China probe is latest legal headache for JPMorgan

By David Henry

NEW YORK (Reuters) - A federal bribery investigation into whether JPMorgan Chase & Co. hired the children of key Chinese officials to help it win business is just the latest in a series of legal and regulatory headaches for Chief Executive Jamie Dimon.
Dimon piloted the bank through the financial crisis, but it is now facing at least a dozen investigations from federal agencies and state and foreign governments, including over the "London Whale" trading scandal that cost it more than $6.2 billion.
In the latest probe, the Securities and Exchange Commission (SEC) is looking at whether the bank's Hong Kong office hired the children of powerful heads of state-owned companies in China with the express purpose of winning underwriting business and other contracts, a person familiar with the matter said.
The SEC is questioning JPMorgan's relationships with at least two families in China that may have legitimate explanations, the source said.
U.S. law does not stop companies from hiring politically well-connected executives. But hiring people in order to win business from relatives can be bribery, and the SEC is investigating JPMorgan's actions under the U.S. Foreign Corrupt Practices Act.
SEC spokeswoman Florence Harmon declined to comment on the investigation. A Hong Kong-based spokeswoman for the bank declined to comment beyond what was in the bank's regulatory filings and said the bank was cooperating with probes.
REGULATORY HEADACHES
Whatever the outcome of the latest investigation, Dimon's time is increasingly being consumed by regulatory matters.
Federal prosecutors on Wednesday brought criminal charges against two former JPMorgan traders, accusing the pair of deliberately understating losses in the "Whale" scandal. The SEC is seeking an admission of wrongdoing from the bank in a parallel civil action, a rare step for the government agency.
Earlier this month, the bank revealed that it was facing parallel criminal and civil probes by the U.S. Department of Justice in California into mortgage bonds that it sold before the financial crisis.
And last month, the bank agreed to pay a $285 million penalty and give back $125 million of trading profits in a settlement with the Federal Energy Regulatory Commission for alleged power market manipulation. JPMorgan neither admitted nor denied violations.
Since 2011, the bank has been writing in its quarterly filings with regulators that it "is currently experiencing an unprecedented increase in regulation and supervision, and such changes could have a significant impact on how the firm conducts business". In its last quarter, JPMorgan estimated that it could have legal losses that are $6.8 billion beyond an undisclosed sum that it has already set aside to cover those charges.
Wall Street analysts may be understating the extent of the bank's future litigation expenses, said independent analyst Charlie Peabody of Portales Partners.
JPMorgan's annual litigation costs have been around $4.9 billion for each of the last two years, and Peabody expects the cost will be $1.5 billion to $2 billion over each of the next two quarters. On average Wall Street expects roughly $300 million to $500 million per quarter, he added.
While major U.S. banks have faced a litany of probes since the financial crisis, Dimon has repeatedly griped in public about how regulations designed to prevent the next financial crisis are stifling banking and its ability to help the economy.
A report from a U.S. Senate subcommittee described an episode where Dimon shouted at his then-chief financial officer for giving information to a regulator. The bank's board of directors has made it clear to the chairman and chief executive that he must improve his relationship with regulators, a source familiar with the matter told Reuters earlier this year.
Even with heavy litigation costs, JPMorgan posted $21.28 billion of net income last year, its highest level ever even after it suffered from $6.2 billion of trading losses from the bad derivatives bets made by Bruno Iksil, the trader nicknamed the "London Whale".
"ELEPHANT HUNTING"
In the China case, the New York Times said that JPMorgan at one point hired Tang Xiaoning, the son of Tang Shuangning, chairman of the China Everbright Group, a state-controlled financial conglomerate. He also had been a Chinese banking regulator, the Times reported.
After the younger Tang joined JPMorgan, the bank secured several important assignments from the Chinese conglomerate, including advising a subsidiary on a stock offering, according to the newspaper.
Another matter the SEC is probing is JPMorgan's hiring Zhang Xixi, the daughter of a now-disgraced Chinese railway official. The bank went on to help advise the official's company, which builds railways for the Chinese government, on its plans to go public, the Times said.
The bank has not been accused of wrongdoing, the New York Times said, citing a government document. There is no documentary evidence that Zhang Xixi or Tang Xiaoning were unqualified, but the SEC is checking whether the bank's Hong Kong office routinely won business from companies connected to its employees, the newspaper reported.
Marie Cheung, a Hong Kong-based spokeswoman for the bank, said on Sunday that the bank had publicly disclosed the investigation in its quarterly regulatory filing earlier this month, and was cooperating with regulators.
The quarterly filing said that the SEC's enforcement division had requested "information and documents relating to, among other matters, the firm's employment of certain former employees in Hong Kong and its business relationships with certain clients".
The practice of hiring politically-connected bankers in China was widespread in the early to mid-2000s, when Wall Street firms engaged in so-called 'elephant hunting', a term used to describe the chasing of mandates to manage the multi-billion dollar stock offerings of the country's big state-owned enterprises.
One of the more well-known China bankers from that era is Margaret Ren, the daughter-in-law of former Chinese Premier Zhao Ziyang, who has worked at several banks. Most major investment banks have employed a politically connected Chinese banker, whether a high level professional such as Ren or a college age associate, at some stage in the last decade.
Many senior investment bankers in China now feel that the heyday for such underwriting contracts has passed, with far fewer jumbo state-owned company listings happening. But banks and private equity firms alike still prize connections to top decision makers.

(Additional reporting by Michael Flaherty and Lawrence White in Asia, Tom Brown and Ian Simpson in the United States; Editing by Dan Wilchins, Peter Henderson and Alex Richardson)

Fiat Empire (Full Version)

This documentary with RON PAUL, G. EDWARD GRIFFIN, EDWIN VIEIRA and TED BAEHR is an excellent primer for the citizen who wants to get an understanding of how money is created and why the U.S. government is in partnership with the elite banks.

The True Cost of Health Care (Full Lecture)

Forget everything you ever thought you knew about health care costs!
In this video I reveal that:
-Most generic medications cost less than most insurance copays
-Hospitals routinely bill ten or more times what they expect to be paid
-Most outpatient tests and procedures are very inexpensive to perform
-Health insurance companies deliberately manipulate these costs to maintain their profits
And much more!
From the website of Dr. David Belk: http://truecostofhealthcare.org

I was in the hospital with an allergic reaction for 45 minutes tops. Benadryl, pepcid and an oral steroid later this is the bill. Never left my room after the waiting room.

Nonprofit delaying defaults on clients' homes through layered scheme

By Josh Salman

Published: Saturday, August 17, 2013 at 11:25 p.m.

Last Modified: Saturday, August 17, 2013 at 11:25 p.m.

A Sarasota nonprofit advertised as a government-sponsored foreclosure rescue is using its clients' homes for a sweeping real estate scheme — delaying defaults through recurrent bankruptcy filings while renting the houses out, a Herald-Tribune investigation has found.

Keeping Kids in Their Home Foundation Corp. and related entities have enticed scores of severely delinquent borrowers from Tampa to Miami to hand over their deeds for just $100, while using dubious techniques to evade mortgage lenders and skirt taxes on those transactions.

The parents of famed wire-walker Nik Wallenda, real estate flippers, a karate sensei and a local pastor are among the borrowers who took out multiple loans against their homes during the housing bubble. When the market slumped and foreclosure was imminent, each turned to Aleksandr Filipskiy and his foundation for help.

Filipskiy has managed to stall those defaults for years by routinely transferring properties to new shell companies and nonprofits he creates, filing for bankruptcy protection under each entity to block the foreclosure proceedings.

All the while, he leases the distressed homes back to their troubled buyers, rents them to others and even lives in one with his family. His brother inhabits another, the Herald-Tribune's investigation revealed.

“There's a lot of misrepresentation here,” said Andrew Rose, a special agent supervisor with the Florida Department of Law Enforcement. “Someone should never deed their house over to anyone without the bank's consent. These guys are predators. It's just sad and disgusting.”

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What Does it Mean to be an Outsider in a Capitalist Society?

Copyright © 2013 by Alissa Quart. This excerpt originally appeared in Republic of Outsiders: The Power of Amateurs, Dreamers, and Rebels published by The New Press
The traditional duality between insider and outsider has, to some extent, broken down. Media renegades, for instance, tend to be people who in a previous era would have been marginalized from established newspaper and media culture; now they create separate spheres where their voices are often more popular than the output of traditional news organizations. But then the most popular of these once-outsider voices are seemingly inevitably swallowed up by the big media brands. Or take a look at formerly fringe stances such as “animal protection,” which has become so familiar that it’s appropriated by burger franchises.
So what constitutes rebellion, originality, and resistance in a culture of remix? What is rebellious thought? In fact, what does it mean to be an outsider in a contemporary culture where “selling out” has almost become an honorific?
The results vary, of course. Sometimes rebels’ attempts fail. Sometimes they succeed on their own terms. Whether these identity innovators fail or succeed, the outcomes can be attributed to the aggressively viral and short life span new ideas are now afforded in America. The line between the outsider and the establishment seems to shift by the day. Once upon a time, an established band or a musician disseminating music from her own small label was maverick or newsworthy; a few years later, that’s closer to the industry standard. Some of the cases in the book, such as the once-disruptive technologies I first reported on years ago and considered for inclusion in these pages, including Craigslist and Pandora, have since become part of a new establishment. Craigslist radicalized sales and publishing, but sooner rather than later its owner had been recast as a kindly philanthropist whose site the New York Times dubbed stodgy and reactionary.
This trajectory isn’t entirely surprising. In the last two generations, centrist culture in the United States has taken on and been enriched by novel, countercultural ideas, movements, and products, including civil rights, workplace safety laws, community antismoking campaigns, “green” architecture and cars, and the widening acceptance of gays (even in the military). And the digital has altered what’s inside the categories “outsider,” “indie culture,” and “niche market”: the Web has increased visibility at the margins because every rebel or amateur can publish or post his or her opinion. There is also a chance of anyone’s output going viral. That in itself changes what is considered outsider or marginal and how “fringe culture” operates: alternative or subcultures no longer assume their messages are for the few or the like-minded. The idea of a mainstream is, at the very least, a useful cliché. Yet it becomes less of a cliché when we recognize that all cultures—the establishment culture included—are dynamic.

Of course, today’s forces of rebellious style can also act as mere supplements to the mainstream. The stances, practices, or styles are often borrowed and watered down. Sometimes these outsiders are voluntarily co-opted, or what I call “self-co-opted,” offered up to a more homogenous populace by the renegades themselves.
While the Internet has enabled saboteurs, it has also created an ephemeral culture where alternatives to the mainstream arise only to crash almost instantly or be absorbed into the established order overnight. Instead of a broad-based participatory democracy, digital culture has given us millions of fragments; while some offer a respite from the endless churn of late capitalism, the escape provided is usually fleeting.
This is not the first era in which this has occurred. Throughout history, movements, aesthetics, and disruptive technologies would eventually be formalized, institutionalized, and capitalized. Outsider styles would be borrowed by insiders and ultimately mainstreamed. Sociologist Philip Selznick popularized the word co-optation to describe this process when he wrote an analysis of the Tennessee Valley Authority’s relationship with community groups and elites in the 1930s. For Selznick and others, co-optation is the process by which a dominant group copies or steals another group’s ideas, style, or practices.
Republished from: AlterNet

The Trends Few Dare Discuss: Social Security and the Decline in Full-Time Employment

by Charles Hugh-Smith
Believing official reassurances based on Fantasyland projections of ever-rising payroll taxes and employment does not magically make the Social Security system viable.
Questioning the financial viability of the Social Security system is often taken as an attack on the program itself. Nothing could be further from reality. Anyone who truly wants Social Security to continue as is should take an active interest in structural trends rather than focusing all their energy on attacking those who question the official reassurances that the system is sound until 2033.
The two primary trends are obvious:
1. A structural decline in full-time employment
2. A historically unprecedented increase in Social Security benefits paid
Take a look at this chart I prepared from St. Louis Federal Reserve and Social Security Administration (SSA) data: Social Security beneficiaries, by year

Notice that the ratio of full-time workers to SSA beneficiaries was comfortably higher than 2-to-1 for decades. Simply put, the number of full-time workers rose at roughly the same rate as the number of people drawing SSA benefits.
The full-time worker/beneficiary ratio was 2.56 in 1970 and 2.49 in 2000–basically the same ratio held for 30 years as full-time employment expanded along with the number of SSA beneficiaries.
But the trendlines are separating as the number of people drawing SSA benefits is soaring while the number of full-time jobs is stagnating. The increase in beneficiaries fro 1970 to 1980 was a steep 9.8 million, but full-time jobs increased by about 16 million despite the stagflationary economy.
The increases in beneficiaries in the next two decades was modest: 4.3 million more between 1980 and 1990, and 5.6 million more between 1990 and 2000. Meanwhile, the economy added roughly 30 million full-time jobs over those two decades.
The increase in beneficiaries between 2000 and 2010 was almost 10 million, while the number of full-time jobs in 2010 actually declined from 2000.
The ratio of full-time workers to SSA beneficiaries is now 2-to-1 and will fall below 2-to-1 as the number of beneficiaries rises.
The recession of 2008-9 revealed a deeply structural decline in full-time employment. Why focus on full-time employment? Only full-time workers pay enough payroll taxes to fund the system. Around 38 million workers make less than $10,000 a year, which means the SSA contributions they and their employers pay is on the order of $1,000 or so a year.


Workers paying in $1,000 or so a year (adjusted for inflation) will receive far more than their contributions in benefits, and so the system depends on higher-income workers.
The problem is full-time work is in structural decline for a number of reasons that aren’t going away: globalization, robotics, advances in software, fast-rising cost of employee healthcare benefits and so on. We can clearly see this structural decline in these charts:
Here is full-time employees as a percentage of the population, courtesy of Lance Roberts:

The same trend in a chart of civilian employment, which includes part-time jobs:

Labor’s share of the economy is in near-freefall:

Notice the trajectory of Social Security benefits: to the moon, while full-time employment has stagnated.

The Social Security system ran a $55 billion deficit in 2012, meaning that payroll tax receipts did not cover benefits paid. (Recall that SSA is “pay as you go,” meaning that current taxpayers fund the benefits paid to current beneficiaries.)
The fiction of the Trust Fund enables some intergovernmental sleight-of-hand, as the Treasury borrows money on the global bond market and pays the SSA interest on the fictional Trust Fund, but the bottom line is that the SSA deficit is funded by the Treasury borrowing money by selling Treasury bonds.
If the global economy slides into recession in the years ahead, as seems increasingly likely, full-time employment in the U.S. could slip to 100 million while the number of beneficiaries continues to soar by 10+ million a decade. All the official projections assume steady, strong increases in payroll taxes and full-time employment; the system’s deficits will explode higher if full-time employment sags while the number of beneficiaries increases from 57 million to 70 million and then on to 80 and 90 million.
Anyone who cares about the viability of Social Security had better wake up to the widening divergence of full-time employment and SSA beneficiaries.
Believing official reassurances based on Fantasyland projections of ever-rising payroll taxes and employment does not magically make the system viable.