Iraq has a new government, Morgan Stanley agrees to a $95 million fine, and PayPal's digital arm will now accept bitcoins. Here are the top news stories of the day for September 9, 2014.
Morgan Stanley agrees to pay $95 Million
In order to resolve a lengthy lawsuit, Morgan Stanley has agreed to pay $95 million for misleading investors in mortgage-backed securities prior to the 2008 financial crisis. The settlement follows years of litigation by the Public Employees Retirement System of Mississippi and the West Virginia Investment Management Board, which claimed false and misleading statements were offered by Morgan Stanley about the securities. Morgan Stanley was accused of violating U.S. securities law in the way they packaged and sold mortgage backed securities in 13 offers in 2006 and 16 more offerings in 2007.
Iraq Approves New Government
Haider al-Abadi was named prime minister of Iraq Monday night as the Iraqi parliament approved a new government. Abadi is a Shi’ite Islamist, and he will lead a cabinet that includes the Shi’ite majority as well as Kurdish and Sunni minority members in an attempt to unify the country in the face of attack by the Islamic State fighters. Adel Abdel Mehdi, from the Islamic Supreme Council of Iraq, was named oil minister and Ibrahim Jaffarri, a former premier, was named foreign minister. A Kurd named Rowsch Shaways was named finance minister. No defense minister was named, although there are plans to have one in place within a week.
Digital PayPal to Accept Bitcoins
Braintree, the mobile payment processing arm of eBay-owned company PayPal, will allow merchants to use the digital currency bitcoin for transactions. In order to ease transactions for its major clients like Uber, Stubhub and Airbnb, Braintree said it will allow the virtual currency to be used as payment on any mobile device. The goal, according to Braintree CEO Bill Ready, is to give merchants flexibility and freedom of choice in payment methods. The bitcoin payment processing company Coinbase will pair with Braintree to provide the service.
Disney, Sony Face Wage Suppression Lawsuit
Walt Disney Co., Sony Pictures and other leading companies in the special effects and animation industry were named in a federal lawsuit Monday claiming they suppressed wages through a no-raid agreement on employees. Also named in the suit were DreamWorks Animation, Digital Domain and Image Movers. The class action suit says the defendants agreed not to steal employees from one another, which also prevented a rise and competition in wages. Disney has already paid $9 million in a settlement with salaried employees last year as part of a broader class action suit over no-raid agreements. The new class action suit is for technical, artistic, creative and research and development staffers and is not restricted to salaried employees. The lawsuit alleges the conspiracy to keep wages down dates back to 1986.
Small Business Optimism Up
The National Federal of Independent Business reports its Small Business Optimism Index rose 0.4 points to 96.1 for the month of August. The report suggests more business owners expect business conditions to improve in the coming months and are planning to increase capital spending. Of the 10 components in the index, eight improved or showed no change based on a random survey of 600 small business owners. The survey reported sluggish job growth, with owners planning to add just 0.02 workers per company, and fewer said they plan to hire more workers in the near future. The index remains four points below where it was before the fiscal crisis of 2008 began.
Federal Reserve to Sit On Banks
A top Federal official said the Federal Reserve is going to make changes to the rules regarding short-term debt funding, and will charge higher surcharges for the biggest banks than globally agreed rules allow. Governor Dan Tarullo said the Federal Reserve is working on three new sets of measures after unreliable funding practices created the banking mess prior to the 2008 recession. Tarullo, who will testify at a hearing of the Senate Banking Committee Tuesday, said “more needs to be done to guard against short-term wholesale funding risks ... volumes are still large relative to the size of the financial system." The Fed says it will require the largest banks to hold more equity capital proportional to the amount they rely on short-term funding.