Subpoenas issued to financial firms in expanded probe (Reuters)

WASHINGTON (Reuters) – The Justice Department issued civil subpoenas to 11 financial institutions as part of a new effort to investigate misconduct in the packaging and sale of home loans to investors, Attorney General Eric Holder said on Friday.

Holder declined to provide specifics, including the names of the firms.

"We are wasting no time in aggressively pursuing any and all leads," Holder said at a news conference announcing details of a new working group to investigate misconduct in the residential mortgage-backed securities (RMBS) market, "you can expect more to follow."

President Barack Obama said he directed Holder to create the new unit in his State of the Union speech late Tuesday, saying it was needed to "help turn the page on an era of recklessness."

On Friday a slew of federal and state officials appeared at the news conference to provide details about the new group.

Housed within an earlier financial fraud task force that Obama created in 2009, it is expected to be staffed with around 50 attorneys, analysts and agents, officials said.

Some skeptics have questioned whether the new group is largely a political move because the other fraud task force already exists.

Also, the Obama administration has received heat from left-leaning activist groups that believe a separate effort to investigate misconduct in processing foreclosures and servicing home loans may not be rigorous enough to extract a meaningful settlement.

In exchange for providing up to $25 billion in housing relief, much in the form of cutting mortgage debt for distressed borrowers, the top U.S. banks are expected to put behind them government lawsuits about lending and servicing abuses - but not securitization claims.

The banks involved in the discussions include Bank of America, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup and Ally Financial Inc.

Those talks have dragged into their second year as some states, including California and New York, criticized the direction of the negotiations and said the proposed settlement would release the banks from too many claims.

The deal appears to be getting closer, with last-ditch efforts to lure the hold-out states to join.

California has said it still has reservations about the deal, but California Attorney General Kamala Harris has met in recent weeks with federal officials in Washington to discuss her concerns about the settlement, people familiar with the matter said.

The attorney general in New York, Eric Schneiderman, was named as a co-chair of the new working group, prompting speculation that the position was partly aimed at persuading him to join the settlement.

In an interview with Reuters, Schneiderman said: "The releases have become narrow enough so that I'm confident a full investigation can go forward." Asked if he was signing on, he said, "Not yet," because "other issues" are still outstanding.

MULTIPLE EFFORTS

At the news conference, U.S. Housing and Urban Development Secretary Shaun Donovan also said that the multistate deal will not prevent the working group from pursuing its own claims about the securitization of home loans.

"We would not be standing here today if we weren't absolutely confident that the releases that are being contemplated were quite narrow, focused on the conduct that was actually investigated," Donovan said.

"There will be concrete actions taken in the next few weeks to confirm we're serious," Schneiderman added in the interview.

Exactly what the new group will tackle is unclear, since the construction and sale of mortgage securities is already the subject of massive government and private lawsuits.

"The simple fact is that this is an election year, and politics will inevitably play a role in every aspect of what is at its core a superfluous investigation," said Richard Gottlieb, who heads the financial industry group at the law firm Dykema.

"Others have already done the leg work, the lawsuits have already been filed, and the courts will already be deciding these issues," said Gottlieb.

The Federal Housing Finance Agency, for example, which oversees Fannie Mae and Freddie Mac, sued 17 large banks last September over losses on about $200 billion of subprime bonds and said the underlying mortgages did not meet investors' criteria.

Speaking at the news conference, U.S. Securities and Exchange Commission enforcement director Robert Khuzami said his agency has already reviewed 25 million pages of documents on related investigations.

"To be clear, investigations into RMBS offerings have been ongoing at the SEC," Khuzami said.

Holder said the Justice Department had discussed the subpoenas with the SEC, and said the new requests do not duplicate earlier efforts from the SEC.

He also responded to criticism that federal enforcers have brought few marquee cases in the aftermath of the financial crisis. Holder said the department has brought around 2,100 mortgage-related cases.

"The notion that there has been inactivity over the course of the last three years is belied by a troublesome little thing called facts," Holder said.

Several top banks, including Bank of America, Citigroup, JPMorgan, RBS Americas and Deutsche Bank, declined to comment when contacted by Reuters about the new working group's efforts.

(Reporting By Aruna Viswanatha and Jim Vicini in Washington, D.C. and Karen Freifeld in New York; Editing by Tim Dobbyn and Matthew Lewis)

Amazon Cell Phone Center

Summary Box: Firms failing in foreclosure program (AP)

NOT DOING ENOUGH: Bank of America and JPMorgan Chase & Co. haven't done enough to help people permanently lower their mortgage payments and avoid foreclosure, the Treasury Department said Thursday.

CRITICISM LEVIED: The government first criticized those two lenders, along with Wells Fargo & Co., and Ocwen Loan Servicing, in June and began withholding financial incentives of up to $1,000 per permanent loan modification.

TRYING TO IMPROVE: JPMorgan Chase and Bank of America said they are working to improve their work on the program. Wells Fargo and Ocwen were removed from the list of companies needing "substantial improvement."

Browse your computer here

Some U.S. firms paid more to CEOs than taxes: study (Reuters)

WASHINGTON (Reuters) – Twenty-five of the 100 highest paid U.S. CEOs earned more last year than their companies paid in federal income tax, a pay study said on Wednesday.

It also found many of the companies spent more on lobbying than they did on taxes.

At a time when lawmakers are facing tough choices in a quest to slash the national debt, the report from the Institute for Policy Studies (IPS), a left-leaning Washington think tank, quickly hit a nerve.

After reading it, Democratic Representative Elijah Cummings, ranking member of the Committee on Oversight and Government Reform, called for hearings on executive compensation.

In a letter to that committee's chairman, Republican Darrell Issa, Cummings asked "to examine the extent to which the problems in CEO compensation that led to the economic crisis continue to exist today."

He also asked "why CEO pay and corporate profits are skyrocketing while worker pay stagnates and unemployment remains unacceptably high," and "the extent to which our tax code may be encouraging these growing disparities."

In putting together its study, IPS chose to compare CEO pay to current U.S. taxes paid, excluding foreign and state and local taxes that may have been paid, as well as deferred taxes which can often be far larger than current taxes paid.

The group's rationale was that deferred taxes may or may not be paid, and that current U.S. taxes paid are the closest approximation in public documents to what companies may have actually written a check for last year.

$16.7 MILLION AVERAGE

Compensation for the 25 CEOs with pay surpassing corporate taxes averaged $16.7 million, according to the study, compared to a $10.8 million average for S&P 500 CEOs. Among the companies topping the IPS list:

* eBay whose CEO John Donahoe made $12.4 million, but which reported a $131 million refund on its 2010 current U.S. taxes.

* Boeing, which paid CEO Jim McNerney $13.8 million, sent in $13 million in federal income taxes, and spent $20.8 million on lobbying and campaign spending

* General Electric where CEO Jeff Immelt earned $15.2 million in 2010, while the company got a $3.3 billion federal refund and invested $41.8 million in its own lobbying and political campaigns.

Though the companies come from different industries, their tax breaks fall into two primary areas.

Two-thirds of the firms studied kept their taxes low by utilizing offshore subsidiaries in tax havens such as Bermuda, Singapore and Luxembourg. The remaining companies benefited from accelerated depreciation.

Shareholders have responded favorably when companies in which they invest keep a tax bill low through legal methods, thereby benefiting earnings. But Chuck Collins, an IPS senior scholar and co-author of the report, said that is a mistake.

"I think it's an exposure of weakness in a company if their profitability is dependent on their accounting department and not on making better widgets," he said.

In prior reports, Collins said, out-sized CEO pay was often a red flag of bigger problems to come. The IPS has been putting a pay report together for 18 years. Among those whose leaders have made the high pay list in years past, only to have their businesses falter: Tyco, Enron and WorldCom.

(Reporting by Nanette Byrnes; Editing by Howard Goller and Todd Eastham)

(The following story was corrected to show Boeing paid CEO Jim McNerney $13.8 million, not billion)

Browse your computer here

2 firms to pay for improper military foreclosures (AP)

By DEREK KRAVITZ and PETE YOST, Associated Press Writers Derek Kravitz And Pete Yost, Associated Press Writers – Thu May 26, 5:42 pm ET

WASHINGTON – Two mortgage lenders will pay more than $22 million combined to settle federal civil charges that they improperly foreclosed on 178 military personnel, some of whom were serving in the Iraq or Afghanistan wars.

Subsidiaries of Bank of America Corp. and Morgan Stanley failed to obtain court orders before imposing the foreclosures between 2006 and 2009, the Justice Department said Thursday. The cases will result in an average of $125,562 in payments per person. The foreclosed homes were in 22 states.

The settlement is "easily the largest amount recovered" in a case of improper military foreclosures, said Thomas E. Perez, an assistant attorney general.

"The men and women who serve our nation in the armed forces deserve, at the very least, to know that they will not have their homes taken from them wrongfully while they are bravely putting their lives on the line on behalf of their country," Perez said.

Among those foreclosed upon were several service members who had been wounded or who suffered from post-traumatic stress disorder, officials said. One involved an Iraq war veteran who was foreclosed upon while he was receiving counseling for nightmares and "nervous conditions" stemming from his service.

Under the settlement, Perez said, the lenders agreed to create additional mortgage loan protections for military personnel.

The Bank of America subsidiary, BAC Home Loans Servicing, formerly known as Countrywide Home Loans Servicing, and the Morgan Stanley subsidiary, Saxon Mortgage Services, also agreed to look into possible cases of improper foreclosures from the summer of 2009 through 2010.

The law the lenders were accused of violating, the Servicemembers' Civil Relief Act, provides protections to military personnel. Under the law, they can't be evicted and creditors can't seize their property while they're on active duty.

The Justice Department began its investigation earlier this year after separate inquiries from the U.S. Marine Corps and Sgt. James Hurley, whose home in Hartford, Mich., was foreclosed upon by Saxon in 2005 while he was in Iraq. Hurley settled with Saxon earlier this year for an undisclosed amount.

Foreclosure cases involving military personnel serving overseas began coming to light in 2005. Last month, New York-based JPMorgan Chase agreed to settle a class-action lawsuit for more than $60 million. The case involved a Marine Corps captain who said JPMorgan overcharged its military customers who took out mortgages with the bank.

Earlier this year, JPMorgan acknowledged that it had overcharged about 4,000 service members on mortgages and had wrongfully foreclosed on 14 of them. At the time, it paid $2 million to those affected and reversed the foreclosures.

Federal officials say they're working to provide greater financial protections for military families. A federal office dedicated to military financial issues, the Office of Servicemember Affairs, was launched in January and is to be incorporated within the newly created Consumer Financial Protection Bureau.

Browse your computer here

U.S. mulls making more firms pay corporate tax: group (Reuters)

WASHINGTON (Reuters) – The Obama administration is considering a plan to force more businesses to pay the corporate income tax, an industry group said, in an overhaul package that could be unveiled as early as this month.

Under the proposal, entities with more than $50 million in gross receipts would pay the corporate income tax, instead of the individual income tax they now pay. Partnerships like law firms and hedge firms would likely be the most affected.

"Treasury Department staff are working on a tax reform proposal that reportedly would include corporate taxation of any pass-through entity with gross receipts of $50 million or more," said a letter to members of the National Association of Publicly Traded Partnerships from its executive director Mary Lyman sent on Friday, obtained by Reuters.

Pass-through entities are those in which the income and tax liability "passes through" to the individual rather than being taxed at the company level.

The top corporate tax rate is now the same as the top individual tax rate -- 35 percent. Still, many firms such as private equity and hedge funds have certain income taxed at lower capital gains rates.

Lyman's group represents publicly traded partnerships investing mostly in energy companies. Such partnerships, also called Master Limited Partnerships, pay no tax themselves. Instead the tax is paid by individual owners.

The Obama administration is drawing up a plan to trim the top 35 percent corporate tax rate, among the highest in the world, while cutting deductions, credits and other breaks. Details could emerge as early as this month, according to a source familiar with the proposal.

Corporate America backs a lower rate, but is wary about what breaks it could lose.

White House spokeswoman Amy Brundage said the process is still unfolding.

"No decisions have been made about the content of any specific reform proposal or the timing or manner in which the administration will move this dialogue forward," Brundage said.

Many lawmakers object to reforming corporate taxes alone, because simply cutting the corporate rate excludes many businesses that pay tax through the individual tax code.

Treating more business income in the same fashion is one way to address this concern.

Many businesses would object to a plan that subjects them to the corporate tax.

"We believe that if this proposal is released in its current form, the fact that it sweeps so broadly will ensure widespread opposition from business groups and many in Congress," Lyman said in her email to members.

Treasury Secretary Timothy Geithner has suggested that changes to how types of business are taxed would be considered.

"Congress has to revisit this basic question about whether it makes sense for us as a country to allow certain businesses to choose whether they're treated as corporations for tax purposes or not," Geithner said at a congressional hearing this year.

(Additional reporting by Rachelle Younglai; editing by Mohammad Zargham)

Browse your computer here

U.S. mulls making more firms pay corporate tax: group (Reuters)

WASHINGTON (Reuters) – The Obama administration is considering a plan to force more businesses to pay the corporate income tax, an industry group said, in an overhaul package that could be unveiled as early as this month.

Under the proposal, entities with more than $50 million in gross receipts would pay the corporate income tax, instead of the individual income tax they now pay. Partnerships like law firms and hedge firms would likely be the most affected.

"Treasury Department staff are working on a tax reform proposal that reportedly would include corporate taxation of any pass-through entity with gross receipts of $50 million or more," said a letter to members of the National Association of Publicly Traded Partnerships from its executive director Mary Lyman sent on Friday, obtained by Reuters.

Pass-through entities are those in which the income and tax liability "passes through" to the individual rather than being taxed at the company level.

The top corporate tax rate is now the same as the top individual tax rate -- 35 percent. Still, many firms such as private equity and hedge funds have certain income taxed at lower capital gains rates.

Lyman's group represents publicly traded partnerships investing mostly in energy companies. Such partnerships, also called Master Limited Partnerships, pay no tax themselves. Instead the tax is paid by individual owners.

The Obama administration is drawing up a plan to trim the top 35 percent corporate tax rate, among the highest in the world, while cutting deductions, credits and other breaks. Details could emerge as early as this month, according to a source familiar with the proposal.

Corporate America backs a lower rate, but is wary about what breaks it could lose.

White House spokeswoman Amy Brundage said the process is still unfolding.

"No decisions have been made about the content of any specific reform proposal or the timing or manner in which the administration will move this dialogue forward," Brundage said.

Many lawmakers object to reforming corporate taxes alone, because simply cutting the corporate rate excludes many businesses that pay tax through the individual tax code.

Treating more business income in the same fashion is one way to address this concern.

Many businesses would object to a plan that subjects them to the corporate tax.

"We believe that if this proposal is released in its current form, the fact that it sweeps so broadly will ensure widespread opposition from business groups and many in Congress," Lyman said in her email to members.

Treasury Secretary Timothy Geithner has suggested that changes to how types of business are taxed would be considered.

"Congress has to revisit this basic question about whether it makes sense for us as a country to allow certain businesses to choose whether they're treated as corporations for tax purposes or not," Geithner said at a congressional hearing this year.

(Additional reporting by Rachelle Younglai; editing by Mohammad Zargham)

Browse your computer here