Rajat Gupta faces two years in prison for an insider trading conviction. Find out more about this and other top business stories of the day.
Fed Staying the Course
The Federal Reserve announced Wednesday that it will take no action as it assesses whether the aggressive steps it launched last month will help the economy. In a statement following its two-day policy meeting, the Fed cited moderate improvement in the economy, with slightly increased consumer spending and further gains for housing. But job growth as well as business investment has slowed, the unemployment rate, currently at 7.8 percent, remains elevated. In September, the Fed began buying mortgage bonds to try to push long-term interest rates lower and make home buying more affordable. It also said it planned to keep its benchmark short-term rate near zero through mid-2015.
S&P 500 Hits Seven-Week Low
U.S. Stocks erased gains yesterday after a lackluster report capping a two-day meeting of Federal Reserve policy makers, sending the Standard & Poor’s 500 to a seven week low, Bloomberg News reports. The S&P 500 fell 0.3 percent to 1,408.75, while the Dow Jones Industrial Average fell 0.2 percent to close at 13,077.34.
Facebook provided one bright spot in yesterday’s trading as its shares surged 19 percent on better than expected sales, Bloomberg reports. All-in-all the S&P 500 is down 3.9 percent from the year high reached on September 14, though the benchmark index remains up 12 percent for the year.
The Billion Dollar Hustle
Citing “spectacularly brazen” conduct, the top federal prosecutor in Manhattan sued Bank of America for more than $1 billion on Wednesday for mortgage fraud against Fannie Mae and Freddie Mac during the years around the financial crisis. This lawsuit is the first civil fraud suit brought by the Justice Department concerning loans that were later sold to Fannie and Freddie. Countrywide Financial, which was later bought by Bank of America, is accused of churning out mortgage loans from 2007 to 2009 without making sure that borrowers could afford them. According to the lawsuit, Countrywide used a process called "the Hustle," shorthand for "High-Speed Swim Lane." The idea was that mortgage loans, as they were being processed, would "move forward, never backward," CBS Moneywatch reports. The lawsuit alleges that Countrywide traded quantity for quality and eliminated underwriters, even from mortgage loans for which borrowers did not have to get their income verified. Bank of America had no immediate comment.
Barnes & Noble Victims of “Sophisticated” Crime
Barnes & Noble Inc. the nation’s largest bookseller, said Wednesday that the customer data breach in stories in nine states was “a sophisticated criminal effort.” The company cautioned customers to check for unauthorized transactions and to change their PIN numbers, and stated it is working with federal law enforcement authorities. PIN pads were tampered with in 63 stores in California, Florida, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Rhode Island. All the PIN pads in its nearly 700 stores nationwide were disconnected on Sept. 14, after the company learned of the tampering. Criminals planted bugs in the tampered devices, allowing for the capture of credit card and PIN numbers, the company said in a press release.
As New Car Sales Go Up, Used Car Prices Fall
Looking for a used car? Chances are you’ll pay less this month compared to last, according to a CNW Research report that shows used-car prices are falling as inventory grows, USA Today reports.
Theaverage price for a used car was $11,419 in October, down 0.34% from September, according to the report, though prices remain 0.22% higher compared to the same period in 2011. The biggest cut came from independent dealers who lowered their asking price by 3% from September to October.
The drop is attributed to an increase in trade-ins resulting from new car sales, and a higher turn-in rate for leased and commercial vehicles in an improving economy, USA Today reports.
Rajat Gupta Receives Two-Year Sentence
Rajat Gupta, a former board member at both Goldman Sachs and Procter & Gamble, was sentenced to two years in prison on Wednesday as part of an ongoing federal investigation into insider trading violations, CNN Money reports.
Gupta, who also chaired The Global Fund and was head of the McKinsey & Co. consulting firm, was found guilty of leaking information from Goldman board meetings to hedge fund manager Raj Rajaratnam in 2008. Rajaratnam is now serving an 11-year sentence for insider trading. Gupta also faces a $5 million fine and a year of supervised released, and must begin serving his sentence in January, according to CNN Money.
A total of 72 indictments and 69 guilty pleas or convictions have resulted since 2009 from the federal crackdown on insider trading.