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Judge Urges U.S. to Consider Releasing N.S.A. Data on Calls

September 13, 2013 by

Judge F. Dennis Saylor IV issued the opinion in a response to a motion filed by the American Civil Liberties Union, saying such a move would add to “an informed debate” about privacy and might even improve the reputation of the Foreign Intelligence Surveillance Court on which he sits.

The ruling was the latest development to show the seismic impact of the disclosures by Edward J. Snowden, the former N.S.A. contractor, on the secrecy that has surrounded both the agency and the court. It came a day after the director of national intelligence, James R. Clapper Jr., said in a speech that Mr. Snowden’s leak of secret documents had set off a “needed” debate.

Judge Saylor of Boston, one of the 11 federal judges who take turns sitting on the court operated under the Foreign Intelligence Surveillance Act, said in his ruling that the publication in June of a court order leaked by Mr. Snowden regarding the phone logs had prompted the government to release a series of related documents and “engendered considerable public interest and debate.”

Among the documents voluntarily made public by the Obama administration since then are two FISA court rulings from 2009 and 2011 that were highly critical of the N.S.A., which the judges said had not only violated the agency’s own rules and the law, but had repeatedly misled them.

Those disclosures ran counter to a longstanding assertion by the court’s critics that it acts as a rubber stamp for the N.S.A. and the F.B.I., since statistics show that it has rarely turned down a request for a government eavesdropping warrant.

Judge Saylor seemed to applaud the fuller picture of the court’s actions from the disclosures to date, saying of the possibility of the release of more declassified rulings that “publication would also assure citizens of the integrity of this court’s proceedings.”

The court was responding to the A.C.L.U.’s request for public release of rulings related to the N.S.A.’s collection of the so-called metadata of virtually all phone calls in the United States — phone numbers, time and duration of calls, but not their content. The collection takes place under a provision of the Patriot Act that allows the government to gather “business records” if they are relevant to a terrorism or foreign intelligence investigation.

Though the intelligence court has continued to approve orders to the telephone companies to turn over the call logs, members of Congress — including Representative Jim Sensenbrenner of Wisconsin, a Republican and an author of the Patriot Act, and Senator Patrick J. Leahy of Vermont, the Democratic chairman of the Judiciary Committee — have said the N.S.A.’s collection goes too far.

Alex Abdo, a staff lawyer with the A.C.L.U.’s national security project, said the ruling showed that the court “has recognized the importance of transparency to the ongoing public debate about the N.S.A.’s spying.” Mr. Abdo added, “For too long, the N.S.A.’s sweeping surveillance of Americans has been shrouded in unjustified secrecy.”

Before Mr. Snowden began his release of documents in June, intelligence officials insisted that any public discussion of N.S.A. programs or the secret court rulings governing them would pose a danger to national security. But the strong public and Congressional response to many of the disclosures has forced the spy agency to shift its stance, and President Obama has directed it to make public as much as possible about its operations and rules.

In response, Mr. Clapper’s office has created a new Web page to make public documents, statements by officials and other explanatory material.

On Thursday, in a talk to intelligence contractors, Mr. Clapper said he thought Mr. Snowden’s leaks had started a valuable discussion. “It’s clear that some of the conversations this has generated, some of the debate, actually needed to happen,” he said, according to The Los Angeles Times. “If there’s a good side to this, maybe that’s it.”

But he denounced Mr. Snowden’s leaks, saying they had damaged national security. “Unfortunately, there is more to come,” he said, referring to the fact that news reports have covered only a small fraction of the tens of thousands of documents Mr. Snowden took.

Article source: http://www.nytimes.com/2013/09/14/us/judge-urges-us-to-consider-releasing-nsa-data-on-calls.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Bucks Blog: Banks Lag on Consumer-Friendly Checking Practices

June 4, 2013 by Leave a Comment

Two of the country’s largest banks scored well on a ranking of the consumer-friendliness of their checking accounts, but no bank met all of the recommended criteria, a new analysis found.

The report, from the Pew Charitable Trusts’ Safe Checking in the Electronic Age project, assessed 36 of the country’s largest 50 banks, ranked by deposits, on their policies for clear disclosure of terms and fees; overdrafts; and dispute resolution. (Fourteen of the country’s 50 largest banks were not included because they didn’t offer a way for consumers to learn about their policies without visiting a bank branch).

Pew defines “best” practices as those that are most effective in giving account holders clear, concise information about costs and terms; reducing the number of overdrafts, and eliminating practices — like transaction re-ordering – -that maximize overdraft fees; and providing a meaningful alternative to mandatory binding arbitration for consumers to solve problems with their bank.

The report identified seven “best” practices and 11 “good” practices. For instance, Pew’s “best” practice for disclosures is the adoption of a simple “summary box” or a page that lays out the basic terms and fees associated with the account in simple language. Eight banks meet this criteria, Pew found. (Pew has worked with banks to help them design the simplified disclosures).

The top-ranked bank overall was Ally Bank, an online-only bank that met six of the seven “best” practices identified by Pew, and nine of 11 “good” practices.”

Two of the biggest banks, Citibank and Bank of America, ranked in the top five over all, with five “best” practices each. [Read more…]

Article source: http://bucks.blogs.nytimes.com/2013/06/04/banks-lag-on-consumer-friendly-checking-practices/?partner=rss&emc=rss

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High & Low Finance: A Plot Twist at Herbalife Draws in the Auditors

April 11, 2013 by Leave a Comment

Herbalife lost its auditor, KPMG, this week after it was revealed that Scott I. London, the partner in charge of the audit until he was fired, had been providing inside information about Herbalife and the shoe company Skechers to a frequent golf partner who was trading on the tips.

The audit firm decided that it would not only resign as auditor at Herbalife and Skechers, whose audits Mr. London also led, but would also withdraw its certification of the old audits, even though it said it had no reason to doubt the accuracy of the reviews. That left the two companies scrambling to find new auditors who will have to reaudit results from recent years, an expensive and time-consuming process.

Skechers presumably will have no trouble getting one of the other Big Four firms — PricewaterhouseCoopers, Deloitte Touche and Ernst Young — to take over its audit. And it seems reasonable to think that KPMG will end up paying the extra costs, since it was the misconduct of its partner that led to the mess.

But it will be interesting to see which firm signs on as Herbalife’s auditor. When an auditor is selected, that firm will be under close scrutiny by the participants in the Herbalife stock market war being fought by hedge funds. That war pits Bill Ackman of Pershing Square Capital Management, who has loudly shorted the stock, against Daniel S. Loeb of Third Point, who bought the shares after Mr. Ackman disclosed his position. Carl C. Icahn, who has an unrelated complaint with Mr. Ackman, has also leapt in to buy the stock.

Financial statements are not at the heart of Mr. Ackman’s argument that Herbalife is an illegal pyramid scheme that will be the target of federal regulators. But he has complained about inadequate and misleading disclosures. It is at least conceivable that an auditor might seek to force additional disclosures.

All audit firms have risk groups that review new business, including the quality of the company to be audited, and that decide that some prospective clients are not worth the risks. It will be interesting to see if any of the other major firms conclude that the risks are acceptable, particularly given that Herbalife’s 2012 audit fee was under $4 million, which is not a large sum to a major firm. If Herbalife turns to a second-tier audit firm, it will be embarrassing to the company.

Then there is the issue of conflicts of interest. Any audit firm that did certain types of consulting work for Herbalife over the last three years might be disqualified, since the new auditor will have to review those periods.

Herbalife’s annual meeting is April 25, and it no doubt would like to have the new auditor on board by then.

Some studies have indicated that financial restatements are more likely when a new auditor is brought in, but the data involved makes it hard to know if there is a causal connection. After all, as a general rule auditors are changed only when either the client or the audit firm is unhappy about the relationship, and a dispute over accounting or even suspicion of management may be at the heart of such a split.

There is no evidence of such a split here. KPMG has been the company’s auditor since before the company went public in 2004, and the two seem to have been getting along fine. If Herbalife’s new auditor does seek to force a restatement, that will be seized upon by advocates of mandatory auditor rotation as support for their argument that auditor independence is inevitably compromised by long tenures of the incumbent firm, and that companies should be required to change firms every decade or so. Such a requirement is fiercely opposed by the accounting industry, but it has been approved by the Dutch Parliament for companies in the Netherlands.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/04/12/business/a-plot-twist-at-herbalife-draws-in-the-auditors.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

High & Low Finance: New Rules Will Give a Truer Picture of Banks’ Size

March 14, 2013 by Leave a Comment

But it is not.

Under American accounting rules, banks that trade a lot of derivatives can keep literally trillions of dollars in assets and liabilities off their balance sheets. Since 2009, they have at least been required to make disclosures about how large those amounts are, but the disclosures leave out some things and — amazingly enough — in some cases do not seem to add up.

The international accounting rules are different. They also allow some assets to vanish, but not nearly as many. As a result, it is virtually impossible to confidently declare how a particular European bank compares in size with an American bank.

Much of that will change when first-quarter financial statements start coming off the printing presses in a few weeks. For the first time, European and American banks are supposed to have comparable disclosures regarding assets. Their balance sheets will still be radically different, but for those who care, the comparison will be possible.

This comes to mind because these days it seems that big banks do not much want to be thought of that way. A rather angry argument has broken out regarding whether “too big to fail” institutions get what amounts to a subsidy from investor confidence that no matter what else happens, they would not be allowed to fail. The banks deny it all. Subsidy? Penalty is more like it, they say.

We’ll get back to that argument in a moment. But first, there is some evidence that the big American banks may have scaled back their derivatives positions last year. At five of six major financial institutions, the amount of assets kept off the balance sheet appears to be lower at the end of 2012 than it was a year earlier.

Still, the numbers are big. JPMorgan Chase, the biggest American institution, had $2.4 trillion in assets on its balance sheet at the end of 2012. But it has derivatives with a market value of an additional $1.5 trillion that it does not show on its balance sheet, down from $1.7 trillion a year earlier.

So is JPMorgan getting bigger? Measured by assets on the balance sheet, the answer is yes. That total was up $93 billion from 2011. But after adjusting for the hidden assets, the bank appears to have shrunk by $109 billion last year. If the bank used international accounting rules, it appears it would be getting smaller.

Not having those assets on the balance sheet makes the bank look less leveraged than it might otherwise appear to be. If you simply compare the book value of the bank with its assets, it appears it has $11.56 in assets for every dollar in equity. Add in those derivatives, and the figure leaps to $18.95.

It is not as if those assets are not real, or that they are perfectly offset by liabilities also kept off the balance sheet. There is a similar amount of liabilities that are not shown, but there is no way to know just how they match up with the assets in terms of riskiness. The nature of derivatives makes it hard to assess aggregate totals.

If a bank has a $1 million loan to someone, that is an asset that would go on the balance sheet at $1 million. Presumably the worst that could happen is that the bank would lose the entire amount. But a large derivative position might currently have a market value of $1 million, and thus would be shown as being worth the same amount, whether on or off the balance sheet. But if the market moves sharply, the profit or loss could be many multiples of that figure.

Under American accounting rules, banks that deal in derivatives can net out most of their exposure by offsetting the assets against the liabilities. They do this based not on the nature of the asset or liability, but on the identity of the institution on the other side of the trade — the counterparty, in market lingo.

The logic of this has to do with what would happen in a bankruptcy. What are called “netting agreements” allow only the net value to be claimed in case of a failure. So the bank shows the sum of those net positions with each party.

Floyd Norris comments on

finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/03/15/business/new-rules-will-give-a-truer-picture-of-banks-size.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Bondholder Group to Fight Bank Settlement on Securities

July 6, 2011 by Leave a Comment

In court papers filed on Tuesday in New York State Supreme Court in Manhattan, 11 companies collectively calling themselves Walnut Place said the settlement was inadequate.

On Wednesday, Bank of America announced the settlement with 22 institutional investors, including BlackRock, MetLife, Pimco and the Federal Reserve Bank of New York.

The bank said that accord would be part of $20 billion of mortgage-related charges that it would take, hoping to resolve much of the liability from its $2.5 billion purchase of the mortgage lender Countrywide Financial in 2008.

Bank of New York Mellon is acting as trustee for 530 mortgage securitization trusts that would be covered by that settlement. It says it favors approval of the $8.5 billion settlement, calling it reasonable.

The settlement was also intended to cover Walnut Place’s claims. But the Walnut Place group said it had “serious concerns about the secret, nonadversarial and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms.”

Walnut Place said it planned to ask Justice Barbara R. Kapnick, whose approval is required for the settlement, to excuse it from the accord or else to compel greater disclosures about the pact, on July 13. A hearing to consider approval of the $8.5 billion settlement is scheduled for Nov. 17.

In February, Walnut Place sued Bank of America, seeking to force it to buy back loans that underlay $1.06 billion of securities it owned, asserting misrepresentations by Countrywide.

It said these misrepresentations in part concerned whether underwriting guidelines had been followed, and the size of the loans relative to the underlying homes’ values.

“Far from being secretive, the conversations leading to the settlement have been publicly disclosed and widely reported,” a spokesman for Bank of America, Lawrence Grayson, said. He said that it was “difficult to believe” that the 22 investors had subordinated their clients’ interests to those of Bank of America.

A spokesman for Bank of New York Mellon, Kevin Heine, declined to comment on the Walnut Place filing. Owen L. Cyrulnik, a lawyer for Walnut Place, did not immediately return a call seeking a comment.

Article source: http://feeds.nytimes.com/click.phdo?i=4fd440bfa594427660c6948ce0bc79ba

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