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What We Read Today 01 July 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

  • BNP Paribas to pay $9bn to settle sanctions violations (BBC News) The French bank BNP Paribas has agreed to pay a record settlement of $8.9 billion for money laundering activities. Also, the bank will plead guilty to two criminal charges of breaking U.S. sanctions against trade with Sudan, Iran and Cuba. Eleven individuals are also facing charges. See also press release from the Federal Reserve Board.

  • Secrets of the Creative Brain (Nancy Andreasen, The Atlantic) A leading neuroscientist who has spent decades studying creativity shares her research on where genius comes from, whether it is dependent on high IQ—and why it is so often accompanied by mental illness.

In A Beautiful Mind, her biography of the mathematician John Nash, Sylvia Nasar describes a visit Nash received from a fellow mathematician while institutionalized at McLean Hospital. "How could you, a mathematician, a man devoted to reason and logical truth," the colleague asked, "believe that extraterrestrials are sending you messages? How could you believe that you are being recruited by aliens from outer space to save the world?" To which Nash replied: "Because the ideas I had about supernatural beings came to me the same way that my mathematical ideas did. So I took them seriously."

Some people see things others cannot, and they are right, and we call them creative geniuses. Some people see things others cannot, and they are wrong, and we call them mentally ill. And some people, like John Nash, are both.

  • Moaning Moguls (James Surowiecki, The New Yorker) Hat tip to Marvin Clark who asks "are the rich being taken advantage of by the rest of us?" Stephen Schwarzman, Tom Perkins, and other billionaires have recently ranted against the poor and middle class. James Surowiecki explains why: It is a matter of faith with many of the wealthy that "people succeed or fail because that's what they deserve". The view is that failure is a condition "earned" by lack of merit and any attempt to reduce inequality "looks unfair".

There are 12 articles discussed today 'behind the wall'.

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  • Profiteering on Banker Deaths: Regulator Says Public Has No Right to Details (Pam Martens and Russ Martens, Wall Street on Parade) The abject corruption of the regulatory-banking axis of evil continues to be detailed by the outstanding investigative reporting of the Martens. In this article they review their attempts to get public disclosure of 450 pages of material about the practice of banks to hold life insurance policies on their employees. This is a major financial activity. For JP Morgan Chase the death benefits total around $179 billion. The regulator who denied the request is Daniel P. Stipano, Deputy Chief Counsel of the Office of the Comptroller of the Currency (OCC), the U.S. regulator of national banks and the supervisor of the OCC's Enforcement and Compliance, Litigation, Community and Consumer Law, and Administrative and Internal Law Divisions. This was not the first exposure the Martens' had to Stipano:

Stipano is the man who played an outsized hand in the scandalous structure of the "Independent Foreclosure Review," where the major Wall Street banks who had illegally foreclosed on families were allowed to hire their favorite, deeply conflicted consultants to review the foreclosure files for wrongdoing, set the terms of the consulting contracts and pay out $2 billion to the consultants before homeowners had received a dime - and a year had been wasted on bogus reviews.

The end result of that hubris, as Senator Elizabeth Warren revealed last year, was that the actual banks engaged in the illegal foreclosure activities, not the so-called Independent Foreclosure Review consultants, were allowed by the OCC to tally up and classify their own wrongdoing.

One of the "independent" consultants that the OCC rubber-stamped for hire by the banks was Promontory Financial Group. As Wall Street On Parade reported in April of last year:

"In the engagement letter dated September 6, 2011 between Bank of America and Promontory Financial Group, the 'independent' consultant it hired to conduct its foreclosure investigation, Promontory attested to regulators that: 'Promontory does not have an ongoing relationship with BAC [Bank of America], nor does it act in any advocacy capacity on its behalf.'

"The veracity of that statement is severely undercut by public records. While it was denying any ongoing relationship to regulators, Promontory actually had a large scale re-branding and turnaround contract with Bank of America that had been in place since May of 2011, four months prior to its engagement letter to conduct a government investigation into the bank's foreclosure abuses."

  • The Survivor (Glenn Trush, Politico) Eric Holder is the only cabinet member in history to be held in contempt of Congress, has failed to process charges against any top financial system executives for actions involved in the largest financial crisis in history and is banned by his own administration from appearing on Sunday show programs. And he remains U.S. Attorney General after more than six years in the office, one of the longer tenures in that office in the nation's history.
  • Japan’s Population Problem in Five Charts (Yoko Sudo, The Wall Street Journal) Japan's population is in decline, a condition in place now for the past eight years. This trend is expected to continue into the foreseeable future. With a population od 127 million today, Japan is projected to have 88.1 million people by 2048 and 86.7 by 2060. Japan is looking at modifying its notoriously strict immigration regulations to allow more temporary work visas. See Success of ‘Abenomics’ hinges on immigration policy (Reiji Toshida, The Japan Times).


  • Stash Pad (Michael Hudson, The New York Times) The New York real-estate market is now the premier destination for wealthy foreigners with rubles, yuan, and dollars to hide. The infographic below gives an example of how "hot" money is laundered through many hands before ending up invested in New York real estate. In this case, a bribe in Taiwan ends up buying a $1.6 million apartment in Chelsea, a section of Manhattan centered on West 28th Street.

Click for entire timeline at The New York Times.

  • (What’s Left of) Our Economy: Why the First Quarter’s Shrinkage was Historically Bad (Alan Tonelson, Reality Check) The first quarter decline in GDP of 2.9% was the worst ever in U.S. history for any quarter that was not in a recession. Of course, a recession could still be proclaimed for this period after the passage of time (sometimes a year or more). Tonelson points out that the net change for the last two quarters was a contraction, but that is different from the generally accepted definition of recession of two consecutive quarters where both declined.
  • Central Bankers, Worried About Bubbles, Rebuke Markets (Jack Ewing, The New York Times) Global markets are advancing in a manner which indicates little regard for risk according to the BIS (Bank for International Settlements), often referred to as the central bank for central banks. This opinion was expressed in the organization's annual report issued 29 June 2014. Apparently the invisible hand is on vacation.


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