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Thursday, October 30, 2014

NY Times -- DealB%k with Founder Andrew Ross Sorkin: Prosecutors Suspect Repeat Offenses on Wall Street By BEN PROTESS and JESSICA SILVER-GREENBERG

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INVESTMENT BANKING | LEGAL/REGULATORY
Prosecutors Suspect Repeat Offenses on Wall Street
By BEN PROTESS and JESSICA SILVER-GREENBERG OCTOBER 29, 2014 3:56 PMOctober 29, 2014 3:56 pm 431 Comments
Photo
From left, Benjamin M. Lawsky, New York State’s banking regulator, is taking a fresh look at old cases and negotiating new settlements, as are the federal prosecutor Leslie R. Caldwell in Washington and Cyrus R. Vance Jr., district attorney in Manhattan.Credit Hiroko Masuike/The New York Times, Pablo Martinez Monsivais/Associated Press and Justin Lane/European Pressphoto Agency

It would be the Wall Street equivalent of a parole violation: Just two years after avoiding prosecution for a variety of crimes, some of the world’s biggest banks are suspected of having broken their promises to behave.

A mixture of new issues and lingering problems could violate earlier settlements that imposed new practices and fines on the banks but stopped short of criminal charges, according to lawyers briefed on the cases. Prosecutors are exploring whether to strengthen the earlier deals, the lawyers said, or scrap them altogether and force the banks to plead guilty to a crime.

That effort, unfolding separately from a number of well-known investigations into Wall Street, has ensnared several giant banks and consulting firms that until now were thought to be in the clear.

Prosecutors in Washington and Manhattan have reopened an investigation into Standard Chartered, the big British bank that reached a settlement in 2012 over accusations that it transferred billions of dollars for Iran and other nations blacklisted by the United States, according to the lawyers briefed on the cases. The prosecutors are questioning whether Standard Chartered, which has a large operation in New York, failed to disclose the extent of its wrongdoing to the government, imperiling the bank’s earlier settlement.

A branch of the Bank of Tokyo-Mitsubishi UFJ in Tokyo.Credit Yuriko Nakao/Reuters

New York State’s banking regulator is also taking a fresh look at old cases, reopening a 2013 settlement with the Bank of Tokyo-Mitsubishi UFJ over accusations that the bank’s New York branch did business with Iran, according to the lawyers who were not authorized to speak publicly.

The regulator, Benjamin M. Lawsky, the lawyers said, is negotiating a new settlement deal with the bank that, if it goes through, would involve a penalty larger than the $250 million it paid last year. Mr. Lawsky suspects that the bank initially played down the scope of its wrongdoing.

PricewaterhouseCoopers, the influential consulting firm that advised the Japanese bank on that case, is also under investigation, according to the lawyers briefed on the matter. The Manhattan district attorney’s office is examining whether the firm watered down a report about the bank’s dealings with Iran before it was sent to government investigators.

Those developments, not previously reported, are part of a broader revisiting of settlements with some of the world’s biggest banks, an effort that has focused on foreign banks but could eventually spread to American institutions.

As reported earlier by The New York Times, prosecutors are also threatening to tear up deals with banks like Barclays and UBS that were accused of manipulating interest rates, pointing to evidence that the same banks also manipulated foreign currencies, a violation of the interest rate settlements. The prosecutors and banks have agreed to extend probationary periods that would have otherwise expired this year.

The reopening of these cases represents a shift for the government, the first acknowledgment that prosecutors are coming to terms with the limitations of how they punish bank misdeeds. Typically, when banks have repeatedly run afoul of the law, they have returned to business as usual with little or no additional penalty — a stark contrast to how prosecutors mete out justice for the average criminal.

When punishing banks, prosecutors have favored so-called deferred-prosecution agreements, which suspend charges in exchange for the bank’s paying a fine and promising to behave. Several giant banks have reached multiple deferred or nonprosecution agreements in a short span, fueling concerns that the deals amount to little more than a slap on the wrist and enable a pattern of Wall Street recidivism.

Even now that prosecutors are examining repeat offenses on Wall Street, they are likely to seek punishments more symbolic than sweeping. Top executives are not expected to land in prison, nor are any problem banks in jeopardy of shutting down.

Still, fearing a certain fallout from the new round of scrutiny, banks have bolstered their legal teams. Standard Chartered, for instance, has retained one of the most lauded litigators in the country, Theodore V. Wells Jr., to work on the reopened sanctions case, according to the lawyers briefed on the matter.

The decision to revisit the cases also draws attention to consulting firms that helped shape the original settlements. When determining the extent of wrongdoing at a bank, the government often relies on assessments from consultants that are handpicked and paid by the same bank.



The regulator, Benjamin M. Lawsky, the lawyers said, is negotiating a new settlement deal with the bank that, if it goes through, would involve a penalty larger than the $250 million it paid last year. Mr. Lawsky suspects that the bank initially played down the scope of its wrongdoing.

PricewaterhouseCoopers, the influential consulting firm that advised the Japanese bank on that case, is also under investigation, according to the lawyers briefed on the matter. The Manhattan district attorney’s office is examining whether the firm watered down a report about the bank’s dealings with Iran before it was sent to government investigators.

Those developments, not previously reported, are part of a broader revisiting of settlements with some of the world’s biggest banks, an effort that has focused on foreign banks but could eventually spread to American institutions.

As reported earlier by The New York Times, prosecutors are also threatening to tear up deals with banks like Barclays and UBS that were accused of manipulating interest rates, pointing to evidence that the same banks also manipulated foreign currencies, a violation of the interest rate settlements. The prosecutors and banks have agreed to extend probationary periods that would have otherwise expired this year.

The reopening of these cases represents a shift for the government, the first acknowledgment that prosecutors are coming to terms with the limitations of how they punish bank misdeeds. Typically, when banks have repeatedly run afoul of the law, they have returned to business as usual with little or no additional penalty — a stark contrast to how prosecutors mete out justice for the average criminal.

When punishing banks, prosecutors have favored so-called deferred-prosecution agreements, which suspend charges in exchange for the bank’s paying a fine and promising to behave. Several giant banks have reached multiple deferred or nonprosecution agreements in a short span, fueling concerns that the deals amount to little more than a slap on the wrist and enable a pattern of Wall Street recidivism.

Even now that prosecutors are examining repeat offenses on Wall Street, they are likely to seek punishments more symbolic than sweeping. Top executives are not expected to land in prison, nor are any problem banks in jeopardy of shutting down.

Still, fearing a certain fallout from the new round of scrutiny, banks have bolstered their legal teams. Standard Chartered, for instance, has retained one of the most lauded litigators in the country, Theodore V. Wells Jr., to work on the reopened sanctions case, according to the lawyers briefed on the matter.

The decision to revisit the cases also draws attention to consulting firms that helped shape the original settlements. When determining the extent of wrongdoing at a bank, the government often relies on assessments from consultants that are handpicked and paid by the same bank.

The offices of PricewaterhouseCoopers in New York.Credit Andrew Renneisen/The New York Times

The Bank of Tokyo-Mitsubishi case demonstrated the potential pitfalls of that approach. When Mr. Lawsky made his initial $250 million settlement with the bank last year, the punishment was based partly on an outside consultant’s estimate of the illegal dealings. But the New York State regulator has since uncovered emails indicating that the consultant, PricewaterhouseCoopers, watered down the report under pressure from the bank, according to regulatory records.

In August, Mr. Lawsky imposed a $25 million penalty on PricewaterhouseCoopers, which said at the time that the report was “detailed” and “disclosed the relevant facts.”

After that settlement, people briefed on the matter said, prosecutors at the Manhattan district attorney’s office opened an investigation into the work that PricewaterhouseCoopers did for the Japanese bank, a previously unreported development. Already, the prosecutors have requested the consulting firm’s records in the case.

The investigations, the people said, also unearthed emails showing that PricewaterhouseCoopers changed the report not only at the suggestion of the bank, but also at the behest of lawyers working on the bank’s behalf. Like many banks caught in the government’s cross hairs, the Bank of Tokyo-Mitsubishi turned to Sullivan & Cromwell, an elite law firm as woven into the fabric of Wall Street as the banks it represents. Sullivan & Cromwell also represented Standard Chartered in the bank’s 2012 settlement with the Justice Department in Washington and the district attorney’s office in Manhattan.
Credit

More recently, the government has grown skeptical of the argument that some banks are simply too big to charge, an argument that Sullivan & Cromwell often employs for its clients. That argument was tested in a recent case against BNP Paribas, the giant French bank accused of processing billions of dollars for Sudan and Iran.

At a meeting in Washington this year, a lawyer from Sullivan & Cromwell cautioned prosecutors about the potential fallout from BNP pleading guilty to a crime, according to people briefed on the meeting. To illustrate the concern, the lawyer presented prosecutors with a fake newspaper article reporting that a huge bank had pleaded guilty for the first time in decades. The hypothetical report detailed what regulatory problems could befall the bank if prosecutors did not lower their demands for a fine and take precautions when extracting a plea.

Weeks later, after lowering the fine to $8.9 billion, the prosecutors forced the bank to plead guilty. Far from reporting a crisis, BNP’s chief executive that day noted that the bank “will once again post solid results this quarter.”

Not every bank will have to plead guilty in future cases. Prosecutors still see benefits from deferred-prosecution agreements, which can require banks to install independent monitors and more broadly overhaul their practices than in the event of a guilty plea.

Lawmakers and other critics, however, contend that the agreements can lack teeth, begetting a pattern of misbehavior.

Jonathan Ashley, center, and participants of the University of Virginia School of Law’s First Amendment clinic.Credit Jay Paul for The New York Times

Since 2001, at least eight big banks have committed further offenses after receiving an initial deferred-prosecution agreement, according to data assembled by Brandon L. Garrett, a University of Virginialaw school professor and author of the book, “Too Big to Jail: How Prosecutors Compromise With Corporations.”

UBS has reached three deferred or nonprosecution agreements since 2009. On Tuesday, the Swiss bank said it had reached an agreement with the Justice Department to extend by another year a two-year nonprosecution agreement that was scheduled to expire in December.

The cycle of misbehavior is difficult to break.

Regulators and prosecutors blame a culture that prioritizes profit over compliance. And as banks have grown larger, and more international, illegality can stop in one unit of a bank even as it flourishes in another.

The offices of Standard Chartered bank in London.Credit Facundo Arrizabalaga/European Pressphoto Agency

Standard Chartered is at risk of becoming Exhibit A of corporate backsliding. The Justice Department’s criminal division in Washington and the district attorney’s office in Manhattan, which settled with Standard Chartered in 2012 over its business dealings with Iran, are exploring whether the bank repeatedly violated that deferred-prosecution agreement.

The bank, which declined to comment for this article, previously said it was “cooperating with all relevant ongoing reviews, requests for information and investigations.”

The prosecutors, Leslie R. Caldwell in Washington and Cyrus R. Vance Jr. in Manhattan, have not decided whether to take additional action against the bank. But as an initial step, lawyers briefed on the matter said, they are expected to extend the length of the deferred-prosecution agreement, which would have otherwise expired in December. In an August regulatory filing, the bank acknowledged that the agreement “is likely to be extended.”

The prosecutors are questioning whether the bank underestimated the amount of its improper dealings with Iran, according to the lawyers briefed on the matter. In the course of an investigation into another bank, the lawyers said, evidence emerged that Standard Chartered had processed other transactions that it did not relay to the government. And because the 2012 settlement agreement applied only to transactions that had “already been disclosed,” the discovery of additional illegal transactions could scuttle the deal.

The prosecutors also took notice of Mr. Lawsky’s recent decision to file his second case against Standard Chartered in two years, faulting the bank for breakdowns in a computer system that was supposed to catch suspicious transactions. In August, Mr. Lawsky fined the bank $300 million for the lingering compliance woes, a penalty that came in addition to the $340 million the bank paid Mr. Lawsky’s agency in 2012.

It didn’t take long for concerns to arise. Just weeks after the bank settled in late 2012, its chairman appeared to violate a provision of the deal that forbade Standard Chartered executives from issuing “any public statement contradicting the acceptance of responsibility.”

In a conference call, the chairman referred to the illicit transactions as “clerical errors” — comments he later retracted.


A version of this article appears in print on 10/30/2014, on page A1 of the NewYork edition with the headline: Repeat Offenses Are Suspected on Wall Street

Fifteen Years of NASA's Chandra X-ray Observatory | NASA

Fifteen Years of NASA's Chandra X-ray Observatory | NASA

“High-Functioning” Bipolar Disorder posted on January 17, 2011 by Natasha Tracy "So all the appearance of my functioning is paid for by utter decimation and exhaustion the rest of the time. I don’t have energy or brain space left to read, see friends, date or do pretty much anything else. The last thing I want to do is leave the house. I want to sleep. Forever. And ever. I do know wonderful people and I do adore them. But that doesn’t overcome the inertia of having every drop of energy sucked from me so I can pay rent."

“High-Functioning” Bipolar DisorderPosted on January 17, 2011 by Natasha Tracy

"So all the appearance of my functioning is paid for by utter decimation and exhaustion the rest of the time. I don’t have energy or brain space left to read, see friends, date or do pretty much anything else. The last thing I want to do is leave the house. I want to sleep. Forever. And ever.

I do know wonderful people and I do adore them. But that doesn’t overcome the inertia of having every drop of energy sucked from me so I can pay rent."


Sometimes people don’t believe I’m particularly sick. They meet me, I look fine, I interact, I charm, I wit and all seems, if not normal, at least something reasonably normal adjacent.

And that’s fine. It’s by design. Being a high-functioning mentally ill person, I can’t really afford to run around with my hair on fire. But faking normalcy, happiness and pleasure is a tricky and very expensive bit of business.


High-Functioning Bipolar

Being a “high-functioning” bipolar doesn’t really have a definition, per se. The term indicates that I’m not in a mental hospital, and I do things like live on my own, pay rent, work and whatnot. I would suggest that being “high-functioning” seems to indicate that I can fake not being a crazy person.
High-Functioning Weekdays
It’s really important that I be able to put my bipolar on the shelf. I have to be able to put the crazy away so that I can talk to people, engage in business, produce technical documentation, write articles and so on. I wrote about 12,000 words last week for clients. You can’t do that if you’re pondering where on your wrist the best place to slice is.


Low-Functioning Weekends

The trouble is, using all my control, sanity and energy during the week to try and produce enough work to pay my rent then leaves me with a really large deficit when I’m not working. I’m crazy. Remember? Not normal? I’m just faking the normal. And faking normal requires more effort than you can possibly imagine.

So then, as soon as I’m not working, I break into a thousand pieces all over the tiles on my kitchen floor.

Sure, you go out Friday night with friends. My Friday night is usually spent fairly catatonic trying desperately not to get suicidal.
Energy is Finite, Bipolar is Exhausting

As I see it, everyone has a similar tank of energy. We expend that energy in lots of ways. We run after kids, we go to the office, we jump out of planes. All fine uses of energy. Me, on the other hand, I spend a massive amount of energy just trying to keep my brain in one place. I have almost no energy, or brain left, outside of that.
I Give Up a Life to Survive

So all the appearance of my functioning is paid for by utter decimation and exhaustion the rest of the time. I don’t have energy or brain space left to read, see friends, date or do pretty much anything else. The last thing I want to do is leave the house. I want to sleep. Forever. And ever.

I do know wonderful people and I do adore them. But that doesn’t overcome the inertia of having every drop of energy sucked from me so I can pay rent.
Bipolar Sucks the Life You Don’t See
I’m the least fun person in the world. I work. I sleep. I have a schedule. I keep that schedule. I’m tired. I make excuses not to go out. I’m sort of the lamest person ever.

But that’s the mental illness sucking the life out of my ears. I want to go out. I want to see my friends. I want to do something fun. I want to have a drink with you after work. I just can’t. I’m too tired.

So yes. I’m capable. I’m talented. I work hard. I produce stuff. Yay me. But the price I pay for that is not being able to be anything else.

You can find Natasha Tracy on Facebook or GooglePlus or @Natasha_Tracy on Twitter or at the Bipolar Burble, her blog.


his entry was posted in Being Crazy, Coping, Depression, How Others See Bipolar, Impact of Bipolar, Understanding Mental Illness and tagged Bipolar Disorder, Crazy, Depression, Honest About Bipolar, I Have Bipolar Disorder, Mental Illness, Public, Routine, Understanding Illness. Bookmark the permalink.

Sunday, October 26, 2014

NY Times: Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required. By SHAILA DEWAN “I don’t think they’re really interested in anything,” Mr. Potashnik said of the prosecutors. “They just want the money.”

Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required

By SHAILA DEWAN                    OCT. 25, 2014


Carole Hinders at her modest, cash-only Mexican restaurant in Arnolds Park, Iowa. Last year tax agents seized her funds.
Credit Angela Jimenez for The New York Times
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ARNOLDS PARK, Iowa — For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.

The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.

“How can this happen?” Ms. Hinders said in a recent interview. “Who takes your money before they prove that you’ve done anything wrong with it?”

The federal government does.

Using a law designed to catch drug traffickers, racketeers and terrorists by tracking their cash, the government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. The government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent. Many give up.

The I.R.S. seized almost $33,000 from Ms. Hinders. Credit Angela Jimenez for The New York Times

“They’re going after people who are really not criminals,” said David Smith, a former federal prosecutor who is now a forfeiture expert and lawyer in Virginia. “They’re middle-class citizens who have never had any trouble with the law.”

On Thursday, in response to questions from The New York Times, the I.R.S. announced that it would curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by “exceptional circumstances.”

Richard Weber, the chief of Criminal Investigation at the I.R.S., said in a written statement, “This policy update will ensure that C.I. continues to focus our limited investigative resources on identifying and investigating violations within our jurisdiction that closely align with C.I.’s mission and key priorities.” He added that making deposits under $10,000 to evade reporting requirements, called structuring, is still a crime whether the money is from legal or illegal sources. The new policy will not apply to past seizures.

The I.R.S. is one of several federal agencies that pursue such cases and then refer them to the Justice Department. The Justice Department does not track the total number of cases pursued, the amount of money seized or how many of the cases were related to other crimes, said Peter Carr, a spokesman.

But the Institute for Justice, a Washington-based public interest law firm that is seeking to reform civil forfeiture practices, analyzed structuring data from the I.R.S., which made 639 seizures in 2012, up from 114 in 2005. Only one in five was prosecuted as a criminal structuring case.

The practice has swept up dairy farmers in Maryland, an Army sergeant in Virginia saving for his children’s college education and Ms. Hinders, 67, who has borrowed money, strained her credit cards and taken out a second mortgage to keep her restaurant going.
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Their money was seized under an increasingly controversial area of law known as civil asset forfeiture, which allows law enforcement agents to take property they suspect of being tied to crime even if no criminal charges are filed. Law enforcement agencies get to keep a share of whatever is forfeited.

Critics say this incentive has led to the creation of a law enforcement dragnet, with more than 100 multiagency task forces combing through bank reports, looking for accounts to seize. Under the Bank Secrecy Act, banks and other financial institutions must report cash deposits greater than $10,000. But since many criminals are aware of that requirement, banks also are supposed to report any suspicious transactions, including deposit patterns below $10,000. Last year, banks filed more than 700,000 suspicious activity reports. Owners who are caught up in structuring cases often cannot afford to fight. The median amount seized by the I.R.S. was $34,000, according to the Institute for Justice analysis, while legal costs can easily mount to $20,000 or more.

There is nothing illegal about depositing less than $10,000cash unless it is done specifically to evade the reporting requirement. But often a mere bank statement is enough for investigators to obtain a seizure warrant. In one Long Island case, the police submitted almost a year’s worth of daily deposits by a business, ranging from $5,550 to $9,910. The officer wrote in his warrant affidavit that based on his training and experience, the pattern “is consistent with structuring.” The government seized $447,000 from the business, a cash-intensive candy and cigarette distributor that has been run by one family for 27 years.

There are often legitimate business reasons for keeping deposits below $10,000, said Larry Salzman, a lawyer with the Institute for Justice who is representing Ms. Hinders and the Long Island family pro bono. For example, he said, a grocery store owner in Fraser, Mich., had an insurance policy that covered only up to $10,000 cash. When he neared the limit, he would make a deposit.

Ms. Hinders said that she did not know about the reporting requirement and that for decades, she thought she had been doing everyone a favor.

Jeff Hirsch, an owner of Bi-County Distributors on Long Island. The government seized $447,000 from the business, a candy and cigarette distributor run by one family for 27 years.
Credit Bryan Thomas for The New York Times

“My mom had told me if you keep your deposits under $10,000, the bank avoids paperwork,” she said. “I didn’t actually think it had anything to do with the I.R.S.”

In May 2012, the bank branch Ms. Hinders used was acquired by Northwest Banker. JoLynn Van Steenwyk, the fraud and security manager for Northwest, said she could not discuss individual clients, but explained that the bank did not have access to past account histories after it acquired Ms. Hinders’s branch.

Banks are not permitted to advise customers that their deposit habits may be illegal or educate them about structuring unless they ask, in which case they are given a federal pamphlet, Ms. Van Steenwyk said. “We’re not allowed to tell them anything,” she said.

Still lawyers say it is not unusual for depositors to be advised by financial professionals, or even bank tellers, to keep their deposits below the reporting threshold. In the Long Island case, the company, Bi-County Distributors, had three bank accounts closed because of the paperwork burden of its frequent cash deposits, said Jeff Hirsch, the eldest of three brothers who own the company. Their accountant then recommended staying below the limit, so for more than a decade the company had been using its excess cash to pay vendors.
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More than two years ago, the government seized $447,000, and the brothers have been unable to retrieve it. Mr. Salzman, who has taken over legal representation of the brothers, has argued that prosecutors violated a strict timeline laid out in the Civil Asset Forfeiture Reform Act, passed in 2000 to curb abuses. The office of the federal attorney for the Eastern District of New York said the law’s timeline did not apply in this case. Still, prosecutors asked the Hirsch’s first lawyer, Joseph Potashnik, to waive the CARFA timeline. The waiver he signed expired almost two years ago.

The federal attorney’s office said that parties often voluntarily negotiated to avoid going to court, and that Mr. Potashnik had been engaged in talks until just a few months ago. But Mr. Potashnik said he had spent that time trying, to no avail, to show that the brothers were innocent. They even paid a forensic accounting firm $25,000 to check the books.

“I don’t think they’re really interested in anything,” Mr. Potashnik said of the prosecutors. “They just want the money.”

Bi-County has survived only because longtime vendors have extended credit — one is owed almost $300,000, Mr. Hirsch said. Twice, the government has made settlement offers that would require the brothers to give up an “excessive” portion of the money, according to a new court filing.

“We’re just hanging on as a family here,” Mr. Hirsch said. “We weren’t going to take a settlement, because I was not guilty.”

Army Sgt. Jeff Cortazzo of Arlington, Va., began saving for his daughters’ college costs during the financial crisis, when many banks were failing. He stored cash first in his basement and then in a safe-deposit box. All of the money came from paychecks, he said, but he worried that when he deposited it in a bank, he would be forced to pay taxes on the money again. So he asked the bank teller what to do.

“She said: ‘Oh, that’s easy. You just have to deposit less than $10,000.’”

The government seized $66,000; settling cost Sergeant Cortazzo $21,000. As a result, the eldest of his three daughters had to delay college by a year.

“Why didn’t the teller tell me that was illegal?” he said. “I would have just plopped the whole thing in the account and been done with it.”

A version of this article appears in print on October 26, 2014, on page A1 of the New York edition with the headline: Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required. Order Reprints|Today's Paper|Subscribe

NY Times QUOTATION OF THE DAY: "How can this happen? Who takes your money before they prove that you've done anything wrong with it?"

QUOTATION OF THE DAY

"How can this happen? Who takes your money before they prove that you've done anything wrong with it?"

CAROLE HINDERS, who runs a small, cash-only Mexican restaurant in Iowa, and had made regular deposits at a nearby bank, until the Internal Revenue Service seized her funds.

Saturday, October 25, 2014

NY Times - Combating a Flood of Early 401(k) Withdrawals: Your Money By RON LIEBER

401(k)'s and Similar Plans
Combating a Flood of Early 401(k) Withdrawals
OCT. 24, 2014
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Your Money 

By RON LIEBER
  

This week, the Internal Revenue Service announced that people under age 50 in 401(k) and similar workplace retirement plans will be able to deposit up to $18,000 in 2015, an increase of $500 from this year. Those 50 and over can toss in as much as $24,000, a $1,000 increase.

Which is all fine and dandy for the well-heeled and the frugal. But one of the biggest problems with these accounts has nothing to do with how much we can put in. Instead, it’s the amount that so many people take out long before they retire.

Over a quarter of households that use one of these plans take out money for purposes other than retirement expenses at some point. In 2010, 9.3 percent of households who save in this way paid a penalty to take money out. They pulled out $60 billion in the process; a significant chunk of the $294 billion in employee contributions and employer matches that went into the accounts.

These staggering numbers come from an examination of federal and other data by Matt Fellowes, a former Georgetown public policy professor who now runs a software company called HelloWallet, which aims to help employers help their workers manage their money better.

In a paper he wrote with a colleague, he noted that industry veterans tend to refer to these retirement withdrawals as “leakage.” But as the two of them wrote, it’s really more like a breach. And while that term has grown more loaded since their treatise appeared last year and people’s debit card information started showing up on hacker websites, it’s still appropriate. Millions of people are clearly not using 401(k) plans as retirement accounts at all, and it’s a threat to their financial health.

“It’s not a system of retirement accounts,” said Stephen P. Utkus, the director of retirement research at Vanguard. “In effect, they have become dual-purpose systems for retirement and short-term consumption needs.”

How did this happen? Early on in the history of these accounts, there was concern that if there wasn’t some way for people to get the money out, they wouldn’t deposit any in the first place. Now, account holders may be able to take what are known as hardship withdrawals if they’re in financial trouble. Moreover, job changers often choose to pull out some or all of the money and pay income tax on it plus a 10 percent penalty.

The breach tends to be especially big when people are between jobs. Earlier this year, Fidelity revealed that 35 percent of its participants took out part or all of the money in their workplace retirement plans when leaving a job in 2013. Among those from ages 20 to 39, 41 percent took the money.

The big question is why, and the answer is that leading plan administrators like Fidelity and Vanguard don’t know for sure. They don’t do formal polls when people withdraw the money. In fact, it was obvious talking to people in the industry this week and reading the complaints from academics in the field that the lack of good data on these breaches is a real problem.
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Fidelity does pick up some intelligence via its phone representatives and their conversations with customers. “Some people see a withdrawal as an opportunity to pay off debt,” said Jeanne Thompson, a Fidelity vice president. “They don’t see the balance as being big enough to matter.”

Or their long-term retirement savings matter less when the 401(k) balance is dwarfed by their current loans. Andrea Sease, who lives in Somerville, Mass., is about to start a new job as an analytical scientist for a pharmaceutical company. She was tempted to pull money from her old 401(k) to pay down her student loan debt, which is more than twice the size of her balance in the retirement account. “It almost seems like they encourage you,” she said, noting that the materials she received from her last retirement account administrator made it plain that pulling out the money was an option. “It’s an emotional thing when you look at your loan balance and ask yourself whether you really want to commit to 15 more years of paying it, and a large sum of 401(k) cash is just sitting there.” So far, she’s keeping her savings intact.

Another big reason that people pull their money: Their former employer makes them. The employers have the right to kick out former employees with small 401(k) balances, given the hassle of tracking small balances and the whereabouts of the people who leave them behind. According to Fidelity, among the plans that don’t have the kick-them-out rule, 35 percent of the people with less than $1,000 cashed out when they left a job. But at employers that do eject the low-balance account holders, 72 percent took the cash instead of rolling the money over into an individual retirement account.

This is unconscionable. Employers may meekly complain about the difficulty of finding the owners of orphan accounts, but it just isn’t that hard to track people down these days. Whatever the expense, they should bear it, given its contribution to the greater good. Let people leave their retirement money in their retirement accounts, for crying out loud.

Account holder ignorance may also contribute to the decision to withdraw money. “There is a complete lack of understanding of the tax implications,” said Shlomo Benartzi, a professor at the University of California, Los Angeles, and chief behavioral economist at Allianz Global Investors, who has done pioneering research on getting people to save more. “And given that we’re generally myopic, I don’t think people understand the long-term implications in terms of what it would cost in terms of retirement.”

In fact, young adults who spend their balance today will lose part of it to taxes and penalties and would have seen that balance increase many times over, as the chart accompanying this column shows.

But Mr. Fellowes of HelloWallet, interpreting the limited federal survey data that exists, says he believes that people raid their workplace retirement accounts most often because they have to. They are facing piles of unpaid bills or basic failures of day-to-day money management. Only 8 percent grab the money because of job loss and less than 6 percent do so for frivolous pursuits like vacations.
Continue reading the main story
 What can be done to change all of this? Mr. Benartzi thinks a personalized video might be even more effective than a boldly worded infographic showing people the money they stand to lose. He advises a company called Idomoo that has a clever one on its website aimed at people with pensions. If you want to see the damage that an early withdrawal could do, Wells Fargo has a tool on its site.

Fidelity has recently begun calling account holders to talk to them about cashing out, and it has found that people who get on the phone are a third as likely to remove some of their money as they are if they receive written communication. Here’s hoping more people will get such calls when they leave for another job.

Mr. Fellowes has a bigger idea. Given that so many people are pulling money from retirement savings accounts for nonretirement purposes, perhaps employers should make people put away money in an emergency savings account before letting them save in a retirement account. It’s a paternalistic solution, but some of the large employers he works with are considering it.

It’s surprising that regulators haven’t taken more notice of the breaches here. The numbers aren’t improving, but more and more people are relying on accounts like this as their primary source of retirement savings. “This is a problem that industry should solve,” said Mr. Benartzi, pointing to the unsustainability of tens of billions of dollars each year leaving retirement accounts for nonretirement purposes.

He says he thinks that there’s a chance that a company from outside the financial services industry could come in and solve the problem in an unexpected way before regulators take action. “If we don’t solve it, someone is going to eat our lunch, breakfast and dinner and drink our wine too.”

Hinode Captures Images of Partial Solar Eclipse | NASA

Hinode Captures Images of Partial Solar Eclipse | NASA

Wednesday, October 22, 2014

NASA Launches a SoundCloud Page Full of Audio Clips From Historic Missions by Glen Tickle

NASA Launches a SoundCloud Page Full of Audio Clips From Historic Missions
by Glen Tickle at 2:39 pm on October 22, 2014



NASA (see previously) has launched a SoundCloud page full of audio clips from missions like Apollo, Mercury, Voyager, and other important moments in the history of human spaceflight.

image via NASA




Delanceyplace.com: Today's selection from "When Two Brains Connect" by Rajesh P.N. Rao and Andrea Stocco.

Today's selection -- from "When Two Brains Connect" by Rajesh P.N. Rao and Andrea Stocco. Rao and Stocco are the first to successfully allow one human brain to communicate an intention directly to another human brain:

"Technologies known as brain-computer interfaces (BCIs) are now beginning to allow paralyzed individuals to control, say, a computer cursor or a prosthetic limb with their brain signals. ... In 2010 one of us (Rao) had a realization: perhaps we could use this same principle to beam thoughts from one human brain to another. Imagine if a teacher could convey a mathematical proof to your brain, nonverbally. Or perhaps a medical student could learn a complex surgical skill straight from a mentor's mind. ... In short, we would use one person's brain data to produce a specific pattern of neural activity in another individual. ...
"We decided to test our brain-to-brain interface by seeing if we could play a simple two-player video game. After students in our labs spent months writing computer code and integrating the technologies, on August 12 of last year we finally tried out our setup. Rao took on the role of the sender of information, and Stocco assumed the part of the receiver.

"In the game, a pirate ship is shooting rockets at a city. The goal is to fire a cannon to intercept each rocket. Rao alone could see the screen displaying the game. But only Stocco could press the button to fire the cannon. At just the right moment, Rao had to form the intention to shoot, and a few seconds later Stocco would receive the intention and press the button.

"Rao donned a tight-fitting cap studded with 32 electrodes, which measure fluctuations in electrical activity at different locations across the head. At any given time, distinct populations of neurons may be oscillating at many different frequencies. When he imagined moving a hand, the EEG electrodes registered a telltale signature that our software could detect. The giveaway was a drop in the low-frequency oscillations in Rao's brain. We used that signature as our cue to send a command over the Internet to stimulate Stocco's brain.

"Stocco did not register the impulse consciously, but his right hand moved anyway. The stimulation caused his hand to lift, and when it fell it hit a keyboard and fired the cannon. Success! For the first time, a human brain had communicated an intention directly to another human brain, allowing the two brains to jointly complete a task. As we played the game, we got better and better, to the point where in our last run, we intercepted the pirate rockets with almost 100 percent accuracy. Rao learned how to imagine moving his hand in a consistent manner, giving the computer a chance to make sense of his EEG brain data. Stocco found that he did not know his wrist was moving until he felt or saw his hand in motion.


Rajesh Rao, left, plays a computer game with his mind. Across campus, researcher Andrea Stocco, right, wears a magnetic stimulation coil over the left motor cortex region of his brain


"We have now replicated our findings with several other pairs of humans. Not every trial went perfectly in these experiments, but in all cases, whenever an intention was correctly detected by the EEG system, the information was communicated directly to the receiver's brain using TMS. Throughout the experiment, both subjects were conscious of each other's roles and willingly cooperated to solve a mutually agreed-on task. When a pirate rocket gets hit, the sender knows that his or her partner's brain enacted a movement in response to the sender's own brain activity. We believe this conscious cooperation between subjects is the ultimate goal of true brain-to-brain communication, something that may be hard to achieve with animal studies."

Authors: Rajesh P.N. Rao and Andrea Stocco Article: "When Two Brains Connect" 
Publisher: Scientific America Mind 
Pages: 36 to 39 
Date: November/December 2011

Red


About Us

Delanceyplace is a brief daily email with an excerpt or quote we view as interesting or noteworthy, offered with commentary to provide context.  There is no theme, except that most excerpts will come from a non-fiction work, mainly works of history, are occasionally controversial, and we hope will have a more universal relevance than simply the subject of the book from which they came. 

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Extreme Ultraviolet Image of a Significant Solar Flare | NASA

Extreme Ultraviolet Image of a Significant Solar Flare | NASA

James Webb Space Telescope's Heart Survives Deep Freeze Test | NASA - James Webb Space Telescope's Heart Survives Deep Freeze Test After 116 days of being subjected to extremely frigid temperatures like that in space, the heart of the James Webb Space Telescope, the Integrated Science Instrument Module (ISIM) and its sensitive instruments, emerged unscathed from the thermal vacuum chamber at NASA’s Goddard Space Flight Center in Greenbelt, Maryland. The Webb telescope's images will reveal the first galaxies forming 13.5 billion years ago. The telescope will also pierce through interstellar dust clouds to capture stars and planets forming in our own galaxy. At the telescope's final destination in space, one million miles away from Earth, it will operate at incredibly cold temperatures of -387 degrees Fahrenheit, or 40 degrees Kelvin. This is 260 degrees Fahrenheit colder than any place on the Earth’s surface has ever been. To create temperatures that cold on Earth, the team uses the massive thermal vacuum chamber at Goddard called the Space Environment Simulator, or SES, that duplicates the vacuum and extreme temperatures of space. This 40-foot-tall, 27-foot-diameter cylindrical chamber eliminates the tiniest trace of air with vacuum pumps and uses liquid nitrogen and even colder liquid helium to drop the temperature simulating the space environment. The James Webb Space Telescope is the scientific successor to NASA's Hubble Space Telescope. It will be the most powerful space telescope ever built. Webb is an international project led by NASA with its partners, the European Space Agency and the Canadian Space Agency. > More: NASA Webb's Heart Survives Deep Freeze Test Image Credit: NASA/Chris Gunn

Sunday, October 19, 2014

Monday, October 13, 2014

QUICK PAINLESS CERTAIN DISCREET SAFE ACCESSIBLE TIDY RATIONALE

Zarate, Carlos (NIH/NIMH) [E]

Dear Mr. Reed—
I appreciate your concern about ketamine not being widely available at this time. There are many research efforts under way to attempt to achieve FDA approval of ketamine for treatment-resistant depression including multicenter trials around the country. For now, we need to wait for the efficacy and safety results of these trials before the treatment can be given as an approved standard of care for treatment-resistant depression. On our end, we continue with research to better understand how ketamine works and to develop safer alternatives than ketamine.

Sincerely,

Carlos A. Zarate, Jr., M.D.
Chief Experimental Therapeutics & Pathophysiology Branch &
Section Neurobiology and Treatment of Mood Disorders
Division of Intramural Research Program
National Institute of Mental Health
zaratec@mail.nih.gov


http://www.nimh.nih.gov/labs-at-nimh/research-areas/clinics-and-labs/etpb/index.shtml



Transforming the understanding
and treatment of mental illnesses.

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The Experimental Therapeutics and Pathophysiology Branch (ETPB) is part of the National Institute of Mental Health (NIMH), a major research component of the National Institutes of Health (NIH). The ETPB conducts clinical research studies on mood disorders (including: major depressive disorder and bipolar disorder) with the goal of creating better ways to prevent, diagnose, and treat mental illness.

Researchers at NIMH that specialize in Mood Disorders seek through RESEARCH STUDIES to:
DEVELOP medications that rapidly decrease symptoms of depression
IDENTIFY biological characteristics (biomarkers)
Better PREDICT with biomarkers who might respond to medications and treatments
UNDERSTAND the mechanisms in the brain that are causing depression and response to treatments

At NIMH, research studies on mood disorders investigate how the depressed brain works, with a primary focus on the glutamate and cholinergic systems. Understanding how experimental medications may work to quickly lift severe and hard-to-treat depressive symptoms may lead to development of new, faster-acting treatments. Researchers at the ETPB also seek to understand what makes some people more likely to develop mood disorders.

Robin Hood, "Man" Marion; Interpretor for Redgrave, Redistributing Time Bandit's Loot to the Poor

NY Times: The Opinion Pages | Op-Ed Columnist - Revenge of the Unforgiven; How Righteousness Killed the World Economy by Paul Krugman

The Opinion Pages | Op-Ed Columnist
Revenge of the Unforgiven
How Righteousness Killed the World Economy

OCT. 12, 2014
Continue reading the main story
"Response to poor economic performance has essentially been that the beatings will continue until morale improves." Paul Krugman

Continue reading the main story

Stop me if you’ve heard this before: The world economy appears to be stumbling. For a while, things seemed to be looking up, and there was talk about green shoots of recovery. But now growth is stalling, and the specter of deflation looms.

If this story sounds familiar, it should; it has played out repeatedly since 2008. As in previous episodes, the worst news is coming from Europe, but this time there is also a clear slowdown in emerging markets — and there are even warning signs in the United States, despite pretty good job growth at the moment.

Why does this keep happening? After all, the events that brought on the Great Recession — the housing bust, the banking crisis — took place a long time ago. Why can’t we escape their legacy?

The proximate answer lies in a series of policy mistakes: Austerity when economies needed stimulus, paranoia about inflation when the real risk is deflation, and so on. But why do governments keep making these mistakes? In particular, why do they keep making the same mistakes, year after year?

The answer, I’d suggest, is an excess of virtue. Righteousness is killing the world economy.

What, after all, is our fundamental economic problem? A simplified but broadly correct account of what went wrong goes like this: In the years leading up to the Great Recession, we had an explosion of credit (mainly to the private sector). Old notions of prudence, for both lenders and borrowers, were cast aside; debt levels that would once have been considered deeply unsound became the norm.

Then the music stopped, the money stopped flowing, and everyone began trying to “deleverage,” to reduce the level of debt. For each individual, this was prudent. But my spending is your income and your spending is my income, so when everyone tries to pay down debt at the same time, you get a depressed economy.

So what can be done? Historically, the solution to high levels of debt has often involved writing off and forgiving much of that debt. Sometimes this happens explicitly: In the 1930s F.D.R. helped borrowers refinance with much cheaper mortgages, while in this crisis Iceland is outright canceling a significant part of the debt households ran up during the bubble years. More often, debt relief takes place implicitly, through “financial repression”: government policies hold interest rates down, while inflation erodes the real value of debt.

What’s striking about the past few years, however, is how little debt relief has actually taken place. Yes, there’s Iceland — but it’s tiny. Yes, Greek creditors took a significant “haircut” — but Greece is still a small player (and still hopelessly in debt). In major economies, very few debtors have received a break. And far from being inflated away, the burden of debt has been aggravated by falling inflation, which is running well below target in America and near zero in Europe. Continue reading the main story

Why are debtors receiving so little relief? As I said, it’s about righteousness — the sense that any kind of debt forgiveness would involve rewarding bad behavior. In America, the famous Rick Santelli rant that gave birth to the Tea Party wasn’t about taxes or spending — it was a furious denunciation of proposals to help troubled homeowners. In Europe, austerity policies have been driven less by economic analysis than by Germany’s moral indignation over the notion that irresponsible borrowers might not face the full consequences of their actions.

So the policy response to a crisis of excessive debt has, in effect, been a demand that debtors pay off their debts in full. What does history say about that strategy? That’s easy: It doesn’t work. Whatever progress debtors make through suffering and saving is more than offset through depression and deflation. That is, for example, what happened to Britain after World War I, when it tried to pay off its debt with huge budget surpluses while returning to the gold standard: Despite years of sacrifice, it made almost no progress in bringing down the ratio of debt to G.D.P.

And that’s what is happening now. A recent comprehensive report on debt is titled “Deleveraging, what deleveraging?”; despite private cutbacks and public austerity, debt levels are rising thanks to poor economic performance. And we are arguably no closer to escaping our debt trap than we were five years ago.

But it has been very hard to get either the policy elite or the public to understand that sometimes debt relief is in everyone’s interest. Instead, the response to poor economic performance has essentially been that the beatings will continue until morale improves.

Maybe, just maybe, bad news — say, a recession in Germany — will finally bring an end to this destructive reign of virtue. But don’t count on it.

Charles M. Blow is off today.

A version of this op-ed appears in print on October 13, 2014, on page A21 of the New York edition with the headline: Revenge of the Unforgiven. Order Reprints|Today's Paper|Subscribe

Sunday, October 12, 2014

Gold On The Ceiling by Black Keys Official Video


Lonely Boy Black Keys with Andrea


ChumbaW*mba Tub Thumping

Zaibatsu (財閥, literally financial clique)

Zaibatsu (財閥?, literally financial clique)

et al...

Did I Ever Love You by Leonard Cohen


"Black Hole Sun" Soundgarden Cover by Nouela

Friday, October 10, 2014

KATZ



Wednesday, October 8, 2014

NY Times: QUOTATION OF THE DAY "It scared the pants off many people." AL PASCUAL, a security analyst with Javelin Strategy and Research, reacting to JPMorgan Chase's disclosure that a cyberattack had compromised tens of millions of household accounts.

QUOTATION OF THE DAY

"It scared the pants off many people."

AL PASCUAL, a security analyst with Javelin Strategy and Research, reacting to JPMorgan Chase's disclosure that a cyberattack had compromised tens of millions of household accounts.