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Krebs Daily Briefing 23 January 2014

Thomas L. Krebs, Securities Litigation, Regulation and Compliance Attorney Lawyer (c)2014 Brandon L. Blankenship

Thomas L. Krebs


Banks Aid U.S. Forex Probe, Fulfilling Libor Accords

Banks bound by cooperation agreements in an interest-rate rigging probe are providing a windfall of information to U.S. prosecutors investigating possible currency manipulation, according to a Justice Department official and a person familiar with the matter. “We’ve seen tangible, real results,” Mythili Raman, the acting head of the Justice Department’s criminal division, said in an interview. The cooperation “expanded our investigations into the possible manipulation of foreign exchange and other benchmark rates,” said Raman, who declined to name the banks or comment further on the probe. The accords have compelled some lenders to conduct internal examinations of their foreign-exchange businesses and share findings with the Justice Department, speeding the government’s criminal probe into the $5.3 trillion-a-day market, according to a person with knowledge of the investigation. Some banks are handing over lists of potential witnesses, making employees available for interviews and giving up documents without subpoenas, said the person, who asked not to be identified because the inquiry is confidential. Investigators are holding weekly and sometimes daily phone calls with the banks, the person said. UBS AG (UBSN), Barclays Plc (BARC) and Royal Bank of Scotland Group Plc resolved a Justice Department investigation into how the London interbank offered rate, or Libor, was set, paying more than $800 million in criminal fines and penalties and agreeing to cooperate in other inquiries. The three lenders are among the largest currency traders in the world. Dominik von Arx, a spokesman for UBS, Nichola Sharpe at Barclays and Sarah Small at RBS, declined to comment.


Davos 2014: What does ‘Reshaping the world’ theme mean?

The theme of this year’s World Economic Forum is ‘Reshaping the world’ – but what does it actually mean? International Monetary Fund deputy managing director Zhu Min told BBC World that it meant giving emerging market countries a bigger voice. He also admitted the IMF wanted to reform to give countries such as Brazil increased voting rights.


Iran wants full nuclear deal and investment, Rouhani tells Davos

(Reuters) – Iran is determined to negotiate a comprehensive deal on its nuclear program with major powers so it can develop its battered economy, President Hassan Rouhani said on Thursday, inviting Western companies to seize opportunities now. Addressing the World Economic Forum in Davos, the pragmatic president said Tehran was negotiating with the United States as part of a “constructive engagement” with the world and wanted Washington to back up its words with actions. However, a day after a chaotic Syria peace conference from which Iran was excluded, he was unbending in his support for Syrian President Bashar al-Assad. Ending the “terrorism” that is backed by some of Syria’s neighbors was a precondition for any settlement of the country’s civil war, he said. Elected last year on a promise to improve Tehran’s relations with outside world, Rouhani took the United Nations by storm in New York in September. His appearance in the Swiss resort launched phase two of a charm offensive aimed at ending international sanctions that are crippling Iran’s economy. An interim deal with the United States, Russia, China, Britain, France and Germany – known as the P5+1 – came into force this week. This granted Iran a limited easing of the sanctions in return for temporary constraints on its uranium enrichment and nuclear development.


The Disappeared

In the ancient southeastern Turkish city of Antakya,1 20 miles from the border with Syria, a plump Syrian merchant who calls himself Abu Nabil can be found most evenings drinking tea in the Bellur, a pleasant open-air cafe. Abu Nabil is the kind of mysterious middleman who germinates spontaneously in war zones. His specialty, or so he says, is arranging the release of journalists and activists kidnapped by the regime of President Bashar al-Assad in Damascus. When I met Abu Nabil, in the first days of October 2013, he told me that he was at that very moment negotiating for the freedom of James Foley, an American freelance journalist who had disappeared the year before. I said that I had heard that Foley was held by rebels, not by the regime. Abu Nabil shot me a masterful look. “The company” — Kroll Risk and Compliance Solutions, the private security firm working the case — “doesn’t know anything; the government doesn’t know anything; nobody knows anything,” he said, through an interpreter. “James Foley will come to his family in 15 days.”



Report: Va. AG won’t defend gay marriage ban

RICHMOND, Va. (AP) — The office of Virginia Attorney General Mark Herring says he’s concluded that the state’s ban on gay marriage is unconstitutional and he will no longer defend it in federal lawsuits challenging it. In an e-mail to the Associated Press early Thursday, Herring spokesman Michael Kelly says the state will instead side with the plaintiffs who are seeking to have the ban struck down. Kelly says the attorney general decided the ban was unconstitutional after a thorough legal review of the matter. Virginia has emerged as a critical state in the nationwide fight for gay marriage. The state’s shift comes on the heels of recent court rulings in which federal judges struck down gay marriage bans in Utah and Oklahoma.


When Political Spouse Helps Cause a Downfall

Virginia’s first lady needed a designer dress for her husband’s inauguration. When a political patron offered to buy her an Oscar de la Renta gown, fit for ladies who lunch or a Vogue cover shoot, Maureen McDonnell jumped, according to federal prosecutors, until an aide to her husband, Gov. Bob McDonnell, vetoed the gift. Ms. McDonnell sent off an angry email: “We are broke, have an unconscionable amount in credit card debt already, and this Inaugural is killing us!!” In most tales of political careers destroyed by personal weaknesses, it is the officeholder’s spouse who has wound up embarrassed and humiliated. The wives of two former governors, Eliot Spitzer of New York and Mark Sanford of South Carolina, and of former Representative Anthony Weiner of New York, have often looked like stunned bystanders to their husbands’ sex scandals. The archetype has inspired a television drama, “The Good Wife.” But there is another drama that plays out, too: the political spouse whose own misjudgment and taste for luxury contribute to an officeholder’s downfall. In a 43-page federal indictment of the McDonnells, charging them with aiding a Virginia businessman in exchange for cash and designer baubles, prosecutors portray Ms. McDonnell as the person whose desires for luxury items led the couple to use the governor’s office to promote a contributor’s dietary supplement business. A former Washington Redskins cheerleader who married her high school sweetheart, Ms. McDonnell, 59, treated herself to a shopping spree at Bergdorf Goodman, travel by Ferrari and private jet, and a silver Rolex watch to present to her husband, prosecutors said Tuesday.


McGraw Alleges Geithner Threatened S&P Lawsuit As Retaliation For Downgrade

Harold McGraw, the chairman of McGraw-Hill Financial Inc (MHFI.N), alleged in a declaration filed in the S&P lawsuit on Monday, former U.S. Treasury Secretary Timothy Geithner threatened retaliation for its decision to downgrade the U.S. credit rating during the 2011 debt ceiling debate. The allegation was made as S&P defends itself against the government’s $5 billion fraud lawsuit surrounding rating practices leading up to the 2008 financial crisis. McGraw said he returned a call from Geithner on August 8, 2011, three days after S&P cut the U.S. credit rating to “AA-plus,” and that Geithner told him “you are accountable” for an alleged “huge error” in S&P’s work. “He said that ‘you have done an enormous disservice to yourselves and to your country,’” and that S&P would be “looked at very carefully,” McGraw said. “Such behavior could not occur, he said, without a response from the government.” McGraw said he learned of Geithner’s concerns from a message left by one of the Secretaries former underlings at the Federal Reserve Bank of New York, where Geithner served as president in 2008. The U.S. Department of Justice, which filed the S&P lawsuit U.S. v. McGraw-Hill Cos et al, accused S&P of hurting banks and credit unions by inflating ratings to win more fees from issuers, and then failing to downgrade debt backed by deteriorating mortgage-backed securities fast enough. S&P has claimed that the lawsuit was filed in retaliation for the downgrade, and should be dismissed. Its main rating agency rivals, Moody’s Investors Service and Fitch Ratings, were not sued. U.S. officials have said there was no connection between the lawsuit and the downgrade. S&P has said the downgrade was prompted by concern about Washington’s ability to manage the country’s debt.


U.S. brings fraud charges against firm that vetted Snowden

(Reuters) – The Justice Department has accused United States Investigations Services (USIS), the private firm that also vetted Edward Snowden before he leaked documents about U.S. spying efforts, of bilking millions of dollars through improper background checks, a court filing showed. USIS has a contract with the U.S. government since 1996 to vet individuals seeking employment with federal agencies. Such background checks include investigative fieldwork on each application. The whistleblower lawsuit, filed in July 2011 by a former employee of USIS, is not about the firm’s review of Snowden. The lawsuit alleges that USIS failed to perform quality control reviews in connection with its background investigations. Blake Percival filed the lawsuit under the False Claims Act, which lets people collect rewards for blowing the whistle on fraud against the government. In a filing made late on Wednesday, the Justice Department (DOJ) said USIS submitted background investigations that were not reviewed as per agreed standards. DOJ said that due to its fraudulent conduct, USIS received millions of dollars that it otherwise would not have received had the government been aware that the background investigations had not gone through the quality review process required by the contract. The DOJ said that between March 2008 and September 2012, USIS filed at least 665,000 flawed background checks, which was about 40 percent of the total submissions. “USIS management devised and executed a scheme to deliberately circumvent contractually required quality reviews of completed background investigations in order to increase the company’s revenues and profits,” DOJ said in its filing.


JPMorgan CEO Dimon says government cases were ‘unfair’

(Reuters) – JPMorgan Chase & Co (JPM.N) Chief Executive Officer Jamie Dimon said on Thursday that government legal cases, including those over mortgage securities the company settled for more than $13 billion, were “unfair”. Dimon, speaking on CNBC in a pre-recorded interview from Davos, Switzerland, said most of the government claims against the company were for dealings that took place at companies before JPMorgan bought them in the financial crisis. “I think a lot of it was unfair, but I am not going to go into the details,” Dimon said in the television interview. JPMorgan agreed last year to pay $13 billion to settle multiple government claims over dealings in mortgage securities at JPMorgan and at two banks it took over during the crisis, Bear Stearns and Washington Mutual. It also settled other assorted cases for about $7 billion more. Those included allegations stemming from derivatives and electric power trading and sales of extra products to credit card customers. Dimon said JPMorgan had “two really bad options” in choosing to settle or fight the cases. Going to court could have taken three or four years and the outcome could have been worse, he said. “It would really hurt this company and that would have been criminal for me to subject our company to those kinds of issues,” Dimon said.


Five men arrested over 1978 Lufthansa heist at JFK

The FBI says five men were arrested on charges of murder and other crimes linked to an infamous 1978 Lufthansa heist at JohnF.KennedyInternationalAirport. NEW YORK — Five men were taken into custody Thursday on charges of murder and other crimes linked to an infamous 1978 Lufthansa heist at JohnF.KennedyInternationalAirport, an FBI spokeswoman said. The arrests in the three-decades-old crime, made famous by the 1990 film “Goodfellas,” were the result of an FBI search last summer at the New York home of James “Jimmy the Gent” Burke, said FBI spokeswoman Kelly Langmesser. Burke, the suspected mastermind of the heist, died in prison in 1996 while serving time for the murder of a drug dealer. Robert DeNiro played a character based on Burke in the film. The five men are reputed mobsters associated with New York’s Bonnano crime family, a federal law enforcement source said Thursday. Vincent Asaro was among four suspects arrested in early morning raids on Thursday by FBI agents and a fifth man surrendered to authorities, Langmesser said.


Some Predictions on How Medicare Will Release Physician Payment Data

The federal government’s announcement last week that it would begin releasing data on physician payments in the Medicare program seems to have ticked off both supporters and opponents of broader transparency in medicine. For their part, doctor groups are worried that the information to be released by the Centers for Medicare and Medicaid Services will lack context the public needs to understand it. “The unfettered release of raw data will result in inaccurate and misleading information,” AMA President Ardis Dee Hoven, MD, said in a statement to MedPage Today. “Because of this, the AMA strongly urges HHS to ensure that physician payment information is released only for efforts aimed at improving the quality of healthcare services and with appropriate safeguards.” On the other hand, healthcare hacker Fred Trotter has raised concerns about CMS’ plan to evaluate requests for the data on a case-by-case basis. That isn’t much of a policy at all, he wrote, giving federal officials too much discretion about what to release. So, how is this all going to shake out? Three recent examples offer some clues:


FBI questions Hoboken mayor’s aides, sources say

FBI agents have begun questioning witnesses in the investigation into whether New Jersey Gov. Chris Christie’s aides threatened to cut off Hurricane Sandy relief money to Hoboken unless the city’s mayor backed a billion-dollar development project, three sources with direct knowledge of the probe told NBC News on Wednesday. Federal prosecutors and agents have also instructed key witnesses to preserve all documents and emails relating to the allegations by Hoboken Mayor Dawn Zimmer, these sources said. After Zimmer gave her account of the alleged threat to federal prosecutors on Sunday, federal agents questioned Dan Bryan, Zimmer’s chief of staff, and Juan Melli, her communications director, the sources said.



Committee rejects Morrow’s RSA bill

MONTGOMERY — It’s not a good sign for a lawmaker when officials of the party he’s trying to defend stand up in a committee meeting and say they don’t support his bill. Rep. Johnny Mack Morrow’s bill to give Retirement Systems of Alabama chief David Bronner “total unilateral control” to make investment decisions failed in a House committee Wednesday. Morrow, D-Red Bay, had a tough sell with the Republican-majority committee, but then legal counsel for RSA expressed concern about the legislation. Neah Mitchell said RSA appreciates Morrow’s efforts, but, “we do think there needs to be some fiduciary oversight.” She later said RSA feels its current oversight system is sufficient. Morrow’s legislation was prompted by a December resolution approved by the employees’ retirement system board that will require investment recommendations made by Bronner to be reviewed and approved by a three-member investment committee. That’s contrary to how RSA has operated for nearly 40 years, Bronner said. He always has been able to approve investment decisions by proxy. Further discussion about the resolution, which takes effect Feb. 1, will take place during an RSA meeting later this month. His bill is dead, but Morrow said he isn’t done. He plans to introduce a resolution, to be voted on in the House, condemning the RSA board’s action. “The members of the retirement systems, current retirees and future, had a defeat with this vote, but we won’t stop here,” he said. Sen. Roger Bedford, D-Russellville, is sponsoring the Senate version of the bill the House committee killed.


Political Agenda: Alabama lawmakers want to fix the Constitution, just not the one that’s broken

Alabama lawmakers want to make a way to fix the Constitution and they have introduced bills that would lay the groundwork for how Alabama would deal with a constitutional convention if one were called. But if you were hoping their aim is to fix Alabama’s Constitution of 1901, you’re going to be disappointed, but Alabama’s constitution reformers are used to that, right?  Yes, Alabama has the longest constitution in the world with new amendments added almost every election cycle. Yes, Alabama’s constitution hoards power in Montgomery and away from local jurisdictions that frequently struggle without the means to solve their close-to-home problems. And, yes, Alabama’s constitution has nurtured a regressive tax structure, putting a larger tax burden on those who have the least ability to pay it. We’ve been down that dirt road so many times that the ruts in the mud do all the steering for us.  No, it’s the U.S. Constitution we’re talking about today. Across the country there has been a quiet movement building momentum to use Article V of the Constitution to call a convention to amend it. On Tuesday, Sen. Trip Pittman, R-Montrose, and Sen. Arthur Orr, R-Decatur, explained why Alabama needs to be ready for such a convention. “I would see this as being very narrow, very tailored to deal with potential issues that may not be able to be handled in Congress because of the environment, the plethora of interests and all of the great challenges that sometimes seem to be overwhelming,” Pittman said. “They are tough enough here in Montgomery, and this is a minor league compared to Washington, D.C.”


In letter to Shelby, Department of Energy clears environmental group of using federal funds for political activities

The US Department of Energy has found no evidence that the Southern Environmental Law Center used federal funds for political activities in Alabama or elsewhere, the agency said last week in a letter to Sen. Richard Shelby. In December, the Alabama Coal Association revealed the SELC received grants from the California-based Energy Foundation and accused the organization of waging a “war on coal” in Alabama. After that, Shelby requested the Department of Energy investigate whether SELC and other environmentalist groups had used federal funds to finance political activities, including activism against coal-fired power plants. At the time, the SELC denied the allegations and reported what federal funds it had received with a breakout of how those funds had been spent. In its letter last week, the DOE said it found no record of federal funding from the agency to the SELC. A second group, the Southern Alliance for Clean Energy, did receive funding from the Department of Energy, but after reviewing the records, the agency concluded that those funds had been spent on the programs they were designated to support.


Multiple bills get tough on welfare recipients

A bill that would require those receiving public assistance to perform at least 20 hours of community service was carried over in a Senate committee Wednesday, after committee members raised concerns and the sponsor said it was too broadly drafted.The legislation, sponsored by Sen. Bryan Taylor, R-Prattville, had already drawn criticism from Alabama Arise, a nonprofit that works on poverty issues. Arise said the bill as drafted would overwhelm schools and nonprofits and did not accurately reflect the lives of those who receive assistance. But two other Alabama senators are finding support for bills aimed at toughening the laws on welfare benefits, including requiring drug testing of some welfare applicants. The Senate Fiscal Responsibility and Accountability Committee overwhelmingly approved four bills Wednesday that are sponsored by Republican Sens. Trip Pittman of Daphne and Arthur Orr of Decatur. The bills now go to the Senate, where Pittman’s and Orr’s roles as chairmen of the two Senate budget committees virtually assure them of getting the bills up for debate. The bills apply to Temporary Assistance to Needy Families, the cash assistance program commonly called welfare. TANF is different from food stamps because it can be used for a variety of household expenses. Like food stamps, it comes on an electronic card similar to a credit card.


Senate, House committees approve changes to death penalty appeals process

Committees in the Senate and the House approved legislation Wednesday to shorten the time taken during the appeals process in death penalty cases.The Senate Judiciary Committee voted 7 to 1, with one abstention, to approve the legislation, sponsored by Sen. Bill Holtzclaw, R-Madison. It now moves to the full Senate. The legislation focuses on two of the three phases of a death penalty appeal process. In the first, known as a direct appeal, issues and facts of the case are addressed. The direct appeals process is followed by a phase known as a Rule 32 process, where issues such as the effectiveness of counsel and access to evidence are raised. Both appeal processes can go as high as the U.S. Supreme Court, and under current state law, the first round of appeals must be exhausted before the second can begin. The proposal would put both the first and second rounds of appeals on a dual track process. If implemented, those convicted of a capital crime would have to file their Rule 32 petitions within 180 days of beginning the direct appeal process. In addition, a circuit court would have to rule on a Rule 32 appeal within 180 days of a direct appeal process being concluded.


Alabama Prison Was House of Horrors for Female Inmates, Feds Say

A Justice Department investigation accuses Alabama officials of violating women’s rights by fostering an environment of rampant sexual abuse at the state’s Tutwiler Prison, where inmates “universally fear for their safety” and officers allegedly forced women to engage in sex acts just to obtain basic sanitary supplies. The nearly 900 women incarcerated at the maximum-security prison live “in a toxic environment with repeated and open sexual behavior,” the Justice Department said in announcing its findings today into the Wetumpka, Ala., facility. As part of the alleged abuses, male officers openly watched women shower or use the toilet, staff helped organize a “strip show,” prisoners received a constant barrage of sexually offensive language, and prisoners who reported improper conduct were punished, according to the department. What’s more, at least a third of the 99 employees at Tutwiler have had sex with prisoners, the department said. “We conclude that the state of Alabama violates the Eighth Amendment of the United States Constitution by failing to protect women prisoners at Tutwiler [Prison] from harm due to sexual abuse and harassment from correctional staff,” the Justice Department wrote in a letter to Alabama Gov. Robert Bentley. Perhaps most disturbing, investigators concluded the Alabama Department of Corrections and officials at Tutwiler have been “well aware of the multitude of structural problems that allow this abuse and harassment to continue unabated.” “Officials have been on notice for over eighteen years of the risks to women prisoners and, for over eighteen years, have chosen to ignore them,” the head of the Justice Department’s Civil Rights Division, Acting Assistant Attorney General Jocelyn Samuels, said in the letter. In that time, inmates have been raped, sodomized and fondled by prison staff, yet officials “remain deliberately indifferent to the serious and significant need to protect women prisoners.” In addition, the report found the sexual abuse and harassment were grossly under-reported due to fear of retaliation. “Action needs to be taken immediately,” George Beck Jr., the U.S. attorney for the Middle District of Alabama, said in a statement.



What could Birmingham do, if Birmingham would do it? (John Archibald)

What could Birmingham do, if Birmingham could do anything it wanted? What could it accomplish without the bickering and balkanization, without that Legislative Delegation and this Alabama Department of Transportation? A list: Go ahead and build that dome, but build it in the architectural style of the old terminal station. That landmark was torn down all too soon, leaving a hole in the city’s soul. This, well, this would put both those old ghosts to rest. It’ really is time to move forward with the dome. Birmingham, after all, has a bigger TV market than NBA cities such as Oklahoma City, Memphis and New Orleans. With a place to play, there’s no reason the city could not pull together a 10-year plan to lure an NBA team. There’s no better way to think like a big league city than to become one. Too bad Montgomery already took the name “Biscuits” for its baseball team, though. The Birmingham Biscuits has a heckuva ring. Better than Birmingham’n’eggs. Run a train – or a trolley or a fancy modern bus line — from the airport through the BJCC and the new entertainment district, and on up to Five Points, to start. But wait, these are pipe dreams anyway, so run it over to Homewood, into Mountain Brook, to the zoo and back. Call it the Red Mountain Express, and let it open the city to visitors and locals alike. Let riders step off the platform under a replica of the old Magic City sign. Speaking of trains, go ahead and do that long-debated deed of running high-speed passenger rail from Atlanta, through Birmingham, to New Orleans. Run them from Mobile to Huntsville, too. Some planners believe you could build a high-speed train from Birmingham to Huntsville – about 100 miles – for about the same cost as the $5 billion-plus Northern Beltline. Maybe. Maybe not. But hey, if that’s too much dreaming, I’d settle for a moderate speed commuter rail connecting the state’s major cities.


Morning Money

WILL OBAMA PUSH HOUSING REFORM IN SOTU? – POLITICO’s Jon Prior and Kate Davidson preview the big speech next week: “President Obama will deliver his State of the Union address on Tuesday and in the world of finance there is one question that keeps popping up: Will he mention Fannie Mae and Freddie Mac? In August the president laid out his case for getting rid of the taxpayer-owned mortgage giants and putting in place a new housing finance system. But the administration has mostly been quiet since. Obama could change that by calling for an overhaul of the mortgage market Tuesday night.

“Industry leaders hope he does. ‘We would welcome the White House’s engagement in the GSE debate, particularly on the issue of bringing private capital back to the secondary mortgage market through ideas such as up front risk sharing,’ said Dave Stevens, head of the Mortgage Bankers Association. ‘On access to credit, the President has the ability to reinforce the objective that qualified, lower and middle class borrowers should not be disqualified from homeownership by the very rules that were supposed to protect them.’

NOT EXPECTED THIS YEAR BUT MOMENTUM MATTERS – “The issue isn’t whether Congress will enact legislation this year getting rid of Fannie and Freddie. That’s unlikely. But the further along legislative efforts get by year’s end the more likely an overhaul is to happen before Obama leaves the White House. For instance, Senate Banking leaders are trying to wrap up a bipartisan bill in the coming weeks that would stand as a counterpoint to the more conservative proposal advanced by House Financial Services Committee Republicans last year.

“The Senate plan being worked on more closely hews to the administration’s preference for how big of a role the government should continue to play in the mortgage market. A Treasury Department official said in a speech Wednesday that the administration is ‘intensively engaged’ with Senate Banking. But if Obama really wants to give the issue a boost he can give it the coveted SOTU mention.”

LEW LIVE FROM DAVOS – Treasury Secretary Jack Lew will be lives from Davos on CNBC’s Squawk Box around 6:45am EST … At 11:20am EST Secretary Lew will participate in a moderated conversation on the U.S. and global economy with The Wall Street Journal’s Gerard Baker. Web cast: http://wef.ch/live

LEW LETTER URGES FEBRUARY DEBT LIMIT HIKE – Secretary Lew’s new letter to Congress urging lawmakers to raise the debt limit by February saying he does “not foresee any reasonable scenario’ in which extraordinary measures could last into March. Many on Wall Street and the CBO believe extraordinary measures could last longer but there is little certainty given the level of tax refunds the government pays out around this time of year before tax payments start coming in in April. Letter: http://1.usa.gov/19OPt2G

NEW TREASURY SECURITY – Treasury Assistant Secretary for Financial Markets Matt Rutherford writes in CNBC op-ed on FRNs – the first new Treasury security in 17 years: “With this new tool, Treasury will have additional flexibility to meet our goal of financing the government at the lowest cost over time. FRNs should also help expand Treasury’s investor base by attracting new buyers who are looking for high quality, liquid, stable-value securities with a longer maturity date than Treasury currently offers through our weekly bill auctions.” http://cnb.cx/1hl3DYK

ROUHANI HITS DAVOS – Reuters/Davos: “Iranian President Hassan Rouhani said on Wednesday it was possible to turn more than three decades of enmity with the United States into friendship if both sides made an effort. He was speaking in a Swiss television interview after arriving at the World Economic … where he will court the global business community and meet a series of oil company executives on Thursday.

“Asked whether there could one day be a U.S. embassy again in Tehran instead of the Swiss embassy representing U.S. interests in Iran, the president told public RTS television: ‘No animosity lasts eternally, no friendship either lasts eternally. So we have to transform animosities into friendship.’ … Rouhani travelled to Davos to persuade foreign investors to return to his country, which has some of the world’s biggest oil and gas resources and a market of 76 million people.” http://reut.rs/1muPFob

CHINESE MANUFACTURING DIPS – Bloomberg/Beijing: “Chinese manufacturing … showed a slowdown in January as output and orders cooled, with the gauge slipping to a level that signals a contraction. The preliminary reading of 49.6 for a Purchasing Managers’ Index … released today by HSBC Holdings Plc and Markit Economics, a six-month low, compares with a final figure of 50.5 in December and a 50.3 median estimate of 19 analysts in a Bloomberg News survey. A number above 50 indicates expansion. Asian stocks and the Australian dollar extended losses as the report showed domestic and global demand weakening, with new export orders shrinking.’ http://bloom.bg/1eTSyMq

LIMITED WINDOW FOR CONGRESS ON DEBT LIMIT – POLITICO’s Jake Sherman: “There’s not a ton of time. The House is out of session this week, and only in session for two and a half days next week. As of right now, there doesn’t appear to be a plan to lift the debt limit. … The debt limit is not the fiscal standoff it used to be. When Republicans first took the House, they demanded deep cuts to spending as a price for increasing the national borrowing limit. Last time they lifted the cap, they did it without concessions … Republicans will have time to discuss how they plan to lift the limit when they have their annual legislative retreat in Cambridge, Md., next week.’ http://politi.co/1eTDL4c

FIRST LOOK: VETERANS TO LAUNCH AD BUY – Per release going out this morning: “New ads produced by Concerned Veterans for America (CVA) blasts Congress for failing to address the nation’s dangerous $17 trillion debt and instead cutting pensions for military retirees. The 30-second ads – totaling $770,136 and entitled ‘Priorities’-will run statewide on TV and radio in Arkansas, on radio in Denver, Colorado, and online throughout the country for three weeks. The ads praise Rep. Tom Cotton (AR-4) and Rep. Mike Coffman (CO-6) for their principled stand in voting against the most recent budget deal.’

FIRST LOOK II: LEFT PUSHES OBAMA ON MINIMUM WAGE – Per a petition being circulated today by Democracy for America: “Wouldn’t it be great if President Obama could break some actual news at next Tuesday’s address? … There is something President Obama could do right now to make life better for as many as two million low-wage workers – and there is nothing Republicans could do to stop it.

“With one executive order, President Obama has the power to give preferential treatment to federal contractors who pay higher wages, giving a de facto minimum wage increase to hundreds of thousands of workers … Tell President Obama to announce in next Tuesday’s State of the Union speech that he is signing an executive order to raise the minimum wage for employees of federal contractors.”

THE SUPER BOWL AIRPORT WRANGLER – Bloomberg’s Alan Levine reports: “New Jersey’s Teterboro Airport, one of the nation’s busiest for business aviation, along with Newark’s Liberty International and at least four smaller airports will be jammed with 1,200 private and charter planes flying in for the Super Bowl. Airport wrangler, Wayne Boggs’ job is to prevent post-game runway gridlock that can hold up CEOs and celebrities used to being whisked around on a whim. …

“Boggs’ team of 11 will be responsible for untangling aircrafts on the tarmac, which during the game will resemble the MetLife Stadium parking lot less than 2 miles away. At Teterboro, reservations for up to 600 plane parking spaces during the Super Bowl filled up before Christmas. The concrete tarmac of Newark Liberty International will hold planes worth more than $1 billion on game day. … In addition to being the “Air Boss”, Wayne Boggs also happens to be the brother of Wade Boggs.”

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES – Jon Prior on Treasury’s approach to an expansion of HARP. … To learn more about Pro’s subscriber-only coverage – and to get Morning Money every day before 6 a.m. – please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD THURSDAY MORNING – Happy to see the Yankees break out the checkbook again for star Japanese pitcher Masahiro Tanaka who gets $155 million for seven years. Nice work if you can get it. http://nyti.ms/1f7VzLh

DRIVING THE DAY – Initial jobless claims at 8:30am expected to tick up slightly to 330K from 326K … Existing home sales at 10:00am expected to rise to 4.93M from 4.9M … Index of leading indicators at 10:00am expected to rise 0.2 percent … At Davos, Secretary Lew will meet with Financial Stability Board (FSB) to the International Monetary and Financial Committee Chairman and Bank of England Governor Mark Carney,among other meetings

TRANSITIONS: JENNIFER DUNN TO WELLS FARGO – Per release going out today: “Wells Fargo & Company has hired Jennifer Dunn to lead the company’s communications strategy and activities in support of its federal policy priorities. Dunn will be based in Washington, D.C. with Wells Fargo’s federal government relations team, led by Executive Vice President Anita B. Eoloff. …

“Most recently, Dunn led communications and public relations programs at Cisco … Dunn also served in senior communications positions with former U.S. Senators Christopher J. Dodd (D-CT) and Blanche L. Lincoln (D-AR).’ Full release: http://bit.ly/1muXk5O

BEHIND EL-ERIAN DEPARTURE – FT’s Tom Braithwaite: “Long hours and a frequently fractious relationship with Pimco’s founder Bill Gross prompted Mohamed El-Erian’s resignation as chief executive of the world’s largest bond house, say people familiar … Mr El-Erian often sparred with the company’s founder over strategy, in a workplace that insiders say rivals any investment bank for fierce arguments and a hard-charging culture. … His resignation on Tuesday evening came as a shock to those both inside and outside of Pimco but his plan to leave had been known to a small group of senior executives for several months

“Mr El-Erian, whose day in the office starts about 4.15am in Newport Beach, California, told colleagues he wanted to write a book and spend more time with his family.

He said he was looking for a ‘third career’ after spending 15 years at the International Monetary Fund and 17 years in investment management, both at Pimco … and a two-year stint managing HarvardUniversity’s endowment. The resignation was not related to Pimco’s recently lacklustre performance, the people said.” http://on.ft.com/1g2hS8e

GORMAN: BANKERS NOT AS DISTRUSTED AS CONGRESS – Morgan Stanley CEO James Gorman on Bloomberg Television from Davos asked why banks are the least trusted industry in the world: “I am told we are actually the second least. Fortunately, we have still got Congress. In all seriousness, this is the most damaging financial crisis since the Depression, maybe even well before that, with all of the home foreclosures, the bank failures, and the impact that that had on the global economy. It was devastating. It does take lot of time to recover their trust. That is not surprising.” http://bloom.bg/1ioBFim

OVERSEAS BANKS TO FACE US RULES – NYT’s Peter Eavis: “One of the biggest loopholes on Wall Street may soon close. More than three years ago, Congress passed a sweeping overhaul of the financial system that was supposed to leave no big bank untouched. Staggeringly, though, half of the large banks on Wall Street are able to avoid crucial parts of the overhaul – simply because they are foreign. In particular, the overseas banks – Barclays, Deutsche Bank and Credit Suisse among them – have not had to comply with parts of the overhaul … Now, however, the American authorities appear poised to snatch that advantage away. … The Fed … which regulates banks, is expected to complete rules soon that will force large foreign banks to abide by many of the requirements their American counterparts have had to operate under …

“The foreign banks are not pleased with the crackdown. The Fed first proposed the foreign bank rules at the end of 2012 and, as is its practice, invited the industry and the public to provide feedback. The Fed received strongly worded letters in opposition from a handful of large foreign lenders … In the face of such criticism, it is possible the Fed will end up substantially softening its rules. But senior executives at the foreign banks said they did not expect much in the way of dilution.” http://nyti.ms/1c5mOFL

TREASURY STILL WANTS HOUSING REFORM – FT’s Michael Mackenzie and Tracy Alloway: “Michael Stegman, counsellor to the secretary of the Treasury for housing finance policy, said while it was good news that Fannie Mae and Freddie Mac were generating large profits, it should not derail efforts to reform the “Government Sponsored Entities” that were taken into conservatorship in September 2008 … The GSEs have nearly paid back their $180bn bailout from the Treasury, thanks to the recovery in home prices since the financial crisis of 2008.

“That has fuelled talk that reform was not required at this time, particularly with midterm elections later this year dominating the agenda in Washington. Some stakeholders mistakenly argue that housing finance reform is no longer needed, that the GSE’s are so flush with cash … We could not disagree more.”

CREDIT SUISSE COULD FACE $800M U.S. FINE – WSJ’s John Letzing, Francesco Guerrera and David Enrich: “Talks between Credit Suisse Group … and U.S. authorities on settling allegations the Swiss bank helped Americans evade taxes have intensified, and a settlement of more than $800 million could be struck in the first half of the year, people familiar with the situation said.

“If the deal goes through, it would represent the biggest fine in the U.S. government’s crackdown on offshore tax evasion in Switzerland. The discussions between Zurich-based Credit Suisse and the Justice Department are in early stages … Both people said any settlement would likely top the $780 million UBS AG … agreed to pay in 2009 to settle with the U.S.” http://on.wsj.com/1cXe7ZZ


GSELEVATOR GETS A BOOK DEAL – FT’s Tracy Alloway: “What is good news for Kate Upton, Vanilla Ice and Bette Midler might make grim reading for Goldman Sachs executives as the anonymous author behind the@GSElevator Twitter profile has agreed a deal to turn his allegedly insider observations into a tell-all book about life at the bank. Tentatively entitled ‘Straight to Hell: True Tales of Deviance and Excess in the World of Investment Banking,; the book is due for an October 2014 publication …

“[A]ccording to its anonymous author [the book] is intended to be ‘the definitive exposure of investment banking culture . . . shedding new light on a world that is far more abhorrent, and yet, way more entertaining than people can imagine.’ … @GSElevator has … attracted more than 600,000 followers on the social media network, dwarfing the number of followers of Goldman’s own official profile.” http://cnb.cx/1jnLhtO

ICBA RIPS RETAILERS ON TARGET BREACH – Per release: “The Independent Community Bankers of America … expressed its shock and outrage at a National Retail Federation (NRF) letter blaming the financial services industry for recent data breaches at retailers such as Target and Neiman Marcus. ‘The NRF should focus its attention on responding to the harm that security breaches at several retailers have done to consumers and their financial institutions rather than hurling false allegations blaming the banking industry for these retail breaches,’ ICBA President and CEO Camden R. Fine said.'”

NAFCU WANTS DATA SECURITY STANDARDS – Per letter from the National Association of Federal Credit Unions to congressional leaders: “The breadth and scope of the massive Target Corporation breach exemplifies the need for Congressional action. … I write today to continue to urge you and your colleagues to act on federal data security and breach notification standards. As noted by a retailer trade group in a letter earlier this week, there is agreement among many industry stakeholders that federal breach notification laws are desperately needed to keep consumers safe.”

POTUS Events

10:00 am || Receives the Presidential Daily Briefing
5:15 pm || Delivers remarks at reception with U.S. mayors; East Room

House and Senate are not in session.


About Thomas Krebs

Securities litigation, regulation and compliance attorney.

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