Daily Archives: April 25, 2016

Deutsche Bank leader cleared of fraud allegations

MUNICH, Germany, April 25 (UPI) — Deutsche Bank Co-CEO Jürgen Fitschen was cleared Monday of allegations he gave false testimony in a legal dispute involving Kirch Media Group that lasted more than a decade.

Fitschen and other former bank executives were accused of giving false testimony in a civil suit in connection with the collapse of German media mogul Leo Kirch’s company. The court also dismissed charges against Fitschen’s predecessors, Rolf Breuer and Josef Ackermann, and two other former management board members, Clemens Boersig and Tessen von Heydebreck.

“The accusations weren’t substantiated,” said Peter Noll, the presiding judge. Prosecutors have one week to appeal the ruling.

Read on.

Why Is the Obama Administration Trying to Keep 11,000 Documents Sealed?

*Update: Ironically, one of the very first memoranda Barack Obama wrote as president was about the Freedom of Information Act, and contained language very similar to Judge Sweeney’s. “The Government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears.” (Hat-tip to analyst Josh Rosner for pointing this out.)

It’s not quite the Panama papers, but one hell of a big pile of carefully guarded secrets may soon be made public.

For years now, the federal government has been quietly fighting to keep a lid on an 11,000-document cache of government communications relating to financial policy. The sheer breadth of the effort to keep this material secret may not have a precedent in modern presidential times.

“It’s the mother of all privilege logs,” explains one lawyer connected with the case.

The Obama administration invoked executive privilege, attorney-client and deliberative process over these documents and insisted that their release would negatively impact global financial markets. But in finally unsealing some of these materials last week, a federal judge named Margaret Sweeney said the government’s sole motivation was avoiding embarrassment.

“Instead of harm to the Nation resulting from disclosure, the only ‘harm’ presented is the potential for criticism,” Sweeney wrote. “The court will not condone the misuse of a protective order as a shield to insulate public officials from criticism in the way they execute their public duties.”*

So what’s so embarrassing? Mainly, it’s a sordid history of the government’s seizure of mortgage giants Fannie Mae and Freddie Mac, also known as the government-sponsored enterprises, or GSEs.

Read more: http://www.rollingstone.com/politics/news/why-is-the-obama-administration-trying-to-keep-11-000-documents-sealed-20160418#ixzz46rXYM2Gb

Should mortgage lenders consider payday loans?

The answer should be no!

Housingwire:

Mortgage loans are out of fashion with some big banks these days because of the high cost of originating a loan. Jamie Dimon, CEO at JPMorgan Chase, openly questioned why the bank is still in the mortgage business in the company’s shareholder letter, citing “increasingly lower returns.”

But lenders looking for better results with other lending products have limited options. As this article in the May issue of the Atlantic shows, the same regulators that have driven up mortgage loan origination costs are now training their sights on payday lenders.

Payday lending rules proposed by the Consumer Financial Protection Bureauwould prevent consumers from re-borrowing to pay the interest on these loans, but has other consequences that hurt both lenders and consumers.

But the industry argues that the (CFPB’s) rules would put it out of business. And while a self-serving howl of pain is precisely what you’d expect from any industry under government fire, this appears, based on the business model, to be true—not only would the regulations eliminate the very loans from which the industry makes its money, but they would also introduce significant new underwriting expenses on every loan.

Panama Papers shed light on corporate secrecy in United States

Star Tribune:

It took a massive leak of secret records from a Panama City law firm to reveal the global scope of tax evasion, profit offshoring and money laundering.

The scandal from the “Panama Papers” has already brought down a head of state, sparked numerous investigations and ensnared sports figures, ruling families and politicians from democratic and autocratic states alike.

The investigation led by the International Consortium of Investigative Journalists has also focused attention on shell corporations. These are companies with no employees or business activities that can help hide the true origin and destination of money.

Such is a peril of allowing business too much privacy.

Panama, the Cayman Islands and other offshore tax shelters have their American counterparts in such states as Nevada, Delaware and Wyoming. There, the shell company of choice is typically the limited liability company, or LLC.

An LLC is easy to register and depending on the state, requires little information about its true owners. In 2006, the U.S. Treasury Department warned that LLCs can be exploited to launder ill-gotten money or finance terrorism, and it faulted states for failing to ensure these LLCs aren’t used for illicit purposes.

In New York, LLCs have come under criticism for allowing foreigners to buy luxury Manhattan properties while avoiding taxes. In Iowa, the Quad-City Times newspaper published an editorial April 7 headlined: “Who needs Panama: Iowa, Illinois cater to shell companies.”

The editorial noted that Iowa asks only four questions on its LLC registration form, none of which identifies an actual person who will own or run the business.

Minnesota requires a bit more information than Iowa when an LLC is formed. The Minnesota secretary of state requires “the names and addresses of the organizers/incorporators, the registered office of the entity, and the registered office and the registered agent if they have designated one,” according to Ryan Furlong, a spokesman for the office.

Every year companies have to renew their registration, and on those they have to list their CEO, Furlong said in an e-mail. But “Minnesota law does not require that companies disclose who owns or operates the company either at the time of filing or later.”

Since 2005, more than 265,000 LLCs have been registered in Minnesota. The public can get very basic information on these companies online and can pay a fee to see the articles of incorporation and other records.

60 Minutes segment: Members of Congress dialing for dollars

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NRCC’s “2016 March Dinner Call Diagram”

CBS NEWS
Unbelievable. Just unbelievable… If you want to know why Congress and your own lawmaker that represent your state aren’t doing their job on Capitol Hill, this is must watch from Sunday’s 60 Minutes segment…
Click to watch video. Click here.

60 Minutes:

The following is a script from “Dialing for Dollars” which aired on April 24, 2016. Norah O’Donnell is the correspondent. Patricia Shevlin and Miles Doran, producers.

The American public has a low opinion of Congress. Only 14 percent think it’s doing a good job. But Congress has excelled in one way. Raising money. Members of Congress raised more than a billion dollars for their 2014 election. And they never stop.

Nearly every day, they spend hours on the phone asking supporters and even total strangers for campaign donations — hours spent away from the jobs they were elected to do. The pressure on candidates to raise money has ratcheted up since the Supreme Court’s Citizens United decision in 2010. That allowed unlimited spending by corporations, unions and individuals in elections. So our attention was caught by a proposal from a Republican congressman that would stop members of Congress from dialing for dollars. Given what it costs to get elected today, it’s either a courageous act, a campaign ploy or political suicide.

[David Jolly 2014 special election victory speech: Tonight is not about claiming victory. Tonight is about committing to service.]

Florida Republican David Jolly won a special election to Congress in March 2014. Facing a reelection bid that November, he was happy to get a lesson in fundraising from a member of his party’s leadership. But he was surprised by what he learned.

Rep. David Jolly: We sat behind closed doors at one of the party headquarter back rooms in front of a white board where the equation was drawn out. You have six months until the election. Break that down to having to raise $2 million in the next six months. And your job, new member of Congress, is to raise $18,000 a day. Your first responsibility is to make sure you hit $18,000 a day.

Norah O’Donnell: Your first responsibility–

Rep. David Jolly: My first responsibility–

Norah O’Donnell: –as a congressman?

Rep. David Jolly: –as a sitting member of Congress.

Norah O’Donnell: How were you supposed to raise $18,000 a day?

Rep. David Jolly: Simply by calling people, cold-calling a list that fundraisers put in front of you, you’re presented with their biography. So please call John. He’s married to Sally. His daughter, Emma, just graduated from high school. They gave $18,000 last year to different candidates. They can give you $1,000 too if you ask them to. And they put you on the phone. And it’s a script.

There are actually scripts for calls. We got our hands on one distributed by the National Republican Congressional Committee to help GOP members invite donors to attend their annual fundraising dinner in March.

Three Reasons Why “Too-Big-to-Fail” Banks Need to Be Broken Up

Truthout:

There are three big reasons that indicate that breaking down some of the largest banks would be a step in the right direction.

Too Big, Too Risky

In 1999, President Bill Clinton passed the Gramm-Leach-Bliley Act, which allowed the integration of basic banking activities with investment banking. At that time, the Glass-Steagall Act (established in 1933 in response to the Great Depression) had already been repealed as a result of lobbying efforts by some of the biggest banks. These lobbying efforts had significantly increased from the 1970s, and the bill to repeal the Glass-Steagall Act was passed in the 1980s.

On March 27, 2008, in his speech at the Cooper Union, then-presidential candidate Barack Obama said, “A regulatory structure set up for banks in the 1930s needed to change. But by the time the Glass-Steagall Act was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework…. Unfortunately, instead of establishing a 21st-century regulatory framework, we simply dismantled the old one, thereby encouraging a winner-take-all, anything-goes environment that helped foster devastating dislocations in our economy.”

Critics of the Glass-Steagall Act were of the opinion that the act could not have prevented the financial collapse in 2008, since the “real” offenders of the financial crisis were not the banks, but non-banks like Bear Stearns and Lehman Brothers, which had “bank-like” qualities. Supporters of the Glass-Steagall Act say that if the act had stayed in its place, banks wouldn’t be permitted to indulge in speculative trading in the shadow of traditional banks and such loans would not have been made.

Prof. Robert Reich, who was US secretary of labor under President Clinton, has argued that the non-banks received funding from big banks through such means as mortgages and letters of credit. Reich maintained that if the Glass-Steagall Act had been in effect, then the big banks could not have given funding to non-banks. He further adds that it might have prevented the crash. The quick rise of shadow banks (firms with bank-like activities) gave way to risky activities and could have been regulated only if the Glass-Steagall Act were not repealed.

Too Big, Too Powerful

Lobbyists legally tend to influence a decision-making body for their own special interests through campaign finance. Some of the biggest banks have been associated with large political donations and campaign donations. A study, titled “A Fistful of Dollars: Lobbying and the Financial Crisis,” published in 2011 by the National Bureau of Economic Research, reports that “the political influence of the financial industry played a role in the accumulation of risks, and hence, contributed to the financial crisis.” An example cited by the report shows that Citigroup had spent $3 million on lobbying against the Predatory Lending Consumer Protection Act of 2001 that never became a law. Citigroup received $45 billion worth of bailout funds.

Huge lobbying efforts come easily to big banks due to a large capital base, which can potentially influence the process of the financial regulatory system. The implications of lobbying efforts on financial regulation can be huge, and lobbying has influenced laws like the Glass-Steagall Act and slowed the process of the Dodd-Frank Wall Street Reform and Consumer Protection Act. An apt example of huge lobbying efforts was the repeal of Glass-Steagall that was backed by a $300 million lobbying effort. After the 2008 crisis, strong lobbying efforts were made to slow down the passage of the Dodd-Frank bill. The Nation reported that more than $1 billion was spent on lobbying against the Dodd-Frank bill.

A letter released in November 2015 by Sen. Elizabeth Warren (D-Massachusetts) and Rep. Elijah E. Cummings (D-Maryland) revealed that portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act were repealed in 2014. This repeal allows FDIC-insured banks to hold $10 trillion in “risky swap trades.”

According to the Center for Responsive Politics, the securities and investment industry spent nearly $74 million on lobbying in the first three-quarters of 2014. In 2013, The Nation reported that as many as 3,000 lobbyists were sent in “hopes of killing off pieces of the proposed bill” (now known as the Dodd-Frank Act). In the 2013-14 election cycle, Wall Street banks and financial interests had reportedly spent more than $1.2 billion to influence decision-making in Washington, according toAmericans for Financial Reform.

Too Big to Jail

A report released by Elizabeth Warren in 2015 shows how “federal regulators regularly let big corporations and their highly paid executives off the hook when they break the law.” Some of the many banking scandals, including many G-SIBs (global systemically important banks) have dated back to the subprime mortgage crisis. According to Reuters, a state and a federal working group has reached settlements with four major financial institutions since 2012: JPMorgan Chase ($13 billion), Bank of America ($16.6 billion), Citibank ($7 billion) and Morgan Stanley ($3.2 billion). Because big banks have complicated banking structures and are interconnected with risky activities, their exposure to multibillion-dollar scandals is not a surprise. According to a report by Labaton Sucharow LLP, one-third of bank employees with less than 20 years in the industry are willing to engage in “insider trading to make $10 million, if there was no chance of being arrested.”

The sizes of some of the largest banks are so huge that they surpass the GDPs of certain countries, and convictions for such crimes are numbered. Since the banks are huge, it is difficult and complicated to retrace the origin of banking crimes. With billions being lost in scandals, the ones found guilty pay huge fines to settle the charges against them, with very few convicted. Typically, following such settlements, the bank executives at high positions step down. On April 11, 2016, the US Department of Justice, along with federal and state partners, announced a $5.06 billion settlement with Goldman Sachs related to its role in the “packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.”

Bad News For Canadians: “You Have 30 Days To Close Your Account”

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Source: Zerohedge