Tuesday, September 25, 2012

NCUA Sues Barclay’s Capital for Misrepresentations

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NCUA Sues Barclay’s Capital

Legal Action Is the Agency’s Seventh Against Wall Street Investment Firms

NCUA has previously filed similar actions against J.P. Morgan Securities, LLC, RBS Securities, Goldman Sachs, Wachovia and UBS Securities. NCUA has already settled claims worth more than $170 million with Citigroup, Deutsche Bank Securities and HSBC, making it the first federal regulatory agency for depository institutions to recover losses from investments in faulty securities on behalf of failed financial institutions.

(NCUA; September 25, 2012)

ALEXANDRIA, Va. (Sept. 25, 2012) – The National Credit Union Administration (NCUA) today filed suit in Federal District Court in Kansas against Barclay’s Capital, Inc.

NCUA’s suit alleges Barclay’s, the U.S. subsidiary of the British financial services firm, violated federal and state securities laws through misrepresentations in the sale of mortgage-backed securities to U.S. Central Federal Credit Union (US Central) and Western Corporate Federal Credit Union (WesCorp). The price paid for the securities by US Central and WesCorp exceeded $555 million. Both corporate credit unions subsequently failed.

“Trust and accountability are two cornerstones of our financial system,” said NCUA Board Chairman Debbie Matz. “As clearly outlined in our complaint, Barclay’s violated that trust by issuing faulty disclosures on securities underwritten by the firm. As a result, two corporate credit unions collapsed, and the entire credit union industry experienced a crisis. Since then, NCUA has successfully worked to restore stability to the credit union system. Now we are working to hold Barclay’s, and other responsible parties, accountable for their actions.”

NCUA’s complaint alleges Barclay’s made numerous misrepresentations and omissions of material facts in the offering documents of the securities sold to the failed corporate credit unions. The complaint also alleges systemic disregard of the underwriting guidelines stated in the offering documents. These misrepresentations caused US Central and WesCorp to believe the risk of loss was minimal, when in fact the risk was substantial.

As liquidating agent for US Central and WesCorp, NCUA has a statutory duty to seek recoveries from responsible parties in order to minimize the cost of any failure to its insurance funds and the credit union industry. Recoveries from these seven additional legal actions would further reduce the total losses resulting from the failure of the five corporate credit unions. Losses from those failures must be paid from the Temporary Corporate Credit Union Stabilization Fund. Expenditures from this fund must be repaid through assessments against all federally insured credit unions. Thus, any recoveries would help to reduce the amount of future assessments on credit unions.

Corporate credit unions are wholesale credit unions that provide various services to retail credit unions, which in turn serve consumers, or “natural persons.” Retail credit unions rely on corporate credit unions to provide them such services as check clearing, electronic payments, and investments.

NCUA Sues Barclay’s Capital
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FDIC & CFPB Penalize Discover for Deceptive Marketing

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Federal Deposit Insurance Corporation and Consumer Financial Protection Bureau Order Discover to Pay $200 Million Consumer Refund for Deceptive Marketing

Discover Pays Additional $14 Million Penalty for Deceptive Marketing of Credit Card 'Add-On Products

(FDIC; September 24, 2012)

WASHINGTON, D.C. – Today, the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) announced a joint public enforcement action with an order requiring Discover Bank to refund approximately $200 million to more than 3.5 million consumers and pay a $14 million civil money penalty. This action results from an investigation started by the FDIC, which the CFPB joined last year. The joint investigation concerned deceptive telemarketing and sales tactics used by Discover to mislead consumers into paying for various credit card “add-on products” – payment protection, credit score tracking, identity theft protection, and wallet protection.

The agencies jointly determined that Discover engaged in deceptive telemarketing tactics to sell the company’s credit card add-on products. Payment Protection was marketed as a product that allows consumers to put their payments on hold for up to two years in the event of unemployment, hospitalization, or other qualifying life events. Discover also sold its Credit Score Tracker, designed to allow a customer unlimited access to his or her credit reports and credit score. The third product was Identity Theft Protection, which was marketed as providing daily credit monitoring. Lastly, Discover’s Wallet Protection product was sold as a service to help a consumer cancel credit cards in the event that his or her wallet is stolen.

Discover’s telemarketing scripts contained misleading language likely to deceive consumers about whether they were actually purchasing a product. Discover’s telemarketers also often downplayed key terms and spoke quickly during the part of the call in which the prices and terms of the add-on products were disclosed. Because of the misleading language in thescripts and the actions of Discover’s telemarketers, consumers were:
=> Misled about the fact that there was a charge for the products: Discover’s telemarketing scripts often used language implying that the products were additional free “benefits,” rather than products for which a fee would be applied to their accounts.
=> Misled about whether they had purchased the products: The telemarketing scripts frequently suggested that consumers would not be charged for the products until after having a chance to review printed materials from Discover. Discover, however, did not provide consumers with the information until after Discover had already initiated the consumer’s purchase of a product.
=> Enrolled without their consent: Discover representatives processed the add-on product purchases without some consumers’ consent. These consumers were then charged for the product on their Discover card.
=> Withheld material information about eligibility requirements for certain benefits: Discover’s telemarketers typically did not disclose critical eligibility requirements for certain payment protection benefits, such as exclusions for pre-existing medical conditions and certain limitations concerning employment.

Enforcement Action

=> Stop deceptive marketing: Discover is required to institute certain changes to its telemarketing of these products that are designed to ensure that these unlawful acts do not occur again. Discover has also agreed to submit a compliance plan to the FDIC and the CFPB for approval, and to take specific corrective actions related to the products.
=> Pay restitution to consumers who purchased the products: Discover will pay approximately $200 million in restitution to more than 3.5 million consumers who were charged for one or more of the products between December 1, 2007 and August 31, 2011. Generally, all consumers affected by Discover’s deceptive practices regarding these products, except those who affirmatively made use of Payment Protection, will receive restitution, with amounts varying depending on when they purchased, and how long they held, the add-on products. All consumers will receive at least 90 days’ worth of fees paid (minus any refunds they have already received), with approximately 2 million consumers receiving full restitution of all of the fees they paid (minus any refunds they have already received).
=> Provide refunds or credits without any further action by consumers: Consumers are not required to take any action to receive their credit or check. If an affected consumer is still a Discover customer, he or she will receive a credit to his or her account. If an affected consumer is no longer a Discover credit card holder, the consumer will receive a check in the mail or have any outstanding balance reduced by the amount of the refund.
=> Submit to an independent audit: Compliance with the restitution terms of the order will be assured through the work of an independent auditor, who will report to the FDIC and the CFPB on Discover’s compliance with the joint FDIC-CFPB Consent Order.
=> Pay a $14 million penalty: The FDIC and the CFPB imposed civil money penalties of $14 million. Discover will pay $7 million of that penalty to the U.S. Treasury and $7 million to the CFPB’s Civil Penalty Fund.

Federal Deposit Insurance Corporation and Consumer Financial Protection Bureau Order Discover to Pay $200 Million Consumer Refund for Deceptive Marketing

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America: Land of Indefinite Corporate Power, Debt, Detention, Quantitative Easing, Wars

Ah yes, America, the Land of the Fee and  Home of the Grave. Big Brother wages perpetual war to keep the masses rooting for him while the national security and surveillance state ramps up and comes down on you, your family, friends, neighbors, and fellow Americans. Ahead is not only a Fiscal Cliff, but a Day of Reckoning - not more and more exciting TV shows, celebrity news, and 'all is well' corporate mass media coverage. The Matrix has plans for you and your best interests are not in their equation.

You and your descendants will be expected and forced to pay up in taxes, fees, and inflation. Your discretionary income will continue shrinking - but not for the Wall Street Banksters, corporate elite, and politicians wealthy from bribes. They are exempt from paying up by design. You pay, they play. The tab per American citizen (man, woman, child) for the funded USA debt is $51,038 and your share of the FYE 2012 interest expense is $1,191. Both of these per capita amounts, from government data, are grossly understated.

The Supreme Court in January 2010 swept aside the individual citizen with a ruling that corporations are persons with electioneering rights and can attempt to sway elections by authority of the Citizens United case. Even Presidential candidate Mitt Romney said, "corporations are people".

President Obama crushed individual liberties, with the overwhelming support of Congress (from the Tea Party caucus to the Progressive caucus voting 'Yes'), by signing the National Defense Authorization Act late on New Year's Eve (December 31, 2011). This provided for the indefinite detention of America citizens (without legal counsel, a judge, a trial, or a jury of peers) as decided by the Office of the President. This is, of course, the Stalin, Mao, Hitler, Mussolini, Pol Pot totalitarian system of citizen control and ultimately annihilation.

Congress has shown blatant and willful disregard for over a decade of the USA's fiscal future by running up funded debt of over $16 trillion (unfunded is easily in excess of $50 trillion). Next will be Internet censorship. Dissent is the new inconvenient truth. Dissenters will be labeled terrorists for NDAA indefinite detention purposes. The War on Terror is the War on You. The security searches and checkpoints, including groping your genitals to teach you compliance and submission, have already begun.

With all 3 branches of the USA federal government assaulting the American citizen's right to life, liberty, and the pursuit of happiness that leaves the Federal Reserve for the final blow. Now Federal Reserve Board Chairman Ben Bernanke has announced the beginning of the end of the The Great American Empire with indefinite quantitative easing, with indefinite money printing, with indefinite inflation. This is not QE 3, this is QE Infinity. This announces the "U.S. Dollar in not worth the paper it is not printed on" - more and more dollars, less and less value. The final financial and economic assault on the American citizen has begun and will now intensify. You'll be seeing more of this, as you already have, as you shop for food, fuel, and basic living needs.

Egan-Jones rating agency immediately downgraded USA sovereign debt from AA to AA- upon the Federal Reserve's QE Infinity announcement. The SEC most likely will announce a retaliatory investigation of Egan-Jones later in an effort of intimidation and censorship of the truth. The SEC and Federal Reserve are controlled by the Wall Street Banksters and they don't want you to know America has been pillaged by them. The world's worst and most criminal credit rating agencies who also serve the Wall Street Banksters (Standard and Poor's, Moody's, and Fitch) have negative outlooks on the bankrupt American Dream but that is as far as they dare go. Moody's and Fitch continue to think we will believe the USA is AAA while Standard and Poor's rates America at AA+. Among other credit rating agencies a more dismal and accurate story is told:
Dagong Global Credit (China): A, Outlook Negative
Weiss Ratings: C-, equivalent to BBB- or 1 level above junk, Outlook Not Provided

Egan-Jones cited the obvious in their American sovereign debt downgrade: debt greater than GDP, a weaker U.S. Dollar resulting from indefinite quantitative easing, an ongoing zero interest rate environment, unsustainable budget deficits.

With the Federal Reserve's QE Infinity, Congress can continue deficit spending, the oldest sovereign trick in the book. No need to balance the budget until the Day of Reckoning. This props up the financial system, prices will go higher, commodity prices will increase, other hard asset prices will rise, and the markets will continue well aloft. The ridiculous and criminal idea that the Fed is creating  jobs with printing money will ultimately be shown a sham. The global corporations want the cheap labor of Asia and South America, not the higher cost American labor. The USA's future is 'post-industrial' which means most jobs will be low-paying service jobs. A poor nation is easier to control per totalitarian doctrine. A middle class is pesky and has higher expectations such as a future.

Through federal government accounting chicanery, the July 2012 interest expense was a negative -$52 billion and this reduced the annualized interest expense and related annualized effective interest rate paid. No matter, the financial truth and facts will ultimately prevail, they always do, and the FY 2012 interest expense is actually an all-time high no matter what the proven liars in Washington say.

The graphic story of the pillaging of a nation.

The real reason the Federal Reserve's zero interest rate environment is indefinite. America will financially collapse if interest rates spike when the debt is $16+ trillion. That's why the Federal Reserve has to buy a significant portion off the U.S. Treasury debt - to keep rates low and fund the ongoing deficits. There's not enough lenders, buyers of U.S. Treasury bills, notes, and bonds, to keep the Ponzi scheme afloat.

Charts consist of the latest data available from the Bureau of Economic Analysis (GDP at 6-30-12), U.S. Treasury (Public Debt at 9-16-12), and U.S. Census Bureau (Population at 9-16-12):
Public Debt $16.05 trillion GDP $15.61 trillion
Population 314.39 million
Annualized Interest Expense $374.29 billion (the books are cooked)
Effective Interest Rate 2.53% (actually higher than 3.0%)

USA Sovereign Debt Now Exceeds GDP: Greetings From Big Brother


Tuesday, September 18, 2012

USA Banks Loan Charge-Offs Drop to 4-Year Low

Net Charge-Offs Decline Across All Loan Categories

Net charge-offs totaled $20.5 billion in the second quarter, an $8.4 billion (29.1 percent) reduction from second quarter 2011. This is the eighth consecutive quarter that charge-offs have declined from year-earlier levels and represents the lowest quarterly charge-off total since first quarter 2008. The year-over-year improvement was led by a $2.2 billion (24.6 percent) decline in credit card charge-offs, a $1.5 billion (25.2 percent) decline in charge-offs of residential mortgage loans, and a $1.2 billion (51.5 percent) drop in real estate construction loan charge-offs.

All major loan categories posted lower charge-offs compared with a year ago. Half of all insured institutions (50.6 percent) reported year-over-year declines in charge-offs.

USA Banks Net Charge-Off Rate by Quarter

USA Banks Return on Assets Rise to Post-Crisis High

Earnings Improvement Trend Reaches Three-Year Mark

The benefits of reduced expenses for loan losses outweighed the drag from declining net interest margins, as insured institutions posted a 12th consecutive year-over-year increase in quarterly net income. Banks earned $34.5 billion in the quarter, a $5.9 billion (20.7 percent) increase compared with second quarter 2011. Almost two out of every three banks (62.7 percent) reported higher earnings than a year ago. Only 10.9 percent were unprofitable, down from 15.7 percent in second quarter 2011.

The average return on assets (ROA) rose to 0.99 percent from 0.85 percent a year earlier. This is the third-highest quarterly ROA for the industry since second quarter 2007.

USA Banks Return on Assets by Year

FDIC Deposit Insurance Fund Balance at 15-Quarter High

FDIC Deposit Inurance Fund Indicators

* The DIF Reserve Ratio Rises 10 Basis Points to 0.32 Percent
* Fees Earned from Debt Guarantees Under the Temporary Liquidity Guarantee Program Add $4 Billion to the DIF
* $1.4 Trillion Temporarily Insured in Noninterest-Bearing Transaction Accounts
* 15 Institutions Fail During the Second Quarter

Total assets of the nation’s 7,246 FDIC-insured commercial banks and savings institutions increased by 0.8 percent ($105.3 billion) in the second quarter of 2012. Total deposits increased by 0.6 percent ($61.6 billion), domestic office deposits increased by 1.0 percent ($88.1 billion), and foreign office deposits decreased by 1.8 percent ($26.5 billion). Domestic noninterest-bearing deposits increased by 2.9 percent ($65.6 billion), while domestic interestbearing deposits rose 0.3 percent ($22.5 billion). For the 12 months ending June 30, 2012, total domestic deposits grew by 8.4 percent ($688.1 billion), with domestic noninterest-bearing deposits rising by 20.2 percent ($387.2 billion) and domestic interest-bearing deposits increasing by 4.8 percent ($300.9 billion).

At the end of the second quarter, domestic deposits funded 63.5 percent of industry assets. Insured institutions held $1.6 trillion in domestic noninterest-bearing transaction accounts larger than $250,000 at June 30. Of this total, $1.4 trillion exceeded the basic coverage limit of $250,000 per account, but is temporarily fully insured through December 31, 2012. Balances exceeding the $250,000 limit in noninterest-bearing transaction accounts increased by 5.0 percent ($65.7 billion) during the second quarter and by 32.1 percent ($335.8 billion) over the past four quarters.

FDIC Deposit Insurance Fund by Quarter: Fund Balance and Provision for Insurance Losses

FDIC Problem Bank List Decreases to 10-Quarter Low

More Than a Year Since Last New Charter

During the second quarter, the number of insured institutions reporting financial results declined from 7,308 to 7,246. Forty-five institutions were merged into other institutions, and 15 institutions failed. No new charters were added during the quarter. This is the fourth quarter in a row in which no new charters have been added. It has been more than six quarters since the last time a new charter was created other than to absorb a failing bank.

The number of full-time equivalent employees at FDIC-insured institutions increased from 2,102,280 to 2,108,200.

The number of institutions on the FDIC’s “Problem List” fell for a fifth consecutive quarter, from 772 to 732. Total assets of “problem” institutions declined from $291 billion to $282 billion.

FDIC Problem Banks by Quarter

Monday, September 17, 2012

Federal Reserve Releases GDP, Unemployment, Inflation Projections

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Federal Open Market Committee GDP Projections

Federal Open Market Committee Unemployment Rate Projections

Federal Open Market Committee PCE Inflation Projections

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Federal Reserve: "Economic activity has continued to expand at a moderate pace"

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Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve

Federal Reserve Issues FOMC statement

Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.

Fed Takes Aggressive Stimulus Action to Move Economy Forward

Federal Reserve chairman Ben Bernanke announced the Fed's third attempt to stimulate the economy by buying up mortgage-backed securities and bonds and keep borrowing rates low. Judy Woodruff talks to David Wessel, economics editor for The Wall Street Journal, to understand why the Fed chose this course of action.

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Sunday, September 16, 2012

Marc Faber on Hedging the Bernanke Put and QE3 with Gold, Land, and Equities!

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Marc Faber on Hedging the Bernanke Put and QE3 with Gold, Land and Equities!

Welcome to Capital Account. The Fed gave the QE-addicted markets another dose of its stimulus drug today as it announced another securities purchase program. The Fed launched an open-ended program to buy $40 billion in mortgage backed securities each month, a program that will continue until the labor market improves. The Fed also committed to record low interest rates even after the economy strengthens. To what end will the Fed pursue this accommodative stance? In response to this action gold climbed to a six month high. Marc Faber, Gloom Boom and Doom publisher, has said that he will not sell any of his gold as long as people like Ben Bernanke are running the world's central banks. We ask Dr.Faber about his near term outlook for gold, and what he thinks of Ben Bernanke's monetary policy.

Also, an editorial from Xinhua, the official Chinese news agency, warns that massive spending to boost China's economy could be detrimental. How does this effect China's growth or slow down? We ask Marc Faber, founder of Marc Faber limited and author of the book "Tomorrow's Gold," about likelihood of a contraction in China and other Asian economies.

Plus, in today's episode of "Loose Change," Lauren and Demetri discuss the reports of Jon Corzine's meeting with officials from the Department of Justice last week, ten months after MF Global failed.

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Seeking Alpha