Setting The Stage

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62 | Th e M Rep o RT O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET LocaL edition Former trader Found guilty in Fraud case Christy romero Continues to pursue justiCe in tArp frAud CAses. connecticut // Christy Romero, special inspector general for the Troubled Asset Relief Program (SIGTARP), an- nounced in a press release that a federal jury in New Haven, Connecticut, has convicted Jesse C. Litvak, a registered broker- dealer and former managing director at New York invest- ment bank Jefferies & Co., Inc., of multiple offenses involving schemes to defraud customers trading in residential mortgage- based securities (RMBS). Litvak was convicted on all counts, including 10 counts of securities fraud, one count of de- frauding TARP, and four counts of making false statements. "This afternoon, Jesse Litvak, a former senior trader at New York investment bank Jefferies & Co., was convicted of lying through his teeth to defraud American taxpayers out of their hard-earned TARP investments," Romero said. Romero continued, "Trading in mortgage securities can be a complicated business, but what the defendant did was simple: he lied to, defrauded, and illegally overcharged customers out of pure greed to benefit Jefferies and himself." Litvak, as a broker-dealer, misrepresented the RMBS seller's asking price to the buyer and subsequently misrepresented the buyer's asking price to the seller. By creating a gap that did not exist, Litvak, on behalf of Jefferies, pocketed the difference. Additionally, Litvak took bonds held in Jefferies' inventory and sold them to RMBS buyers after inventing a fictitious third- party seller. "This ruse allowed Litvak to charge the buyer an extra commission that Jefferies was not entitled to because it was selling bonds it held in its own inventory," the release said. Litvak reportedly defrauded numerous funds for a total of more than $2 million. The release noted, "Litvak was found guilty of 10 counts of securities fraud, a charge that carries a maximum term of im- prisonment of 20 years on each count, one count of TARP fraud, which carries a maximum term of imprisonment of 10 years, and three counts of making false statements to the federal govern- ment, a charge that carries a maximum term of imprisonment of five years on each count." Freddie mac reports Q4 Profit; Will Pay $10B to treasury Gse Continues to report stronG ConseCutive quArters. Washington, D.c. // Freddie Mac released its quarterly earn- ings report for the end of 2013, revealing yet another strong quarter—the ninth straight. Net income at the enterprise totaled $8.6 billion in Q 4, bringing total 2013 profits up to $48.7 billion. According to the company, full-year earnings were spurred by the ongoing hous- ing recovery, legal settlements totaling $7.7 billion, and a tax benefit of $23.3 billion—meaning these levels of earnings won't be sustainable over the long term. For all of 2013, Freddie Mac reported providing liquidity for 1.6 million refinances; 515,000 home purchases; and 388,000 multifamily rental units. The company also reported nearly 168,000 total foreclosure avoid- ance actions, about half of which were loan modifications. Freddie's dividend pay- ment to Treasury will come to $10.4 billion, bringing its total government payments up to $81.8 billion, well above the $71.3 billion the company received in its crisis-era bailout. Per the GSEs' respective agreements with Treasury, each enterprise will continue to make payments despite having made taxpayers whole. The earnings report came one week after Fannie Mae revealed full-year earnings of $84 billion, including $6.5 billion in Q 4. Like Freddie, Fannie benefited

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