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U.S.
FATCA tax law catches unsuspecting Canadians in its crosshairs - (finance.yahoo.com) A Calgary woman's developmentally disabled son
is caught in a U.S. tax quagmire that she fears may cost him the money she
spent years setting aside for his financial future. "He's entrapped,"
said Carol Tapanila, the 70-year-old mother. "There's no way out. He is
entrapped into U.S. citizenship." Her 40-year-old son was born in a
Calgary hospital, but automatically received U.S. citizenship because both his
parents were American. That simple fact may soon create financial woes for the
Tapanila family. Starting in July, a new U.S. tax law, the Foreign Account Tax
Compliance Act (FATCA), goes into effect. It requires banks around the world to
sift through client accounts to find anyone with U.S. connections and send that
information to the U.S. Internal Revenue Service. The law is aimed at Americans
who are hiding offshore accounts, but the information sharing is likely to
unearth many unsuspecting Canadians with U.S. citizenship, like Tapanila's son,
who didn't realize they were required to file U.S. taxes. Tax law expert Allison
Christians calls the Tapanila case "ridiculous" and a "classic
example of why the law is unjust." "[FATCA] was intended to find rich
American tax cheats hiding out in Switzerland," said Christians, who
teaches tax law at McGill University, but it "will now punish poor,
disabled Americans living in other countries, who are only American by
birth."
Mortgage forecasts lowered
for 2014 - (www.cnbc.com) Rising interest rates and a still slow housing
recovery have some of the nation's largest banks reporting huge drops in
residential mortgage originations. Both Wells Fargo and JP
Morgan Chase saw originations plummet in the fourth quarter of
2013, down 60 percent and 54 percent respectively from a year ago. "These
guys are stuck with a lot of liquidity and not a lot of loan growth," said
FBR analyst Paul Miller in an interview on CNBC. Barely an hour after the two
banks reported their quarterly earnings, the Mortgage
Bankers Association lowered its mortgage origination forecast
for 2014 by $57 billion to $1.12 trillion for the year.
Thai
protesters start Bangkok "shutdown" in bid to topple PM - (www.cnbc.com) Thousands of anti-government protesters began a
blockade at major intersections in Bangkok on Monday as they sought to paralyse
Thailand's capital, stepping up pressure on Prime Minister Yingluck Shinawatra
to resign. Police and soldiers kept watch as the city of some 12 million people
ground to a halt, but there were no signs that the government was preparing to
resist the protesters with force. The upheaval is the latest chapter in an
eight-year conflict pitting Bangkok's middle class and royalist
establishment against the mostly poorer, rural supporters of Yingluck and
her self-exiled brother, billionaire former premier Thaksin Shinawatra.
The Bullish Economic Story May Be On The Verge Of A Change -
(www.businessinsider.com) There's been a lot of talk lately about how the
U.S. economy seems to be breaking out, but it looks likely that such enthusiasm
may be tempered going forward. The yield on the 10-year Treasury note broke
through to a new multi-year high of 3.03% on the final day of 2013, following
the Federal Reserve's Dec. 18 decision to begin tapering down its bond-buying
program known as quantitative easing and the attendant sell-off in the U.S.
government bond market. Friday's release of the December jobs report, however,
sent yields tumbling 10 basis points in a single day, and they are now back
below where they were when the tapering-induced sell-off began. Last week,
before the jobs report, we highlighted Citi's Economic Surprise Index,
which stood at its highest level in nearly two years headed into the release.
The surprise index measures how much better or worse economic data progress
relative to the expectations of market economists, so a high number means the
data are blowing expectations out of the water.
U.S.
Regulators Said Ready to Ease Volcker CDO Limits for Banks - (www.bloomberg.com) U.S. regulators are set to give banks an
exemption from Volcker Rule limits for collateralized debt obligations composed
mostly of small-bank securities, according to two people briefed on the
agencies’ plans. The adjustment to the rule, which could come as soon as today,
would allow banks to keep CDOs backed by trust-preferred securities while
limiting the level of insurance and big-bank content, said the people, who
requested anonymity because the regulators haven’t acted. After regulators
approved the Volcker Rule on Dec. 10, smaller U.S. banks said it could force
them to take as much as $600 million in losses on certain CDOs held by about
300 firms. The Federal Reserve, Federal Deposit Insurance
Corp., Securities and Exchange Commission and Office of the Comptroller of the
Currency said they would consider exempting the securities and would deliver
their answer by tomorrow. The exemption would grant grandfathering protection
to CDOs held before last month, as long as they meet thresholds ensuring they
are largely tied to securities issued by banks with less than $15 billion in
assets, the people said. As a so-called interim final rule, it can be
implemented while still allowing the agencies to collect comments.
Obamacare
Customers Skew Older as Young Invincibles Wait to See - (www.bloomberg.com) About
70 percent of Obamacare’s customers are 35 years of age or older, indicating
that U.S. health-care overhaul is initially attracting a less healthy
population that may drive up insurance premiums. The federal- and state-run
insurance exchanges signed up 2.2 million people for private health plans in
the three months ended Dec. 28, the U.S. Department of Health and Human
Services said in a report released today. About 24 percent were 18- to
34-year-olds, and about one-third were 55 or older. The Obama administration
wanted 18- to 34-year-olds to make up about 40 percent of total enrollment to
help offset the cost of care for older and sicker people. Missing the target
for the “young invincibles” may lead insurers to adjust prices if gains aren’t
made by the March 31 end of enrollment.
Did
Banks Dump Structured Financial Products in Your Pension Fund? | Janet Tavakoli - (www.tavakolistructuredfinance.com) Banks
and investment banks were large direct and indirect subprime lenders. I’ve written extensively how desperate banks accelerated sales
of fraud-riddled residential
mortgage backed securities and collateralized debt obligations as the market
unraveled. In addition, variable-rate auction securities (also known as
auction-rate securities or ARS), backed by municipal bonds, student loans,
subprime mortgages, and/or subprime
backed collateralized debt obligations, comprised a $330 billion market. By the end
of 2007, municipal bond insurers, including MBIA and Ambac, that credit wrapped
the ARS were in trouble
after writing credit default protection on toxic collateralized debt
obligations with banks. The same banks that blew up the monoline bond insurers
dumped doomed ARS on investors. Banks sold long-dated auction rate securities
as if they were money market instruments. They told customers that if there
were no buyers at the regular short-term interval auctions at which the ARS
coupons reset, the banks would buy back the securities. Retail investors and
condominium associations were told these were a prudent substitute for T-Bills,
just before the market fell apart. To be clear, banks lied to unsophisticated
buyers to foist losses on them.
Who's
Buying Obamacare, in Three Charts - (www.bloomberg.com) More
than 2.1 million Americans selected private health plans throughhealthcare.gov and state-run websites through Dec. 28,
the Obama administration announced today. Another 1.6 million were judged
eligible for Medicaid, the federal-state insurance program for the poor. Most
of the new enrollees in private health plans—1.8 million—signed up in December,
after the White House relaunched the Affordable Care Act’s stuttering website
on Dec. 1. People can still enroll in Obamacare plans through the end of March
to get coverage this year. The White House is hoping for a mix of people that
includes enough young and healthy folk to balance the medical costs of older
enrollees who need more care. Here’s a snapshot of who signed up in the first
three months. All data are from the Department of Health and Human Services,
through Dec. 28.
The House Passed A
HealthCare.gov 'Security' Bill That Helps No One And Fixes Nothing - (www.businessinsider.com) On
Friday, the House passed the Health Exchange Security and Transparency Act, a one-sentence bill that, in the event of any security breach
of HealthCare.gov, would require the government to notify affected
individuals within two days. But the real purpose of the bill seems to be to
keep negative attention on HealthCare.gov, not to keep users' information
secure. The ranking Democrats on the House Committee on Oversight and
Government Reform noted in a memo that "there have been no successful
security attacks to date on HealthCare.gov," "HealthCare.gov does
not collect or store detailed personal health information," and there are
already protocols in place "for informing affected citizens as rapidly as
possible in the event of a security breach."
Next financial crisis could
be coming - (www.cnbc.com) The
"Lehman weekend" five years ago has taken on symbolic importance as
the fulcrum of the financial crisis, but the roots of the crisis were broad and
deep—planted in years of unconstrained excess on Wall Street and prolonged
complacency in Washington and financial capitals worldwide. "Shadow
banking" permitted the financial sector to engage in highly leveraged,
short-funded maturity transformation with too little transparency, not enough
capital and little restraint. Large firms became more interconnected and became
increasingly reliant on short-term funding from repo transactions, derivatives,
money market funds, securities lenders and prime brokerage business. Huge
amounts of risk moved outside the more regulated parts of the banking system to
where it was easier to increase leverage. Legal loopholes and regulatory gaps
allowed firms to evade oversight. Investment banks, insurance conglomerates and
other entities performing the same market functions as banks escaped meaningful
regulation on the basis of their corporate form, and banks could move
activities off balance sheet and outside the reach of more stringent
regulation.
Why 'Too Big to Fail' Is a Bigger Problem Than
Ever - (www.thefiscaltimes.com) Just
how big are the largest banks in the U.S.? Here’s a little perspective: In the
past few months, JPMorgan Chase has agreed to pay, depending on how you do the
math, somewhere between $22 billion and $25 billion in fines and penalties for
various illegal activities, from hiding its suspicions about Ponzi schemer
Bernie Madoff to misleading investors about the notorious London Whale. Meanwhile,
as of the third quarter of 2013, 99.1 percent of banks chartered in the U.S.
had less than $20 billion in total assets on their books. Think about that for
a moment. In the space of less than 90 days, JPMorgan Chase has agreed to fines
greater than the total value of all the assets held by almost every bank in the
country. And not only is it still in business, it’s generating revenues roughly
equal to all those fines every quarter. And its stock price is soaring.
The bank’s share price rose again yesterday despite The Wall Street
Journal’s revelation of
yet more potential illegal activity – JPM is one of several banks being
investigated for deliberately mispricing volatile residential mortgage-backed
securities during the financial crisis.
White House ditching HealthCare.gov builder - (www.cnbc.com) The
Obama administration will replace CGI Federal, its main IT contractor for the
glitch-prone HealthCare.gov. "CGI and the Centers for Medicare &
Medicaid Services (CMS) have mutually agreed to complete work on CGI's contract
for the Federally-Facilitated Marketplace (FFM), in line with the
previously-scheduled February 2014 contract end date," Linda F. Odorisio,
CGI's vice president of global communications, said in a statement Friday to
CNBC. Earlier Friday, The Washington Post reported that contractor that built the federal
Obamacare health exchange had gotten the boot from the White House in favor of
consulting firm Accenture. Citing a person familiar with the matter, the Post reported
that federal health officials are preparing to sign a year-long contract with
Accenture worth about $90 million. The company built California's exchange. The Post said
Accenture officials declined to comment. In its statement, CGI said the move
was a "joint decision [that] comes at a time when Healthcare.gov is
performing well, due largely to CGI's key role during the 'tech surge.'"
Michelle
Obama’s Princeton classmate is executive at company that built Obamacare
website - (www.dailycaller.com) Hmmm,
now we know how CGI got the Obamacare contract and it likely wasn't based on
merit or qualifications. Just Michelle Obama giving a contract to a female
Princeton classmate: There was a close link between Michelle Obama and one of
the senior vice-presidents of CGI Federal, the failed website creator for
Obamacare. A senior VP of CGI Federal is a former classmate of Michelle Obama.
Toni Townes-Whitley and Michelle Obama are Princeton classmates. First Lady
Michelle Obama’s Princeton classmate is a top executive at the company that
earned the contract to build the failed Obamacare website. Toni Townes-Whitley,
Princeton class of ’85, is senior vice president at CGI Federal, which earned
the no-bid contract to build the $678 million Obamacare
enrollment website at Healthcare.gov.
CGI Federal is the U.S. arm of a Canadian company. Townes-Whitley and her
Princeton classmate Michelle Obama are both members of the Association of Black Princeton Alumni. Toni Townes ’85 is a onetime policy analyst
with the General Accounting Office and
previously served in the Peace Corps in Gabon, West Africa. Her decision to
return to work, as an African-American woman, after six years of raising kids was applauded by a Princeton alumni publication in 1998.
U.S.
Corporate Bond Issuance in Slowest Start to Year Since ’08 - (www.bloomberg.com) Sales
of corporate bonds in the U.S. are off to the slowest start in six years as
relative yields narrow to the least since 2007. Offerings in the first 10 days
of the year were $32.5 billion, the least since $27 billion at the beginning of
2008, according to data compiled by Bloomberg. General Electric Co. (GE), the borrower with the most debt maturing in
2014 of any issuer in the market, sold $3 billion of bonds while Icahn
Enterprises LP
raised $3.65 billion in its biggest sale. Issuance is decelerating after the
busiest year ever as the Federal Reserve begins scaling back unprecedented
stimulus efforts that pushed yields last year to a record low.
Corn
Pile Biggest Since 1994 as Crop Overwhelms Use: Commodities - (www.bloomberg.com) Stockpiles
of corn in the U.S., the world’s top grower, are rising at the fastest pace in
19 years as a record crop overwhelms increased demand for the grain used to
make livestock feed and ethanol. Inventories on Dec. 1, the first tally since
the harvest was complete, probably totaled 10.764 billion bushels (273.4
million metric tons), 34 percent more than a year earlier, according to the
average of 24 analyst estimates in a Bloomberg survey. The biggest gain for
that date since 1994 signals ample supplies may extend the slump in March
futures by 9 percent to $3.75 a bushel, according to Newedge USA LLC’s Dan Cekander.
Jet-skiing
ex-NYPD 'pension scammer' turns self in - (www.nypost.com) The
bird-flipping, jet-skiing ex-NYPD cop charged in the multi-million dollar
pension fraud scam meekly surrendered Thursday morning in Manhattan Supreme
Court. Glenn Lieberman, 48, had a scarf covering his face and declined comment
as he silently walked into the courthouse with his lawyers about 8:30 a.m. for
his arraignment on larceny charges. The former Brooklyn anti-gang cop allegedly
scammed $175,758 in undeserved Social Security Disability payments after
claiming he suffered from “depression and panic attacks” while working at
Ground Zero after 9/11 – though a former colleague said he never worked at the
hallowed site. And investigators from the Manhattan District Attorney Cyrus
Vance’s office discovered a social media photo of a grinning Lieberman zooming
along on a yellow jet ski while shooting a double middle finger salute at the
camera.
Fed had no idea if the taper would terrify
markets - (www.washingtonpost.com) Three
weeks ago, the Federal Reserve announced it would begin slowing its
bond-buying, beginning the long process of tapering its program of quantitative
easing. Now we know more about how the internal debate over the taper caper
played out, after the release of minutes of the Federal Open Market Committee’s
meeting. Here are five points that stand out from the document. They weren't
really sure how the taper would work: The minutes confirm what Chairman Ben
Bernanke said in his press conference: The decision to taper wasn't a close
call. "Most members" of the FOMC agreed that December was the right
time to start, according to the documents. But that doesn't mean they were
confident it would go off without a hitch. The minutes show they have varying
degrees of confidence in their economic forecasts. Some also worried that
markets would panic again once the Fed actually scaled back the program, as
they did in June when Bernanke first signaled that tapering of bond purchases
was imminent.
Spain
Youth Unemployment Rises To Record 57.7%, Surpasses Greece - (www.zerohedge.com) There
has been much speculation recently about some immaculately conceived Spanish
economic recovery. And while it has certainly sent the local Ibex stock market
soaring, we fail to see any indication of such a recovery, at least in official
economic data. The latest example being, of course, today's European
unemployment for November, which at the Euroarea level remained flat at 12.1%,
which also is the all time record high following a prior revision. However,
what is more troubling is that according to the official European statistics
keeper, Spanish unemployment in November was 26.7%: tied for the all time high
seen in October and hardly an indicator of some imminent economic
renaissance.''
Selloff
Accelerates in Emerging Markets - (www.online.wsj.com) Investors
are bailing out of emerging markets from Turkey and Brazil to Thailand and
Indonesia, extending a selloff that began last year, amid concerns about
faltering economies and political unrest. Indonesia's currency on Tuesday hit
its lowest level against the dollar since the financial crisis in Asia trading.
Meanwhile, the Turkish lira plumbed record lows against the greenback this
week. The MSCI Emerging Markets Index, a gauge of stocks in 21 developing
markets, slipped 3.1% in the first four trading days of 2014, building on a 5%
loss in 2013. This compares with double-digit-percentage rallies in stock
markets in the U.S., Japan and Europe last year. The bruising start to the year
underscores the shift in investor sentiment. In past years, money managers of
all stripes, hungry for yields and willing to take some risks, scrambled to
boost exposure to emerging markets, coveted for fast growth and burgeoning
consumer spending.
