BUSINESS
02/06/2013 07:38 am ET

RBS To Settle Libor Allegations: Seven And A Half Things To Know

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Mark Gongloff is off the newsletter this week, so today's 7.5 Things are brought to you by Jillian Berman.

Thing One: Another Scandal, Another Wrist Slap: RBS will be the third bank to receive a wrist slap for allegedly rigging the Libor rate. Regulators are expected to announce today that the bank will pay $630 million to settle the claims, according to the Wall Street Journal. RBS follows Barclays and UBS in paying to dismiss allegations it manipulated Libor, which is integral to determining interest rates for a variety of products around the world. As part of the announcement, RBS will offer up its Japanese unit to plead guilty to criminal charges in the U.S., but the government probably won’t charge any individuals, according to the WSJ.

One RBS staffer is suffering a bit from the bank’s involvement in the Libor scandal though. The head of the bank’s investment arm, John Hourican, resigned and gave up 4 million pounds-worth of bonuses, according to the Financial Times. Though Hourican resigned over the scandal, he didn’t admit to being involved in it personally.

Amid the news of the Libor settlement, one British official is urging the government to do more take RBS off taxpayers’ hands, according to the Telegraph. Business Secretary Vince Cable wants the government to give away free shares of RBS to the public. The government currently owns an 82 percent stake in the bank. U.K.’s Finance Minister, George Osborne, has already said RBS must use bankers’ bonuses -- and not taxpayer dollars to pay any Libor fines.

Thing Two: Budget Battle! If only lawmakers were as tired of hearing themselves argue about the budget as we are. President Obama urged Congress yesterday to pass a package of limited tax increases and spending cuts to avoid automatic cuts to military and domestic spending known as the sequester. In typical fashion, Republican leaders responded by dismissing the President’s proposals, according to The New York Times. Don’t worry, you’re not the only one feeling like this back-and-forth dance is getting all too familiar; lawmakers and the president engaged in a similar exercise during the fiscal cliff debate and the debt ceiling standoff. Obama couched his warning this time in economic terms, saying that the economy would only continue to head in the right direction if Washington didn’t cause any more “self-inflicted wounds,” according to Bloomberg.

Adding urgency to the debate is the fact that the nation’s debt will rise to 77 percent of the economy if Congress doesn’t change any laws, according to the Congressional Budget Office. What’s more is that the debt could grow to a higher share of GDP, if the spending cuts are diluted or if Congress extends expiring tax breaks, according to the Wall Street Journal. And partisan lawmakers are far from reaching an agreement. Hopefully they’ll figure it out?

Thing Three: Dumb Wall Street Emails, S&P Edition: When will Wall Street workers learn that if you’re going to make fun of clients or products you sell you should probably do it verbally instead of over email? Here’s the latest example of the idiotic practice: S&P analysts knew their ratings on mortgage bonds were problematic for years, according to the government’s complaint against the company compiled largely by reading internal emails. One analyst even went as far as to write a parody of the Talking Heads’ “Bringing Down The House” mocking subprime mortgage bonds that the company gave high ratings, according to the lawsuit.

The lawsuit, which seeks $5 billion from S&P, depicts a world in which some executives tried to dilute ratings standards to boost profits, while others grew increasingly worried about the company lowering its standards, according to the New York Times.

For its part, S&P claims the company was making its best educated guess during a confusing time when it assigned top ratings to mortgage bonds that ultimately went sour, the company’s lawyer Floyd Abrams told CNBC Tuesday. He added that S&P’s estimates were the same as those of other ratings agencies and the government. Abrams additionally floated the theory that the government’s probe into S&P increased after the ratings agency downgraded the U.S.’s credit rating in 2011.

Thing Four: Facebook IPO Disaster Never Ends: Nasdaq may be asked to fork over a small pittance for botching one of the most-watched IPOs in history. The company is in talks with the Securities and Exchange Commission over a potential settlement related to the Facebook IPO disaster, according to the Wall Street Journal. It looks like Nasdaq will pay about $5 million in the settlement -- one percent of the $500 million its massive screw up cost investors. (The company has already to pay customers $62 million.) The SEC will announce at the end of March whether the company can move forward with the compensation plan, according to the Financial Times. If the agency fines Nasdaq, it would be the second time it has fined an exchange; the SEC charged NYSE Euronext $5 million in September to settle claims it gave certain customers a look at trading information in advance.

Thing Five: Health Insurers Try To Be Flexible: President Obama’s health care reform law means health insurance companies have to adjust to sell themselves to their new most important customer: You. After years of focusing their business models on attracting employers, health insurance companies are scrambling to figure out the best way to attract individual customers, according to The New York Times. Still, many are seeing the changes as an opportunity for growth, particularly when it comes to health care for the poor. With more low-income Americans switching back and forth between Medicaid and the health care exchanges, many companies are trying to position themselves “to get into the Medicaid space.”

Thing Six: Colleges Suing Students: Because paying for college isn’t hard enough, schools like Yale and the University of Pennsylvania are suing former students who have defaulted on their Perkins loans, according to Bloomberg. The Perkins loan, which is specifically designed for poor students, operates as a revolving fund, meaning that the record nearly $1 billion in Perkins loan defaults is jeopardizing the positions of current students relying on the program. The defaults on Perkins loans is part of a larger trend; the student loan default rate for recent college graduates nearly doubled between 2005 and 2010.

Thing Seven: Amazon Gets Into The Money Business: Amazon is getting into the currency business. The internet giant will soon start offering customers the opportunity to pay for apps and games available on Kindle Fire with Amazon Coins, according the Financial Times. Developers will get 70 percent of the currency, which Amazon will convert into dollars. The coins are part of a plan by Amazon to get customers invested in its own system of devices instead of Apple’s or Google’s.

Thing Seven And One Half: Here's Where You'll Sit In Traffic The Longest: Congratulations Washington D.C. residents, you're dealing with the worst traffic in the country. D.C. is followed by Los Angeles and San Francisco.

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Heard On The Tweets:

@ObsoleteDogma: "Hundred billion dollar deficits" doesn't quite have the same ring to it.

@pkedrosky: "What would I do? I'd shut it down and give the money back to the shareholders." - Michael Dell on Apple, Oct 6, 1997

@grossdm: British parliament to vote on gay marriage. . . far too late for Thomas the valet.

And you can follow us on Twitter, too, if you want, no pressure: @AlexisKleinman and @MarkGongloff

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