As Ken Lewis prepares to defend himself from fraud charges in New York, the retired chief executive of Bank of America Corp. may be sheltered from personal financial loss by several layers of special insurance.

Legal and insurance experts say high-profile executives, such as Lewis, at large corporations are protected from serious financial harm in the case of a lawsuit because of cash set aside for their defense by the company and additional insurance, known as director’s and officer’s insurance. It has also been reported that recently Lewis individually secured additional insurance coverage for any damages not covered by the bank

Hank Paulson, the former US Treasury secretary who orchestrated America’s financial bailouts, has attacked President Barack Obama’s proposals to break up big banks and clamp down on their trading activities.

In an interview with The Sunday Times, Paulson said that the plans to stop banks from betting their own capital on the financial markets would “not solve the problem” or prevent a future crisis.

He also said that the world needed big banks to kick-start the global economy. Rather than breaking them up, regulators should focus on how to wind them down in times of crisis, he said, as recommended by Mervyn King, governor of the Bank of England.

Canada should be bracing itself for the reality that house prices are more likely to go down than up in the next few years, says former Bank of Canada governor David Dodge.

He is not taking sides in the simmering debate about whether there is a housing bubble in this country, noting that policy-makers are still struggling with a long-standing dilemma: you don't know a bubble until it bursts.

What he is saying is that prices are certainly strong enough that it would be wise for Ottawa to take action.

Credit specialists at Citi are considering launching the first derivatives intended to pay out in the event of a financial crisis. The firm has drawn up plans for a tradable liquidity index, known as the CLX, on which products could be structured that allow buyers to hedge a spike in funding costs.

Like the untraded US rates liquidity index (USRLI), the CLX is constructed as a sum of the Sharpe ratio – deviations from the mean divided by volatility – of various market factors, such as equity volatilities, Treasury rates, swap spreads, corporate bond swaption-implied volatilities, and structured credit spreads. Citi will make the CLX tradable by using fixed historical values for the mean and volatility parameters, eliminating the need for costly recomputation from lengthy time series.

Brookfield Asset Management is expanding its real estate holdings in major U.S. cities, including Dallas and Tampa.

The company announced that its real estate distress fund, Brookfield Real Estate Opportunity Fund, had purchased 16 office properties with 2.9 million square feet from JPMorgan Chase for $200 million U.S.

The properties were inherited by JPMorgan when they acquired financial services firms like Bear Stearns Co. and the banking operations of Washington Mutual.

There is an emerging consensus among financial experts and policy makers that the key to successful modifications is to reduce the amount of the borrower’s loan balance, rather than merely reducing the monthly payment. The goal is to lower the payment while restoring equity, thus giving borrowers both the means and the incentive to keep up with their payments.

Administration officials have resisted that approach, in part because they believe it would be too expensive. Another obstacle is the lenders themselves. In general, a lender is unwilling to take losses by reducing principal unless the owners of the second mortgage on a home also take a hit. For banks that own the second mortgages, such losses would be huge — something they clearly would prefer not to face up to.

While Freddie's funding needs are expected to be a relatively modest $10 billion to $20 billion, Fannie would need to raise about $60 billion, according to analysts at Barclays Capital.

Most of the debt will be issued as discount notes, which are short-term debt securities that are sold at a discount to their nominal value and mature at face value, Citi analysts said in a note. The government-sponsored enterprises typically use discount notes to raise cash quickly.

Fannie, however, is also likely to tap the debt market with notes that mature between two years and 10 years, analysts said.

"Renewed debt issuance–which will be well short of that $200 billion total–will re-energize domestic money-manager interest in the debt market," Jim Vogel, senior vice president at FTN Financial, wrote in a note. "It had been flagging since the fourth quarter of last year. We see better liquidity and more trading opportunities as a result."