New York Attorney General Eric Schneiderman (D) has filed a civil lawsuit against JP Morgan Chase alleging “widespread fraud in the sale of mortgage-backed securities,” the Wall Street Journal reports. The suit is the first action brought by the Obama administration’s mortgage fraud task force, which Schneiderman chairs.

The residential mortgage-backed securities (RMBS) in question were actually tied to Bear Stearns, the failed financial institution that JP Morgan acquired before the 2008 financial crisis.

According to the suit, filed in New York state court, the bank was “aware that many of their loan originators were selling defective loans but continued to buy and securitize those loans,” and, similarly to the “shitty deals” peddled by Goldman Sachs bankers, had openly touted the bad packages they were selling:

Other internal communications reflect Defendants’ awareness of the bad quality of loans that were being included in other securitizations. In connection with the Bear Stearns Second Lien Trust 2007-1 (“BSSLT 2007- 1”) securitization, for example, one Bear Stearns executive asked whether the securitization was a “going out of business sale” and expressed a desire to “close this dog.” In another internal email, the SACO 2006-8 securitization was referred to as a “SACK OF SHIT” and a “shit breather.”

Still, the bankers led investors to believe they “had carefully evaluated – and would continue to monitor – the quality of the loans in their RMBS. In fact, Defendants systematically failed to fully evaluate the loans, largely ignored the defects that their limited review did uncover, and kept investors in the dark about both the inadequacy of their review procedures and the defects in the underlying loans.”

By 2006, Bear Stearns’ RMBS business was the largest and most profitable on Wall Street, with its 345,000 securitized loans worth $69 billion. Between 2003 and 2006, it securitized $212 billion in loans, according to the suit.

“We intend to follow up with similar actions against other sponsors and underwriters of RMBS,” an official in Schneiderman’s office told the WSJ.

Two years ago, the Federal Reserve of Chicago warned the Securities and Exchange Commission about the dangers high-frequency trading posed to financial markets and the overall economy, but SEC regulators have been slow to move on reforms and rules that would limit the practice, according to a Reuters report.

High-frequency trading has caused multiple damaging “flash crashes” in the two years since, and the SEC has instituted small reforms aimed at mitigating the damage. But it is still dragging its feet on large-scale proposals by the Chicago Fed and other proponents of limiting the practice, Reuters noted:

The Chicago Fed said exchanges and other trading platforms should install more risk controls, even if it slowed down trading, including a “kill switch” at the trader workstation level. “The competitive quest for greater and greater speed must be balanced with appropriate risk controls so that a clearly erroneous trade does not destabilize markets by precipitating a cascade of other trades in response,” the Chicago Fed’s then Financial Markets Group Senior Vice President David Marshall said in the submission. [...]

And still the move towards reforms has been slow.

Proponents of limiting high-frequency trading include Thomas Peterffy, the man who pioneered computer-based high speed trading in the 1980s. In an interview with NPR’s Planet Money, Peterffy said the speed of today’s trading, which earns traders and firms millions of dollars in revenue by speeding up their ability to make transactions, “has absolutely no social value.” And still, with little oversight from regulators, high-frequency trading has exploded, as this chart from the market research firm Nanex shows:

Germany last week became the first country to make an explicit move toward limiting high-speed trading when its lawmakers approved draft legislation that would require licensing of all trades and limit the number of overall trades made at high-frequency. In the United States, Democratic lawmakers have proposed a return of the financial transactions tax, which would limit trading by levying a small tax on transactions. Such a plan would generate billions of dollars in revenue each year, according to Rep. Peter DeFazio (D-OR), while limiting the market volatility and sudden crashes that occur when high-frequency trades go wrong.

Despite a brief moment of optimism, it turns out that domestic workers in California still won’t be guaranteed a lunch break.

As part of his clean sweep on unfinished legislation from the state house, California Gov. Jerry Brown (D) late last night vetoed a bill that would have ensured basic rights for in-home aide workers. Such protections would have included overtime pay, meal breaks, and “adequate sleeping conditions for live-in workers.”

The California Chamber of Commerce, a business lobby with strong anti-union positions, opposed the protections, arguing that domestic workers couldn’t take breaks without endangering the health of those for whom they are providing care.

Brown apparently sided with those interests. In a letter explaining his decision, he said that he had “unanswered questions” about the bill. But he seemed to have answered some of those questions, as well, since he provided a list of qualms he had with the legislation, arguing that it would cost the state, and disabled employers, too much.

The Domestic Workers’ Alliance responded to Brown’s veto in a statement, calling Brown’s decision “a huge disappointment”:

“It is a huge disappointment that Governor Brown chose not to recognize the people caring for California’s families and homes as real workers,” said Sylvia Lopez a worker with the California Domestic Workers Coalition, sponsor of the bill. “For decades we have tirelessly cared for California’s homes, children, the elderly, and people with disabilities without the protection of basic rights. Tonight, Governor Brown has done a tremendous disservice to thousands of domestic workers, their families, and the people they care for.”

Domestic workers are a largely immigrant, largely female constituency across the country — groups that are often voiceless in political debates. The rights requested in the bill were in no way substantially different from those afforded to employees in small or large businesses, but are harder to enforce in a household setting.

The Wall Street Journal reported on Monday that Mitt Romney’s potential list of nominees for Treasury Secretary includes John Thain, the former CEO of Wall Street investment bank Merrill Lynch who now heads CIT Group. Thain is perhaps best known for overseeing Merrill Lynch as it fell apart during the 2008 financial crisis, necessitating a rescue by Bank of America, and then paying out bonuses to his failed bankers anyway.

But Thain didn’t only think his employees deserved huge bonuses for their role in the financial crash — he also believed that he should be paid $10 million during a year that saw his company lose $11 billion and get bailed out by another bank:

Merrill Lynch & Co. chief John Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered securities firm’s compensation committee is resisting his request, according to people familiar with the situation. [...]

Merrill has suffered net losses of $11.67 billion this year and is about to complete its acquisition by Bank of America Corp. later this month. On Friday, shareholders of both companies separately approved the deal. Mr. Thain has said he deserves a bonus because he helped avert what could have been a much larger crisis at the firm, say people familiar with his thinking.

Bank of America required new infusions of federal aid after acquiring Merrill Lynch, as the extent of Merrill’s losses were never properly disclosed.

According to a new book by former Federal Deposit Insurance Corporation chairwoman Sheila Bair, when the CEOs of America’s major banks came to Washington to discuss the much-reviled $700 billion bank bailout in 2008, the first question asked by Thain was “if his compensation was going to be cut.” Upon Thain’s departure from Merrill Lynch, the New York Times’ Floyd Norris wrote, “The departure of John Thain from Bank of America provides another reminder of how Wall Streeters have come to see themselves as entitled to pay that would seem excessive even if their companies were not failing.”

Romney, of course, has pledged to repeal the Dodd-Frank financial reform law, which included new restraints on executive pay at financial companies.

Asking the Republican presidential ticket to explain how it plans to give a the massive tax cut to the rich while still balancing the budget and avoiding tax increases on the middle class is “laughable,” Virginia Gov. Bob McDonnell (R) told MSNBC’s Andrea Mitchell on Monday.

Yesterday, Fox News Sunday’s Chris Wallace asked Romney’s running mate, Paul Ryan, to explain the math of the tax plan,but Ryan refused because he said “it would take me too long.” The Romney campaign has faced calls from Democrats, the media, and even other Republicans to get more specific about its tax and budget plans, but has thus far refused. That’s fine with McDonnell, an oft-used Romney surrogate, who could neither explain Romney’s tax plan nor name a single specific spending cut Romney would make as president:

MITCHELL: Where is the math, and is Mitt Romney going to be under pressure in this debate to produce some specifics about how it will all add up?

MCDONNELL: Well, Andrea, first, that’s a laughable question. Where’s the president’s plan? He’s had four years. 23 million people don’t have work. So let’s start with that, the president’s policies haven’t worked.

MITCHELL: The question was asked by Chris Wallace on Fox, it’s being asked by other Republicans. Where is the math? How do you add up those tax cuts even eliminating some deductions? Which deductions would you eliminate? Let’s be specific. And how will you do that and reach deficit reduction? Which programs will be cut?

MCDONNELL: The question is how do you get America back to work? What Paul Ryan just said on your clip is you, you flatten the base and increase the, I mean excuse me, you increase the — you reduce the number of deductions that are out there and you expand the base. That’s typically what works. That can be done in a revenue-neutral fashion, I think that’s what Paul Ryan has proposed, and what that does is make America more competitive.

Watch it:

Romney’s tax plan either adds up to budget-busting deficits or tax increases on middle class families, as the Tax Policy Center found when it filled in the gaps of Romney’s plan in the most generous fashion. Republicans and the Romney campaign have insisted that Romney will close tax loopholes that affect the rich to pay for the plan. But TPC found that there weren’t enough of those loopholes, meaning Romney’s plan would have to either add to the deficit or raise taxes on middle class families by as much as $2,000. The plan, as conceived, simply can’t accomplish both of Romney’s goals.

McDonnell tacitly and perhaps unknowingly admitted as much today, when he told Mitchell that there are ways to do tax reform in a revenue neutral way that involves expanding the tax base. Expanding the base often translates to increasing the number of people paying taxes (including, presumably, some of the 47 percent Romney says he can’t convince to take responsibility for themselves), the clearest admission yet from a campaign surrogate that a President Romney would have to raise taxes on the middle class to avoid blowing a hole in the budget.

Occupy DC, a spin-off of the Occupy Wall Street movement that blanketed the nation’s capital with protests against big banks and corporate and lobbyist influence on government in 2011, celebrated its first anniversary with a “shut down K Street” march through downtown Washington this morning. The protest wound through the city and included stops at the offices of JP Morgan Chase, British Petroleum, corporate food giant Monsanto, and several development companies that have razed low-income housing projects in the city to build expensive condominiums and apartments.

Occupy DC protesters camped at McPherson Square park from October 1, 2011 to February 2012, when they were evicted by National Park Police. The park is still closed for restoration, but Occupy has remained active, protesting wrongful foreclosures on area homeowners.

Today’s protest had a less controversial atmosphere than those around the movement’s eviction earlier this year, as Metro Police supervised but remained largely uninvolved throughout. View pictures of the protest (click to enlarge):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The DREAM Act was first introduced as a bipartisan measure in 2001, but has languished in Congress ever since. Republicans have blocked the bill, which would help young undocumented immigrants who came to the U.S. as children gain citizenship. President Obama says he supports the policy and issued a directive in June to help protect DREAMers from deportation by giving those who qualify temporary legal status.

But if Congress passed the DREAM Act and granted legal status to eligible undocumented immigrants who came to the U.S. as children, it would add an additional $329 billion to the U.S. economy and 1.4 million more jobs by 2030, according to a new report from the Center for American Progress and the Partnership for a New American Economy. Enacting the DREAM Act would boost the economy first by improving the education and job opportunities for young undocumented immigrants in the U.S. A legal status and education contribute to higher earnings:

“This report proves a fundamental truth about the contributions of immigrants to the American economy: we absolutely need them to continue our economic growth,” said New York City Mayor Michael Bloomberg, Partnership co-chairman. Critics argue that legalizing undocumented immigrants only would create new workers who would take American jobs, but the new report shows that the economic benefits of the DREAM Act would ripple throughout the economy and create new employment.

While the research about the economic benefits of the DREAM Act does not take into account any costs of implementing the law, the report’s authors say the future costs would be minimal. Previously, the Congressional Budget Office estimated that the DREAM Act would increase federal revenues by $1.7 billion over the next 10 years and reduce federal deficits by $2.2 billion over that time. And the DREAM Act could also help fill the 16 million shortfall of college-educated workers that is expected to hit the U.S. by 2025, especially in science and engineering.

Despite its role in creating the financial crisis of 2008 and the ensuing Great Recession, the financial services industry continues to be one of the most powerful in both the U.S. and abroad. Banks and other financial services companies are back to making huge profits and handing out large bonuses, while lobbying against reforms aimed at preventing a repeat of 2008.

In the U.S., few have stood up to the banking industry. But over in the UK, the banks have earned themselves a new critic: the Church of England. The Church submitted a comment to a parliamentary commission investigating the LIBOR rate rigging scandal that called on the banks to make a “public, corporate contrition for past failings”:

The financial crises and emerging scandals of recent years have…raised profound concern not simply about the ability of the system to prevent extreme and criminal behavior by individuals but about the system itself and a whole cadre of professionals within it. The question is not whether systems have been adequate to identify and deal with the bad apples but whether the whole orchard needs replanting. [...]

One insight from the Christian tradition of penitence and forgiveness is that is often not enough to put matters back to where they were before things went wrong; some demonstration of a change of heart by means of restitution and a visibly robust refusal to let the same failings occur again is necessary before a bad situation can be made good…. To achieve this is not just a matter of technical “fixes” but may require public, corporate contrition for past failings…and possibly some symbolic steps to assure the public that the corporate culture has changed.

Rev. Dr. Malcolm Brown, director of the Church of England’s Mission and Public Affairs Council, told the Wall Street Journal, “you need to rethink how banking is done so that good people can flourish and good people can do good things.” Here in the U.S., meanwhile, a group of nuns have been touring the country focusing on a different public policy issue: the detrimental effect budget cuts will have on low-income families.