is getting kinda dramatic. Over in bankruptcy court land, Judge Arthur Gonzalez has decided to reveal the identities of the group of investors calling themselves “Non-TARP” lenders that are seeking to stop the auction of most of Chrysler’s assets to an entity managed by Fiat SpA, says Bloomberg.
The Ponz is everywhere! Seriously, was anyone doing any real investing over the past several years? John M. Donnelly of Charlottesville, Virginia, was arrested earlier this week and “indicted for fraudulently taking at least $11 million from as many as 31 investors in an alleged Ponzi scheme,” says their local paper the Hook. He was promising investors returns of up to 22% annually, but naturally had failed to make any investments with his clients’ money since 2002. One anonymous person—who may or may not have been a client, we don’t know—told the paper, “I visited his office once. He had a bunch of computers. It seemed like a very sophisticated operation.”
The website Scam Victims United warned its readers about last week’s arrested ponzi schemer, Nick Cosmo, nearly four months ago, based on a visit one of its forum members made to Cosmo’s office. Reuters points out that this site and others like it—Fraud Aid and Scam Warners, for example—are enjoying healthy traffic spikes right now, which is great news in the fight against fraud.
If you thought oil speculators as the reason behind the historic gas prices spikes of this summer was debunked, think again. From ’07 to when the price of oil collapsed, supply increased and demand dropped. According to basic economic theory, this should’ve meant the price went down. But all of a sudden an influx of capital, an infusion that brought the total at play from $13 billion to $300 billion, brought to market by large investment bankers, exploiting de-regulation and trading in black box private exchanges made possible by Enron, drove the price of oil from $69 to almost $150. A new 60 Minutes report explores the issue. Video inside.
Home Depot’s shareholder’s meeting was filled with investors requesting that the big orange home improvement giant improve its notoriously crappy customer service. Suggestions included improving employee pay to lure back quality workers who defected to Lowe’s, and hiring more “aprons.”
Mattel’s shareholders are upset. A pension fund in Michigan has filed a shareholder lawsuit against the company, claiming that they mishandled product safety procedures and were therefor responsible for 3 toy recalls this summer. The lawsuit also alleges that executives with knowledge of the defects sold $33 million in stock before the recalls were announced.