Tag Archive: UBS


US attorney general says banks under investigation not ‘too big to jail’

Eric Holder announced in video address that Justice Department pursuing criminal investigations of financial institutions

Eric Holder
While Holder did not name any banks, he said he is personally monitoring the ongoing investigations into financial institutions. Photo: Matt Rourke /AP

The US Justice Department is pursuing criminal investigations of financial institutions that could result in action in the coming weeks and months, US attorney general Eric Holder said in a video, adding that no company was “too big to jail.”

The comments, made in a video posted on the Justice Department’s website on Monday, came as federal prosecutors push two banks, BNP Paribas SA and Credit Suisse AG , to plead guilty to criminal charges to resolve investigations into sanctions and tax violations, respectively, according to people familiar with the probes.

While Holder did not name any banks, he said he is personally monitoring the ongoing investigations into financial institutions and is “resolved to seeing them through.”

“I intend to reaffirm the principle that no individual or entity that does harm to our economy is ever above the law,” Holder said in the video. “There is no such thing as ‘too big to jail.'”

French bank BNP Paribas warned last week it faces fines from US authorities in excess of $1.1bn over allegations that it violated US sanctions against Iran and other countries.

The Swiss finance minister met Holder on Friday to discuss a US probe into Swiss banks that allegedly helped Americans evade US taxes, which includes Credit Suisse.

While units of financial institutions have agreed to plead guilty to breaking US criminal laws, such agreements have usually involved foreign subsidiaries who have little contact with US regulators.

Japanese units of UBS AG and Royal Bank of Scotland plc, for example, pleaded guilty in the past two years to resolve criminal charges that their traders manipulated the Libor benchmark interest rate.

A criminal conviction of an entity regulated in the United States could lead authorities to potentially revoke a charter or undertake other punitive measures.

 

Read More Here

Enhanced by Zemanta

 The mortgage crisis, fueled by racially discriminatory lending practices, destroyed 53% of African American wealth and 66% of Hispanic wealth.    Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire on the backs of those who fell victim the first time around.   Where is the justice?

~Desert Rose~
……….

The Empire Strikes Back: How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme — Again

You can hardly turn on the television or open a newspaper without hearing about the nation’s impressive, much celebrated housing recovery. Home prices are rising! New construction has started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is brewing.(Cover for the book of the same title by Bryan M. Chavis)

Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.

Wall Street’s foreclosure crisis, which began in late 2007 and forced more than 10 million people from their homes, has created a paradoxical problem. Millions of evicted Americans need a safe place to live, even as millions of vacant, bank-owned houses are blighting neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution: It’s going to rent these foreclosed houses back to us. In the process, it’s devised a new form of securitization that could cause this whole plan to blow up — again.

Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.

In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That’s a spending rate of $100 million a week since October 2012. It recently announced plans to take the business international, beginning in foreclosure-ravaged Spain.

Few outside the finance industry have heard of Blackstone. Yet today, it’s the largest owner of single-family rental homes in the nation — and of a whole lot of other things, too. It owns part or all of the Hilton Hotel chain, Southern Cross Healthcare, Houghton Mifflin publishing house, the Weather Channel, Sea World, the arts and crafts chain Michael’s, Orangina, and dozens of other companies.

“In other words, if Blackstone makes money by capitalizing on the housing crisis, all these other Wall Street banks — generally regarded as the main culprits in creating the conditions that led to the foreclosure crisis in the first place — make money too.”

Blackstone manages more than $210 billion in assets, according to its 2012 Securities and Exchange Commission annual filing. It’s also a public company with a list of institutional owners that reads like a who’s who of companies recently implicated in lawsuits over the mortgage crisis, including Morgan Stanley, Citigroup, Deutsche Bank, UBS, Bank of America, Goldman Sachs, and of course JP Morgan Chase, which just settled a lawsuit with the Department of Justice over its risky and often illegal mortgage practices, agreeing to pay an unprecedented $13 billion fine.

In other words, if Blackstone makes money by capitalizing on the housing crisis, all these other Wall Street banks — generally regarded as the main culprits in creating the conditions that led to the foreclosure crisis in the first place — make money too.

An All-Cash Goliath

In neighborhoods across the country, many residents didn’t have to know what Blackstone was to realize that things were going seriously wrong.

Last year, Mark Alston, a real estate broker in Los Angeles, began noticing something strange happening. Home prices were rising. And they were rising fast — up 20% between October 2012 and the same month this year. In a normal market, rising home prices would mean increased demand from homebuyers. But here was the unnerving thing: the homeownership rate was dropping, the first sign for Alston that the market was somehow out of whack.

The second sign was the buyers themselves.

Click here to see a larger version

“I went two years without selling to a black family, and that wasn’t for lack of trying,” says Alston, whose business is concentrated in inner-city neighborhoods where the majority of residents are African American and Hispanic. Instead, all his buyers — every last one of them — were besuited businessmen. And weirder yet, they were all paying in cash.

Between 2005 and 2009, the mortgage crisis, fueled by racially discriminatory lending practices, destroyed 53% of African American wealth and 66% of Hispanic wealth, figures that stagger the imagination. As a result, it’s safe to say that few blacks or Hispanics today are buying homes outright, in cash. Blackstone, on the other hand, doesn’t have a problem fronting the money, given its $3.6 billion credit line arranged by Deutsche Bank. This money has allowed it to outbid families who have to secure traditional financing. It’s also paved the way for the company to purchase a lot of homes very quickly, shocking local markets and driving prices up in a way that pushes even more families out of the game.

“You can’t compete with a company that’s betting on speculative future value when they’re playing with cash,” says Alston. “It’s almost like they planned this.”

In hindsight, it’s clear that the Great Recession fueled a terrific wealth and asset transfer away from ordinary Americans and to financial institutions. During that crisis, Americans lost trillions of dollars of household wealth when housing prices crashed, while banks seized about five million homes. But what’s just beginning to emerge is how, as in the recession years, the recovery itself continues to drive the process of transferring wealth and power from the bottom to the top.

From 2009-2012, the top 1% of Americans captured 95% of income gains. Now, as the housing market rebounds, billions of dollars in recovered housing wealth are flowing straight to Wall Street instead of to families and communities. Since spring 2012, just at the time when Blackstone began buying foreclosed homes in bulk, an estimated $88 billion of housing wealth accumulation has gone straight to banks or institutional investors as a result of their residential property holdings, according to an analysis by TomDispatch. And it’s a number that’s likely to just keep growing.

“Institutional investors are siphoning the wealth and the ability for wealth accumulation out of underserved communities,” says Henry Wade, founder of the Arizona Association of Real Estate Brokers.

But buying homes cheap and then waiting for them to appreciate in value isn’t the only way Blackstone is making money on this deal. It wants your rental payment, too.

Securitizing Rentals

Wall Street’s rental empire is entirely new. The single-family rental industry used to be the bailiwick of small-time mom-and-pop operations. But what makes this moment unprecedented is the financial alchemy that Blackstone added. In November, after many months of hype, Blackstone released history’s first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstone’s competitors announced that they, too, would develop similar securities as soon as possible.

Depending on whom you ask, the idea of bundling rental payments and selling them off to investors is either a natural evolution of the finance industry or a fire-breathing chimera.

“This is a new frontier,” comments Ted Weinstein, a consultant in the real-estate-owned homes industry for 30 years. “It’s something I never really would have dreamt of.”

 

Read More Here

Enhanced by Zemanta

Some four years after the 2008 financial crisis, public trust in banks is as low as ever. Sophisticated investors describe big banks as “black boxes” that may still be concealing enormous risks—the sort that could again take down the economy. A close investigation of a supposedly conservative bank’s financial records uncovers the reason for these fears—and points the way toward urgent reforms.

By and

Jamie Dimon, JPMorgan’s CEO, testifying last summer before the House Financial Services Committee about his bank’s sudden $6 billion loss. (Jacqueline Martin/AP)

 

The financial crisis had many causes—too much borrowing, foolish investments, misguided regulation—but at its core, the panic resulted from a lack of transparency. The reason no one wanted to lend to or trade with the banks during the fall of 2008, when Lehman Brothers collapsed, was that no one could understand the banks’ risks. It was impossible to tell, from looking at a particular bank’s disclosures, whether it might suddenly implode.

For the past four years, the nation’s political leaders and bankers have made enormous—in some cases unprecedented—efforts to save the financial industry, clean up the banks, and reform regulation in order to restore trust and confidence in the American financial system. This hasn’t worked. Banks today are bigger and more opaque than ever, and they continue to behave in many of the same ways they did before the crash.

Consider JPMorgan’s widely scrutinized trading loss last year. Before the episode, investors considered JPMorgan one of the safest and best-managed corporations in America. Jamie Dimon, the firm’s charismatic CEO, had kept his institution upright throughout the financial crisis, and by early 2012, it appeared as stable and healthy as ever.

One reason was that the firm’s huge commercial bank—the unit responsible for the old-line business of lending—looked safe, sound, and solidly profitable. But then, in May, JPMorgan announced the financial equivalent of sudden cardiac arrest: a stunning loss initially estimated at $2 billion and later revised to $6 billion. It may yet grow larger; as of this writing, investigators are still struggling to comprehend the bank’s condition.

The loss emanated from a little-known corner of the bank called the Chief Investment Office. This unit had been considered boring and unremarkable; it was designed to reduce the bank’s risks and manage its spare cash. According to JPMorgan, the division invested in conservative, low-risk securities, such as U.S. government bonds. And the bank reported that in 95 percent of likely scenarios, the maximum amount the Chief Investment Office’s positions would lose in one day was just $67 million. (This widely used statistical measure is known as “value at risk.”) When analysts questioned Dimon in the spring about reports that the group had lost much more than that—before the size of the loss became publicly known—he dismissed the issue as a “tempest in a teapot.”

Six billion dollars is not the kind of sum that can take down JPMorgan, but it’s a lot to lose. The bank’s stock lost a third of its value in two months, as investors processed reports of the trading debacle. On May 11, 2012, alone, the day after JPMorgan first confirmed the losses, its stock plunged roughly 9 percent.

The incident was about much more than money, however. Here was a bank generally considered to have the best risk-management operation in the business, and it had badly managed its risk. As the bank was coming clean, it revealed that it had fiddled with the way it measured its value at risk, without providing a clear reason. Moreover, in acknowledging the losses, JPMorgan had to admit that its reported numbers were false. A major source of its supposedly reliable profits had in fact come from high-risk, poorly disclosed speculation.

It gets worse. Federal prosecutors are now investigating whether traders lied about the value of the Chief Investment Office’s trading positions as they were deteriorating. JPMorgan shareholders have filed numerous lawsuits alleging that the bank misled them in its financial statements; the bank itself is suing one of its former traders over the losses. It appears that Jamie Dimon, once among the most trusted leaders on Wall Street, didn’t understand and couldn’t adequately manage his behemoth. Investors are now left to doubt whether the bank is as stable as it seemed and whether any of its other disclosures are inaccurate.

The JPMorgan scandal isn’t the only one in recent months to call into question whether the big banks are safe and trustworthy. Many of the biggest banks now stand accused of manipulating the world’s most popular benchmark interest rate, the London Interbank Offered Rate (LIBOR), which is used as a baseline to set interest rates for trillions of dollars of loans and investments. Barclays paid a large fine in June to avoid civil and criminal charges that could have been brought by U.S. and U.K. authorities. The Swiss giant UBS was reportedly close to a similar settlement as of this writing. Other major banks, including JPMorgan, Bank of America, and Deutsche Bank, are under civil or criminal investigation (or both), though no charges have yet been filed.

Libor reflects how much banks charge when they lend to each other; it is a measure of their confidence in each other. Now the rate has become synonymous with manipulation and collusion. In other words, one can’t even trust the gauge that is meant to show how much trust exists within the financial system.

Accusations of illegal, clandestine bank activities are also proliferating. Large global banks have been accused by U.S. government officials of helping Mexican drug dealers launder money (HSBC), and of funneling cash to Iran (Standard Chartered). Prosecutors have charged American banks with falsifying mortgage records by “robo-signing” papers to rush the process along, and with improperly foreclosing on borrowers. Only after the financial crisis did people learn that banks routinely misled clients, sold them securities known to be garbage, and even, in some cases, secretly bet against them to profit from their ignorance.

When we asked Ed Trott, a former Financial Accounting Standards Board member, whether he trusted bank accounting, he said, simply, “Absolutely not.”

Together, these incidents have pushed public confidence ever lower. According to Gallup, back in the late 1970s, three out of five Americans said they trusted big banks “a great deal” or “quite a lot.” During the following decades, that trust eroded. Since the financial crisis of 2008, it has collapsed. In June 2012, fewer than one in four respondents told Gallup they had faith in big banks—a record low. And in October, Luis Aguilar, a commissioner at the Securities and Exchange Commission, cited separate data showing that “79 percent of investors have no trust in the financial system.”

When we asked Dane Holmes, the head of investor relations at Goldman Sachs, why so few people trust big banks, he told us, “People don’t understand the banks,” because “there is a lack of transparency.” (Holmes later clarified that he was talking about average people, not the sophisticated investors with whom he interacts on an almost hourly basis.) He is certainly right that few students or plumbers or grandparents truly understand what big banks do anymore. Ordinary people have lost faith in financial institutions. That is a big enough problem on its own.

But an even bigger problem has developed—one that more fundamentally threatens the safety of the financial system—and it more squarely involves the sort of big investors with whom Holmes spends much of his time. More and more, the people in the know don’t trust big banks either.


 

After all the purported “cleansing effects” of the panic, one might have expected big, sophisticated investors to grab up bank stocks, exploiting the timidity of the average investor by buying low. Banks wrote down bad loans; Treasury certified the banks’ health after its “stress tests”; Congress passed the Dodd-Frank reforms to regulate previously unfettered corners of the financial markets and to minimize the impact of future crises. During the 2008 crisis, many leading investors had gotten out of bank stocks; these reforms were designed to bring them back.

And indeed, they did come back—at first. Many investors, including Warren Buffett, say bank stocks were underpriced after the crisis, and remain so today. Most large institutional investors, such as mutual funds, pension funds, and insurance companies, continue to hold substantial stakes in major banks. The Federal Reserve has tried to help banks make profitable loans and trades, by keeping interest rates low and pumping trillions of dollars into the economy. For investors, the combination of low stock prices, an accommodative Fed, and possibly limited downside (the federal government, needless to say, has shown a willingness to assist banks in bad times) can be a powerful incentive.

Yet the limits to big investors’ enthusiasm are clearly reflected in the data. Some four years after the crisis, big banks’ shares remain depressed. Even after a run-up in the price of bank stocks this fall, many remain below “book value,” which means that the banks are worth less than the stated value of the assets on their books. This indicates that investors don’t believe the stated value, or don’t believe the banks will be profitable in the future—or both. Several financial executives told us that they see the large banks as “complete black boxes,” and have no interest in investing in their stocks. A chief executive of one of the nation’s largest financial institutions told us that he regularly hears from investors that the banks are “uninvestable,” a Wall Street neologism for “untouchable.”

That’s an increasingly widespread view among the most sophisticated leaders in investing circles. Paul Singer, who runs the influential investment fund Elliott Associates, wrote to his partners this summer, “There is no major financial institution today whose financial statements provide a meaningful clue” about its risks. Arthur Levitt, the former chairman of the SEC, lamented to us in November that none of the post-2008 remedies has “significantly diminished the likelihood of financial crises.” In a recent conversation, a prominent former regulator expressed concerns about the hidden risks that banks might still be carrying, comparing the big banks to Enron.

A recent survey by Barclays Capital found that more than half of institutional investors did not trust how banks measure the riskiness of their assets. When hedge-fund managers were asked how trustworthy they find “risk weightings”—the numbers that banks use to calculate how much capital they should set aside as a safety cushion in case of a business downturn—about 60 percent of those managers answered 1 or 2 on a five-point scale, with 1 being “not trustworthy at all.” None of them gave banks a 5.

A disturbing number of former bankers have recently declared that the banking industry is broken (this newfound clarity typically follows their passage from financial titan to rich retiree). Herbert Allison, the ex-president of Merrill Lynch and former head of the Obama administration’s Troubled Asset Relief Program, wrote a scathing e-book about the failures of the large banks, stopping just short of labeling them all vampire squids. A parade of former high-ranking executives has called for bank breakups, tighter regulation, or a return to the Depression-era Glass-Steagall law, which separated commercial banking from investment banking. Among them: Philip Purcell (ex-CEO of Morgan Stanley Dean Witter), Sallie Krawcheck (ex-CFO of Citigroup), David Komansky (ex-CEO of Merrill Lynch), and John Reed (former co‑CEO of Citigroup). Sandy Weill, another ex-CEO of Citigroup, who built a career on financial megamergers, did a stunning about-face this summer, advising, with breathtaking chutzpah, that the banks should now be broken up.

Bill Ackman’s journey is particularly telling. One of the nation’s highest-profile and most successful investors, Ackman went from being a skeptic of investing in big banks, to being a believer, and then back again—with a loss of hundreds of millions along the way. In 2010, Ackman bought an almost $1 billion stake in Citigroup for Pershing Square, the $11 billion fund he runs. He reasoned that in the aftermath of the crisis, the big banks had written down their bad loans and become more conservative; they were also facing less competition. That should have been a great environment for investment, he says. He had avoided investing in big banks for most of his career. But “for once,” he told us, “I thought you could trust the carrying values on bank books.”

Last spring, Pershing Square sold its entire stake in Citigroup, as the bank’s strategy drifted, at a loss approaching $400 million. Ackman says, “For the first seven years of Pershing Square, I believed that an investor couldn’t invest in a giant bank. Then I felt I could invest in a bank, and I did—and I lost a lot of money doing it.”

A crisis of trust among investors is insidious. It is far less obvious than a sudden panic, but over time, its damage compounds. It is not a tsunami; it is dry rot. It creeps in, noticed occasionally and then forgotten. Soon it is a daily fact of life. Even as the economy begins to come back, the trust crisis saps the recovery’s strength. Banks can’t attract capital. They lose customers, who fear being tricked and cheated. Their executives are, by turns, traumatized and enervated. Lacking confidence in themselves as they grapple with the toxic legacies of their previous excesses and mistakes, they don’t lend as much as they should. Without trust in banks, the economy wheezes and stutters.

And, of course, as trust diminishes, the likelihood of another crisis grows larger. The next big storm might blow the weakened house down. Elite investors—those who move markets and control the flow of money—will flee, out of worry that the roof will collapse. The less they trust the banks, the faster and more decisively they will beat that path—disinvesting, freezing bank credit, and weakening the structure even more. In this way, fear becomes reality, and troubles that might once have been weathered become existential.

At the heart of the problem is a worry about the accuracy of banks’ financial statements. Some of the questions are basic: How do banks account for loans? Can investors accurately assess the value of those loans? Others are far more complicated: What risks are posed by complex financial instruments, such as the ones that caused JPMorgan’s massive loss? The answers are supposed to be found in the publicly available quarterly and annual reports that banks file with the Securities and Exchange Commission.

The Financial Accounting Standards Board, an independent private-sector organization, governs the accounting in these filings. Don Young, currently an investment manager, was a board member from 2005 to 2008. “After serving on the board,” he recently told us, “I no longer trust bank accounting.”

Accounting rules have proliferated as banks, and the assets and liabilities they contain, have become more complex. Yet the rules have not kept pace with changes in the financial system. Clever bankers, aided by their lawyers and accountants, can find ways around the intentions of the regulations while remaining within the letter of the law. What’s more, because these rules have grown ever more detailed and lawyerly—while still failing to cover every possible circumstance—they have had the perverse effect of allowing banks to avoid giving investors the information needed to gauge the value and risk of a bank’s portfolio. (That information is obscured by minutiae and legalese.) This is true for the complicated questions about financial innovation and trading, but it also is true for the basic questions, such as those involving loans.

At one point during Young’s tenure, some members of the Financial Accounting Standards Board wanted to make banks account for loans in the same way they do for securities, by recording them at current market values, a method known as “fair value.” Banks were instead recording the value of their loans at the initial loan amount, and setting aside a reserve based on their assumptions about how likely they were to get paid back. The rules also allowed banks to use different methods to measure the value of the same kind of loans, depending on whether the loans were categorized as ones they planned to keep for a long time or instead as ones they planned to sell. Many accounting experts believed that the reported numbers did not give investors an accurate or reliable picture of a bank’s health.

After bitter battles, turnover on the board, worries about acting in the middle of the financial crisis, and aggressive bank lobbying, the accounting mandarins preserved the existing approach instead of switching to fair-value accounting for loans. Young believes that the numbers are even less reliable now. “It’s gotten worse,” he says. When we asked another former board member, Ed Trott, whether he trusted bank accounting, he said, simply, “Absolutely not.”

The problem extends well beyond the opacity of banks’ loan portfolios—it involves almost every aspect of modern bank activity, much of which involves complex investment and trading, not merely lending. Kevin Warsh, an ex–Morgan Stanley banker and a former Federal Reserve Board member appointed by George W. Bush, says woeful disclosure is a major problem. Look at the financial statements a big bank files with the SEC, he says: “Investors can’t truly understand the nature and quality of the assets and liabilities. They can’t readily assess the reliability of the capital to offset real losses. They can’t assess the underlying sources of the firms’ profits. The disclosure obfuscates more than it informs, and the government is not just permitting it but seems to be encouraging it.”

Accounting rules are supposed to help investors understand the companies whose shares they buy. Yet current disclosure requirements don’t illuminate banks’ financial statements; instead, they let the banks turn out the lights. And in that darkness, all sorts of unsavory practices can breed.

We decided to go on an adventure through the financial statements of one bank, to explore exactly what they do and do not show, and to gauge whether it is possible to make informed judgments about the risks the bank may be carrying. We chose a bank that is thought to be a conservative financial institution, and an exemplar of what a large modern bank should be.

Wells Fargo was founded on trust. Its logo has long been a strongly sprung six-horse stagecoach, a fleet of which once thundered across the American West, loaded with gold. According to the firm’s official history, “In the boom and bust economy of the 1850s, Wells Fargo earned a reputation of trust by dealing rapidly and responsibly with people’s money.” People believed Wells Fargo would keep their money safe—the bank’s paper drafts were as good as the gold it shipped throughout the country.

For a century and a half, Wells Fargo stock was also like gold, which is what led Warren Buffett to buy a stake in the bank in 1990. Since then, Buffett and Wells Fargo have been inextricably linked. As of fall 2012, Buffett’s firm, Berkshire Hathaway, owned about 8 percent of Wells Fargo’s shares.

Today, Wells Fargo still prominently displays the stagecoach logo at branches, in advertising, on the 12,000-plus ATMs that dot the country, and even at the bank’s museum stores. There, visitors can buy wholesome, family-friendly items: a stagecoach night‑light; stagecoach salt and pepper shakers; a hand-painted ceramic stagecoach pillbox. These are more than tchotchkes. They are emblems of the bank’s honest and honorable mission.

Buffett’s impeccable reputation has rubbed off on the bank. Wells Fargo is widely regarded as the most conservative of the nation’s biggest banks. Many investors, regulators, and analysts still believe its financial reports reflect a full, fair, and accurate picture of its business. The market value of Wells Fargo’s shares is now the highest of any U.S. bank: $173 billion as of early December 2012. The enthusiasm for Wells Fargo reflects the bank’s good reputation, as well as one seemingly simple fact: the bank earned solid net income of nearly $16 billion in 2011, up 28 percent from 2010.

To find out what’s behind that fact, you have to read Wells Fargo’s annual report—and that is where we began our adventure. The annual report is a special document: it is the place where a bank sets forth the audited details of its business. Although banks also submit unaudited quarterly reports and other periodical documents to the SEC, and have conference calls with analysts and shareholders, the annual report gives investors the most complete and, supposedly, reliable picture.

(Today, big banks have to answer to a dizzying litany of regulators—not only the SEC, but also the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission, the newly created Consumer Financial Protection Bureau, and so on. The disclosure regimes vary, adding to the confusion. Banks confidentially release additional information to these regulators, but investors do not have access to those details. That regulators have these extra, confidential disclosures isn’t much comfort: given the inability of regulators to police the banks in recent years, one of the only groups that investors trust less than bankers is bank regulators.)

Wells Fargo’s most recent annual report, covering 2011, is 236 pages long. It begins like a book an average person might enjoy: a breezy journey through a year in a bank’s life. On the cover, that stagecoach appears. The first page has a moving story about a customer. The next few pages are filled with images of guys in cowboy hats, a couple holding hands by the ocean, cupcakes, and solar panels. In bold 50‑point font, Wells Fargo reports that it contributed $213.5 million to nonprofits during the year, and it even does the math to make sure we appreciate its generosity: “$4.1 million every week or $585,000 every day or $24,000 every hour.” The introduction’s capstone is this: “We don’t take trust for granted. We know we have to earn it every day in our conversations and actions with our customers. Here’s how we try to do that.”

The sheer volume of “trading” at Wells Fargo suggests that the bank is not what it seems.

Fortunately for Wells Fargo, most people do not read past the introduction. In the pages that follow, the sunny faces of satisfied customers disappear. So do the stories. The narrative is replaced by details about the bank’s businesses that range from the incomprehensible to the disturbing. Wells Fargo told us it devotes “significant resources to fulfilling all reporting requirements of various regulators.” Nevertheless, these disclosures wouldn’t earn anyone’s trust. They are littered with language that says nothing, at length. The report is riddled with progressively more opaque footnotes—the financial equivalent of Dante’s descent into hell. Indeed, after the friendly introduction, the report ought to bear a warning to the inquisitive reader intent on truly understanding the bank’s financial positions: “Abandon all hope, ye who enter here.”

The first circle of Wells Fargo’s version of the Inferno, like Dante’s Limbo, merely hints at what is to come, yet it is nonetheless unsettling. One of the main purposes of an annual report is to tell investors how a company makes money. Along these lines, Wells Fargo splits its businesses into two apparently simple and distinct parts—“interest income” and “noninterest income.” At first blush, these two categories appear to parallel the two traditional sources of banking income: interest from loans and customer fees.

 

Read Full Article Here

Politics, Legislation and Economy News

 

 

Politics : Government /  Hypocrisy

 

 

Published on Sep 13, 2012 by

Before the Obama administration,the Espionage Act was used a total of three times in order to convict and persecute individuals accused of spying on the US. But during the past four years, Obama has used the item a total of six times. In certain cases whistleblowers are awarded large sums of money for helping the US government,but on the other hand a cold jail cell. Kristine Frazao breaks down the selective process of punishing whistleblowers.

Politics and Legislation

Obama’s Swiss Banker

Head of Swiss finance house UBS Investment Bank is one of president’s biggest bundlers

Wolf and Obama in Martha's Vineyard in 2010 / AP Images

Wolf and Obama in Martha’s Vineyard in 2010 / AP Images

One of President Obama’s largest financial backers is a key executive at the largest Swiss bank in the world, complicating his criticism of presumptive Republican nominee Mitt Romney.

Robert Wolf is president of Swiss financial giant UBS Investment Bank and chairman of UBS Americas. He has been one of Obama’s most prolific fundraisers dating back to 2006, when the former Senator from Illinois initiated his run for the White House.

Wolf has bundled more than $500,000 for the president’s reelection, campaign records show. He is but one of many wealthy bankers Obama has turned to in an effort to win a second term.

According to campaign reporter John Heilemann, Obama and Wolf first met in December 2006 in a conference room owned by liberal billionaire George Soros, who is currently embroiled in a domestic dispute with his 31-year-old ex-girlfriend.

It was a match made for the ages, Heilemann argued—the “hope and change” candidate and the sympathetic Wall Street millionaire.

Obama eagerly courted the “A-List New York donor,” who would become the future president’s “most copious cash collector in the city by far,” raising more than $500,000 for his 2008 campaign.

Wolf’s company, UBS, gave an additional $532,000, making it the 15th largest contributor to Obama’s first presidential run.

“The way Barack has taken this nation with his rock-star status,” Wolf told Heilemann in 2007, “it’s very exciting!”

Upon taking office in early 2009, Obama appointed Wolf to the Economic Recovery Advisory Board that would help craft the controversial $787 billion stimulus package.

Shortly after Wolf was appointed, UBS admitted to conspiring to defraud the Internal Revenue Service and agreed to pay $780 million to ward off a federal investigation into its activities.

Wolf was also one of several major Democratic donors named to the President’s Council on Jobs and Competitiveness. He remains a close adviser and golfing partner to the president. A recent Wall Street Journal article dubbed Wolf “a ‘fat cat’ with the president’s ear.”

Inside Story – Sarkozy: Fighting for political survival

Published on Apr 24, 2012 by

Are the Socialists on their way back to the Elysee Palace on the back of Sarkozy’s poor showing at the polls? Inside Story discusses with guests: Thierry Marchal-Beck, Anne-Elisabeth Moutet, & Thomas Klau.

After Its Subsidiary Bribed Mexican Officials, Wal-Mart Lobbies To Weaken Anti-Bribery Laws

By

A blockbuster New York Times story published this weekend details how the Mexican subsidiary of retail giant Wal-Mart paid $24 million in bribes to Mexican officials — and subsequently top Wal-Mart officials allegedly decided to cover up these offenses.

The details of Wal-Mart’s complicity in bribery are shocking, but there is one important element that the Times did not report.

While Wal-Mart’s largest subsidiary spent millions of dollars systematically bribing Mexican officials, the company back home has been working, through big business groups like the U.S. Chamber of Commerce, to weaken the Foreign Corrupt Practices Act (FCPA), which renders it illegal for corporations to bribe officials in foreign countries.

The Chamber of Commerce made a major push in late 2010 to severely curtail the power of the FCPA. One of the revisions the business lobby wanted was to limit a parent company’s civil liability for the acts of a subsidiary. This lobbying also came shortly after it was revealed that the Chamber had been getting foreign funding from overseas corporations.

Read Full Article Here

Israel approves three new settlements

Published on Apr 24, 2012 by

Israel’s claim that it has legalised three settlements in the West Bank has been criticized by human rights activists, as such settlements are illegal under international law.

Al Jazeera’s Cal Perry reports from the occupied West Bank.

 

 

Obama condemns monitoring abroad as Congress pushes CISPA

Published on Apr 24, 2012 by

President Obama announced that he is planning on fighting genocide in the Middle East by cracking down on entities that use technology to conduct human rights violations. On Monday, Obama signed an executive order that targets individuals who use technology to monitor and track dissidents. Although President Obama opposes the monitoring of individuals abroad, Congress is attempting to pass a legislation that will allow the US government to do just that domestically. The Cyber Intelligence Sharing Protection Act (CISPA) could alter online freedoms in the US, and Declan McCullagh, CNet News correspondent, joins us for a closer look.

**********************************************************************************

Economy

 

U.S. companies dump billions into China

gm_china_plant.top.jpg

A GM auto plant in China. GM is among the companies investing in Chinese plants to serve the market there rather than export product back to the United States.By Chris Isidore, senior writerJanuary 20, 2011: 10:01 AM ET

 NEW YORK (CNNMoney) — While U.S. businesses are still reluctant to invest in new plants and jobs in the United States, many are pouring money into China. But not for the reasons you’d think.

Rather than “outsourcing” their operations to China’s low-cost environment to produce cheap goods for U.S. consumers, multinational corporations are pouring billions into China to meet demand from the rapidly growing Chinese middle class.

 Total investments in China by U.S. multinationals were worth $49 billion as of 2009 — up 66% from two years earlier, according to U.S. Commerce Department figures. And 2010 is shaping up to be another banner year for the Chinese — U.S. companies poured an additional $6 billion into China in the first three quarters alone.

“American investment in China is still growing,” said Nicholas Lardy, a China expert at the Peterson Institute for International Economics. “It’s one of their most profitable markets, if not their most profitable market. No one is pulling back.”

In 2010 General Motors (GM) sold more cars in China than in the United States for the first time, but did not export any cars from China back to its home market. GM, which closed 13 U.S. plants since its bankruptcy filing in 2009, has opened 15 plants in

Read Full Article Here

Austerity anger boosts European extreme parties

Published on Apr 24, 2012 by

In the Netherlands and across Europe, the growing anger towards austerity measures is leading to a boost in support for the far-left and far-right parties.

Al Jazeera’s Jonah Hull reports from The Hague.

***********************************************************************************

Wars and Rumors of War

 

Sudan’s Bashir Threatens War Against South Sudan

Bio

Nii Akuetteh is an independent analyst of African & international affairs, seen regularly on Al Jazeera and many other global TV outlets and published frequently, especially by Pambazuka News. He is the former Executive Director of Africa Action, and he was a professor of African Studies at Georgetown University.

Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington.

In Sudan, President Bashir has said it’s a time of reckoning with South Sudan, the newly formed country (Juba is its capital). He says either South Sudan will take Khartoum and control all of Sudan or, the other way around, Bashir says he will take South Sudan, where most of the oil now is. And, of course, that’s what in the final analysis most of the conflict in Sudan is about—oil.Now joining us to talk about this is Nii Akuetteh. He’s an independent analyst of African and international affairs. He writes regularly on Pambazuka News, and he’s a former executive director of Africa Action, and he was a professor of African studies at Georgetown University. Thanks very much for joining us, Nii.NII AKUETTEH, FORMER DIRECTOR, AFRICA ACTION: It’s my pleasure. Thank you for having me.JAY: So before we get into the specifics of what’s happening now, these threats and what seems to be intensification and possible open, all-out warfare between North and South Sudan, give us some basic context, some historical context of how we got here.AKUETTEH: Yes. You know, Sudan, South Sudan, the smaller of the two countries in the conflict, became independent just a few months ago. In fact, it’s designated as the youngest country in the world. It broke off from Sudan. So this is a sort of a divorce, a bitter divorce.The quarrels leading to the divorce have been a very long way in coming. Sudan actually got its independence from Britain and Egypt in 1958, but the quarrel between the North and the South actually predates independence, before independence, the Southerners agitating. In fact, Southerners in the national army broke out in revolt in some camps before independence. So there’s been a big quarrel….

Read Full Transcript Here

 

War Against Syria + Israel to Nuke Iran if Nuke Talks Fail + Next False Flag

Published on Apr 24, 2012 by

Representative of the Saudi government has admitted the so called ‘Syrian protesters’ have had weapons all along. NATO sent guns in there, said ‘start shooting’ and we will come in and invade and make you the new government.

Michael Rivero of http://www.whatreallyhappened.com
Watch entire 2012-04-24 Broadcast here: http://www.justin.tv/michaelrivero/b/315941138

 

War on Drugs means big bucks for some

Published on Apr 24, 2012 by

Depending on who you ask, the war on drugs is seen from anything as a failure to a profitable business. According to some South American companies, the US drug policy is responsible for cartel violence. Many are lobbying for the US to keep marijuana illegal because they feel that permitting the plant would not be good business. The private prison industry banks off illegal marijuana, however, and in 2010 nearly half of all drug arrests were weed-related. Mike Riggs, associate editor for Reason Magazine, joins us with his take on the war on drugs.

 

***********************************************************************************

Articles of Interest

 

Julian Assange’s The World Tomorrow: Slavoj Zizek & David Horowitz

Published on Apr 24, 2012 by

Slavoj Zizek and David Horowitz are the guests for the second episode of Julian Assange’s interview show, “The World Tomorrow”. “Intellectual superstar” Slavoj Zizek is a philosopher, psychoanalyst and cultural commentator. David Horowitz is a renowned stalwart of hardline conservative American political thought and an unrepentant Zionist.

The tone of the conversation between Zizek, Horowitz and Assange alternated between combative, personal and good-humoured. The topics covered jumped backwards and forwards at a wildfire pace, to include Palestinians and Nazis, Joseph Stalin and Barack Obama, the decline of Europe and the tension between liberty and equality, amongst many others.

OFFICIAL VIDEO PAGE http://assange.rt.com

Shocking Video Shows Mexican Immigrant Beaten to Death By U.S. Border Patrol Agents. 1 of 2

Published on Apr 24, 2012 by

DemocracyNow.org – A new PBS documentary exposes the tasing and beating death of a Mexican immigrant by U.S. border agents in California, and has renewed scrutiny of what critics call a culture of impunity. In May 2010, 32-year-old Anastasio Hernández Rojas was caught trying to enter the United States from Mexico near San Diego. He had previously lived in the United States for 25 years and was the father of five U.S.-born children. But instead of deportation, Hernández Rojas’ detention ended in his death. A number of border officers were seen beating him, before one tasered him at least five times. During the incident, he was handcuffed and hogtied. He died shortly afterward. The agents say they confronted Hernández Rojas because he became hostile and resisted arrest. But previously undisclosed videos recorded by eyewitnesses on their cell phones show a different story. The footage was obtained by reporter John Carlos Frey and aired in a national television special last Friday night, as part of a joint investigation by the PBS broadcast ,”Need to Know,” and the Investigative Fund of the Nation Institute. Frey joins us to discuss the exposé, along with Hernández Rojas’ widow, María Puga, and translator, Christian Ramírez.

Watch part 2 of this interview:

To watch the complete independent, weekday news hour, read the transcript and download the podcast, please visit http://www.democracynow.org.

 

Shocking Video Shows Mexican Immigrant Beaten to Death By U.S. Border Patrol Agents. 2 of 2

 

 

 

For first time since Depression, more Mexicans leave U.S. than enter

Alejandro Estrada/AP – Migrants jump out of a tractor trailer as Mexican federal police watch at police headquarters in Tuxtla Gutierrez, Mexico, Sunday June 12, 2011. Each year, thousands of migrants cross southern border on their way to the U.S. (AP)

By , Published: April 23

A four-decade tidal wave of Mexican immigration to the United States has receded, causing a historic shift in migration patterns as more Mexicans appear to be leaving the United States for Mexico than the other way around, according to a report from the Pew Hispanic Center.It looks to be the first reversal in the trend since the Depression, and experts say that a declining Mexican birthrate and other factors may make it permanent.

(The Washington Post/Source: Pew Research Center) – Immigration from Mexico has plummeted

“I think the massive boom in Mexican immigration is over and I don’t think it will ever return to the numbers we saw in the 1990s and 2000s,” said Douglas Massey, a professor of sociology and public affairs at Princeton University and co-director of the Mexican Migration Project, which has been gathering data on the subject for 30 years.

Read Full Article Here

Former Morgan Stanley star in China pleads guilty

Reuters 

By Aruna Viswanatha

WASHINGTON (Reuters) – A former Morgan Stanley executive pleaded [plead] guilty to conspiring to evade internal controls required by a U.S. anti-bribery law, in a case that underlines the fall of a once high-flying deal maker for the firm in China.

Garth Peterson, who was a managing director in Morgan Stanley’s real estate investment and fund advisory business, also settled on Wednesday related charges with securities regulators, and agreed to roughly $3.7 million in sanctions and a permanent bar from the industry.

Peterson secretly arranged to have millions paid to himself and a Chinese official and disguised the payments as finder’s fees charged to Morgan Stanley, regulators said.

Such payments violated the Foreign Corrupt Practices Act, which bars bribes to officials of foreign governments, the Securities and Exchange Commission said.

The charges come as both the SEC and the Justice Department have stepped up efforts to enforce the FCPA, extracting billions of dollars in penalties in recent years, but the case is among the first related to the financial services industry.

Morgan Stanley, which cooperated in the government’s investigation, was not charged in the case. Lawyers for Peterson declined to comment.

“Mr. Peterson admitted today that he actively sought to evade Morgan Stanley’s internal controls in an effort to enrich himself and a Chinese government official,” Assistant Attorney General Lanny Breuer said in a statement announcing the plea.

Read Full Article Here

 

 

The Associated Press April 24, 2012, 7:38PM ET

Ex-BP engineer arrested in Gulf oil spill case

By CAIN BURDEAU and MICHAEL KUNZELMAN

NEW ORLEANS

Federal prosecutors brought the first criminal charges Tuesday in the Gulf oil spill, accusing a former BP engineer of deleting more than 300 text messages that indicated the blown-out well was spewing far more crude than the company was telling the public at the time.

Two years and four days after the drilling-rig explosion that set off the worst offshore oil spill in U.S. history, Kurt Mix, 50, of Katy, Texas, was arrested and charged with two counts of obstruction of justice for allegedly destroying evidence.

His attorney, Joan McPhee, issued a statement Tuesday evening describing the charges as misguided and that she is confident Mix will be exonerated.

“The government says he intentionally deleted text messages from his phone, but the content of those messages still resides in thousands of emails, text messages and other documents that he saved,” she said. “Indeed, the emails that Kurt preserved include the very ones highlighted by the government.”

Read Full Article Here

************************************************************************************

[In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit, for research and/or educational purposes. This constitutes ‘FAIR USE’ of any such copyrighted material.]