Daily Archives: April 11, 2016

Bank of America Merrill Lynch pulls mortgages, servicing from PHH

Just three months after Bank of America and PHH renewed their agreement for PHH to continue servicing Merrill Lynch clients, BofA decided to pull the origination of new applications for certain mortgages; both of the moves take the mortgages into internal operations.

PHH disclosed the information earlier today to investors.

This change represents about 20% of Merrill Lynch’s closing dollar volume, and about 5% of PHH’s closing dollar volume. Merrill Lynch will now perform these new mortgages internally starting on April 25, 2016.  Merrill Lynch’s closing volume accounted for about 26% of PHH’s total volume for 2015.

In December, Bank of America Merrill Lynch agreed to continue using PHH’s services starting on January 1, 2016, however the terms of the agreement were not disclosed.

PHH received no assurances regarding the remainder of the Merrill Lynch origination activity, which could also be subject to change at any time during 2016 or beyond.

Read on.

Panama Papers: Corporations Shifted A Half-Trillion Dollars To Offshore Tax Havens In 2012

With the recent release of millions of secret documents from a Panama law firm that helps corporations and wealthy individuals reduce their tax liability, the spotlight is trained anew on tax avoidance. Companies with offshore outposts typically argue that those subsidiaries serve a legitimate business purpose. But now, on the heels of the global Panama Papers scandal, anew report suggests that in many cases the primary goal must be tax avoidance.

According to a review of the most recent IRS data by the watchdog group Citizens for Tax Justice, American corporations in 2012 housed more than a half-trillion dollars’ worth of profits in just 10 small nations. The group said the smoking-gun proof that the schemes are about tax avoidance comes from Bermuda, the Cayman Islands, the Bahamas and Luxembourg, where the profits reported by U.S. corporations were larger than the entire reported gross domestic product of those countries.

“It is obviously impossible for American corporations to earn profits in a given country that exceed that country’s total output of goods and services,” the report concluded. “Clearly, American corporations are using various tax gimmicks to shift profits earned in the U.S. and other countries where they do the bulk of their business into their subsidiaries in these tiny countries that impose little or no tax on corporate profits.”

Read on.

Mexico’s Promise to Investigate 33 Individuals Linked To The Panama Papers Is Met With Skepticism

Mexican tax authorities said last week they will investigate 33 prominent Mexican businessmen and former officials linked to the Panama Papers, a massive leak of documents on the world of offshore financing used frequently by many of the richest and most powerful around the globe.

Parts of the data were published on April 3 by the International Consortium of Investigative Journalists (ICIJ), a Washington-based nonprofit anti-corruption investigative group, and 100 other international news organizations—including Proceso and the Aristegui Noticias in Mexico.

Read on.

JPMorgan’s Dimon: America needs big banks


Star Tribute:

The chief executive of the largest bank in the United States took time in his annual shareholders letter to enumerate the benefits of banks like his not just for American multinationals and countries around the world, but also for community banks. He mentioned neither Sen. Bernie Sanders — who has pledged to break up the big banks as part of his presidential campaign — nor Kashkari in the letter, but warned generally against picking fights with large financial institutions.

“America faces enough real challenges without inventing conflict where none need exist,” Dimon said. “Banks of all sizes do themselves and their stakeholders better service by acknowledging the specific value different types of institutions offer.”

Kashkari, who has now been president of the Minneapolis Fed for just over three months, caused a stir in February when he said he and the economists at the regional bank would come up with a plan by the end of the year for ending “too big to fail.” A first symposium was held in early April, attracting economists from across the country. A second forum will be held May 16, at which former Fed Chairman Ben Bernanke is scheduled to speak.

Executives at big banks and their national trade groups have so far not participated in Kashkari’s effort or said much publicly, though with JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and U.S. Bank all slated to report their quarterly earnings in the next 10 days, executives are likely to get questions on Kashkari’s initiative.

Dimon was the first to weigh in. In the midst of his 50-page letter, Dimon’s answer to the question “Does the United States really need large banks?” took four pages.

He argued that banking as an industry accounts for a smaller share of the economy in the United States than in most large, developed nations. Also, the top five U.S. banks hold a smaller share of the nation’s banking assets than do the largest banks in other countries.

Dimon also laid out the ways big banks help the American economy. They allow public companies, many of them multinationals, to pay and get paid for goods and services all over the world. They extend lines of credit to these firms, and raise capital for them — often in multiple countries in multiple currencies.

Goldman Sachs to Pay Billions in Fines Related to the Financial Crisis, but Nobody’s Going to Jail

Isn’t that the truth…And this another example of a financial firm that admits that they misled their own investors (just like Wells Fargo settlement last week that admitted that they misled their investors in mortgage sales) and yet no criminal charges in both cases.

Vice News:

In the complaints released Monday, the Department of Justice accused Goldman of misleading its own investors as to the strength of its mortgage-backed securities it was selling between 2005-2007. In 2006, for example, Goldman purchased a package of mortgages from a company called New Century Mortgage Corporation. Goldman’s own employees reviewed the loans and flagged them for “extremely aggressive underwriting” practices — meaning New Century’s employees were selling mortgages to buyers who couldn’t afford them, using shoddy documentations, and dubious financial models.
Internally, Goldman then took a close look at a third of those New Century Loans, to see if they were truly healthy investments. It decided to drop a full quarter of them, because they lacked key documents or listed incomes of borrowers that suggested the loans would go into default. The firm then stopped its internal review process, and sold the remaining 75 percent of the New Century loans to investors without saying anything about the problems it had encountered.

The DOJ identified this behavior as a violation of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) — a key financial regulation that sets out a 10 year statute of limitations for fraud. “One of our leading financial institutions that it did not live up to the representations it made to investors about the products it was selling,” said US Attorney Benjamin B. Wagner, explaining Mondays settlement.

The Department of Justice, however declined to name a single individual at Goldman Sachs responsible for the misconduct. That’s despite a new policy directive issued in September, 2015 that declared the DOJ would make “individual accountability” a centerpiece of its financial crime investigations. That policy, enshrined in a memo written by Deputy Attorney General Sally Yates, seemed to direct the DOJ against large financial settlements, and towards individual prosecutions. “In the short term certain cases against individuals will not provide as robust of a monetary return,” Yates wrote, while advising DOJ staffers that “pursuing individual action will result in significant long term deterrence.”

The DOJ still reserves the option to pursue individual action against Goldman executives, but no such case has yet been made public.

So far, other major financial financial institutions have paid out big fines, but financial executives have managed to evade punishment. While JPMorgan Chase paid $13.3 billion in 2013, Bank of America paid $16.6 billion in 2014, and Citi paid a $7 billion settlement in 2014 — no major executives of any of these financial institutions have faced a criminal investigation.

Bartlett Naylor, a former chief of investigations for the US Senate Banking Committee, says that today’s Goldman Settlement seems to suggest the Yates memo hasn’t shifted the DOJ’s strategy. “It’s disappointing that no individuals seem to be identified in this investigation,” Naylor, who now works for as the Financial Policy Advocate for Public Citizen, said. “We were led to believe from the Yates memo, that we would not see settlements without names identified.”

Driving While Black: Cops Target Minority Drivers in This Mostly White New Jersey Town

Anecdotal experience suggests that race matters when you get behind the wheel: minority drivers are more likely to get stopped and pulled over by police than white drivers.

A group of law students at Seton Hall University in New Jersey recently tested that conventional wisdom. When New Jersey police officers issue a traffic ticket, they are required to fill out driver’s name, age, eye color, residence, license plate, and so on, but are not required to record their race or ethnicity. Determining whether tickets were being issued disproportionately to black or Latino drivers meant that the researchers had to collect that data themselves. They spent four weeks last October sitting in on traffic court hearings in Bloomfield, a small township in New Jersey.

The hearings take place twice a day. Researchers sat in on about 70 hours of hearings and observed 855 ticketed individuals, according to their report. During their observations, they made note of the ethnicity, age, gender, and area of residence for each person who showed up.

Bloomfield is an affluent, predominantly white suburb that lies northwest of Newark. CNN Money once deemed it “one of the best places to live” due to low crime rates, and it’s beendescribed as the kind of town that evokes a particular kind of American sentimentality — duck crossing signs, picnicking families, ice cream parlors, and little chapels with green lawns.

The selection of the town was fairly random, according to Mark Denbeaux, the professor who led the study out of the law school’s Center for Policy and Research, which he directs. Students wanted to look closely at a border town, meaning one that is surrounded by a variety of demographics, and one that was easily accessible from Seton Hall.

‘Black men have to sit there and eat shit.’

Just south of Bloomfield lies East Orange, which is over 88 percent black, and Newark, which is 53 percent black and 34 percent Latino. Newark and East Orange are ranked the fifth and sixth poorest towns in New Jersey, respectively. Bloomfield’s other bordering towns — Glen Ridge, Nutley, Clifton, Montclair, and Belleville — are almost entirely white, and relatively affluent.

The researchers found that black and Latino drivers were being disproportionately ticketed, accounting for 78 percent of court appearances for traffic violations despite comprising roughly 43 percent of Bloomfield’s population. Drawing on a database of tickets issued by Bloomfield Police between September 2014 and August 2015, they determined that almost 84 percent of 7,110 traffic tickets with verifiable addresses had occurred in the areas around East Orange and Newark.

Read on.

The boss of Revenue & Customs (HMRC) ‘linked to firm named in Panama Papers’

Edward Troup worked at a firm whose clients have included the Panama-registered Blairmore Holdings, according to a report.

The boss of Revenue & Customs (HMRC), which is to oversee an inquiry into the so-called Panama Papers, was a partner at a top City law firm that acted for Blairmore Holdings and other offshore companies named in the leak, according to a report.

In what is a further embarrassment for the Government, it was revealed that Edward Troup, executive chair of HMRC since April, is a former partner at Simmons & Simmons, whose clients have included the Panama-registered fund created by David Cameron’s father, Ian, The Guardian reported.

Mr Cameron announced at the weekend that HMRC would be working with the National Crime Agency to lead a “world-class” taskforce to investigate allegations of tax dodging and money laundering brought to light by the leak of 11.5 million files from the Panama law firm Mossack Fonseca.

Read on.