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Economy

JP Morgan Misled Regulators On Banned Trades, Senate Says

JP Morgan CEO Jamie Dimon

The risky “London Whale” trading loss JP Morgan Chase reported last May was the result of a risky proprietary trade that should be banned by the Volcker Rule, a bipartisan Senate report alleged Thursday. The Volcker Rule would ban most proprietary trading, which is done with a bank’s own money only to turn profit, at financial institutions that have taxpayer backing.

When he announced the loss, which now amounts to more than $6 billion, JP Morgan CEO Jamie Dimon said the trade was a “hedge” and not a prop trade. As such, Dimon said, a stronger Volcker Rule would not have prevented the bank from engaging in the trade. But that was not the case, both Republican and Democratic senators said in the report, as Bloomberg reports:

JPMorgan’s chief investment office increased risk by mislabeling the synthetic portfolio as a risk-reducing hedge when it was really involved in proprietary trading,” said Senator John McCain of Arizona, the panel’s top Republican.

Sen. Carl Levin (D-MI), the Permanent Subcommittee on Investigations’ chairman and a co-author of the Volcker Rule, said the Senate would work to close a loophole in the rule that may allow “portfolio hedges” similar to what JP Morgan attempted. At the time of the loss, Levin said the rule had a loophole wide enough “a Mack truck could drive right through it.”

Many of the loopholes in the rule, which is not yet finalized, may have resulted from JP Morgan’s lobbying. Dimon has been a vocal opponent of the rule, broadly considered the most contentious piece of the Dodd-Frank Wall Street Reform Act, and JP Morgan and other banks lobbied against it both before and after Dodd-Frank passed. A host of former bankers have announced support for the rule and said it was necessary for financial stability, but the rule was watered down significantly, so much so that its namesake, former Federal Reserve chairman Paul Volcker, said he was no longer satisfied with it.

The committee will hold a hearing on the trading loss today. The JP Morgan official who ran the unit that oversaw the massive loss is scheduled to testify.

Security

Senate Committee Approves Chuck Hagel’s Nomination As Defense Secretary


The Senate Armed Services Committee today voted to move Chuck Hagel’s nomination to become Secretary of Defense to the full Senate on Tuesday afternoon with a vote of 14 to 11, with Sen. David Vitter (R-LA) yet to vote, split down party lines.

“Senator Hagel has received broad support from an array of senior statesmen and foreign policy dignitaries,” Chairman Sen. Carl Levin (D-MI) said before the vote. Levin continued to list the impressive array of endorsements that Hagel has received, noting the long-list of positions Hagel holds that stand firmly in the mainstream.

A vote on the floor of the Senate could come as soon as tomorrow, according to Senate Majority Leader Harry Reid (D-NV). Reid today announced that he would not honor holds — informal filibuster threats placed by individual Senators — from the GOP, forcing them to actually filibuster the nomination to prevent it from coming to a vote.

Sen. Jim Inhofe (R-OK) has already pledged to lead the charge in a filibuster, the first against a Defense Secretary nominee, once the nomination hits the Senate floor. Inhofe, during the discussion before the vote, cited how pleased he was that Sen. Ted Cruz (R-TX) displayed his misleading evidence during Hagel’s testimony. Cruz and Inhofe also implied during the hearing that Hagel has taken money from Saudi and possibly other foreign governments, an argument without proof that found itself harshly challenged.

Inhofe’s plan is unlikely to succeed, though. Several GOP members have already pledged to either vote for Hagel — such as Sen. Thad Chochran (R-MS) — or oppose a filibuster — like Hagel opponent Sen. John McCain (R-AZ) — making the odds of Republicans mustering the 41 votes necessary to prevent cloture on the debate unlikely. While a movement is growing to have a sixty vote threshold for Hagel that is somehow not a filibuster, Hagel has more than enough votes on his side to easily clear the majority required for final confirmation.

Neocons and their allies have been attacking Hagel since weeks before its official announcement. In their desperation in recent weeks, Republicans are throwing everything they can at the nominee, in hopes of derailing him. Instead, their efforts are proving ineffective at best, damaging to their own party at worst.

Security

Top Senate Democrat Says GOP Demands On Hagel ‘Far Exceed’ Previous Nomination Standards

Sen. Carl Levin (D-MI)

Senate Armed Services Committee chairman Carl Levin (D-MI) told ranking member Sen. James Inhofe (R-OK) in a letter on Friday that the demands he and his GOP colleagues have made in asking for more information from Chuck Hagel before his confirmation vote to be the next Pentagon chief “far exceed” the standard that previous nominees have had to meet.

Twenty-five Senate Republicans sent Hagel a letter on Tuesday saying they opposed a vote on his confirmation unless Hagel disclosed numerous pieces of financial information, many of which the former Republican senator has previously said he is not legally obliged to give.

Levin said on Thursday the demands were unprecedented and went “way beyond what the rules of the committee are.” Levin backed up his comments in the letter to Inhofe today:

This letter appears to insist upon financial disclosure requirements that far exceed the standard practices of the Armed Services Committee and go far beyond the financial disclosure required of previous Secretaries of Defense. [...]

There are two unprecedented elements to the financial disclosure demanded by the February 6, letter: (1) the disclosure of “all compensation over $5,000 that [Senator Hagel has] received over the past five years”; and (2) the disclosure of any foreign funding of eight private entities from which Senator Hagel has received compensation since leaving the Senate (including the date, source, and specific amount of each foreign contribution). Each of these demands goes well beyond what the committee has required of any previous nominee. [...]

The committee cannot have two different sets of financial disclosure standards for nominees, one for Senator Hagel and one for other nominees.

Experts agree with Levin. “I think it’s a pretty ridiculous and outrageous thing to ask,” Norman Ornstein of the conservative American Enterprise Institute told the Daily Beast this week. “You could say that there’s been requests for detailed information [in the past], but this goes even beyond the intrusive questionnaires candidates fill out during the vetting process.”

Levin postponed the committee’s vote on Hagel’s nomination this week due to the GOP obstruction but a statement accompanying the letter to Inhofe said “Levin intends to hold a committee vote on the Hagel nomination as soon as possible.”

Security

Senate Democrats Delay Hagel Vote After Desperate And Unprecedented GOP Stall Tactics

Senate Armed Services Committee chair Carl Levin (D-MI) will reportedly delay the committee’s vote on Chuck Hagel’s nomination to be the next Secretary of Defense. Republicans are demanding that Hagel produce the texts of private speeches he made and disclose the financial dealings of private companies he is associated with. A spokesperson for Levin told ThinkProgress that the committee is “working on their concerns.”

The vote was expected to take place as early as Thursday, but Republicans — led by Sens. James Inhofe (R-OK) and Ted Cruz (R-TX) — asked that the vote be delayed after Hagel — citing legal and logistics issues — said he could not give the them everything they’re asking for.

“It’s up in the air,” the committee staffer told Politico. “Levin isn’t interested in pushing it through against their will. We’re trying to resolve their concerns, and hopefully we can get it addressed by tomorrow,” a committee staffer told Politico on Wednesday.

But now it seems like those concerns won’t be met and it’s unclear just how they can or should be addressed at all, seeing that Hagel has said he doesn’t have the texts of all his private speeches and the business dealings of private companies and organizations Hagel is affiliated with is, as the Atlantic’s Steve Clemons points out, “going to be a really fun slippery slope”:

The entangled relationships of all US senators and spouses would be screened to see what they might be able to cough up about firms they have some connection to but don’t run.

I don’t think we should go down that road — but if Senator Cruz compels it, it should be interesting.

“The committee’s vote on Senator Hagel’s nomination has not been scheduled,” Levin said today in a statement. “I had hoped to hold a vote on the nomination this week, but the committee’s review of the nomination is not yet complete. I intend to schedule a vote on the nomination as soon as possible.”

“If we’re really going to go down this route,” TPM’s Josh Marshall writes, “is it time to air the fact that AEI is partly funded by secret grants by the Taiwanese government (at least as of mid-last decade)?”

Economy

Democratic Senator Floats Plan To Raise $200 Billion By Closing Corporate Tax Loopholes

Sen. Carl Levin (D-MI)

A Democratic Senator wants to raise $200 billion over ten years by closing corporate tax loopholes, according to Bloomberg News. Sen. Carl Levin (D-MI) wants to ditch a slew of goodies for corporations, as well as a loophole that allows wealthy money managers to pay far less in taxes than middle-class families:

Senator Carl Levin’s push to close tax loopholes will target corporate deductions for stock options and rates on investment income known as carried interest, seeking to raise at least $200 billion by one estimate.

In a memo to Democratic Senate committee leaders on Friday, the Michigan Democrat described proposals to end what he called excessive corporate tax deductions, scrap the blended tax rate for derivatives such as commodity futures and strengthen enforcement of the tax code, Bloomberg BNA reported. [...]

The plan is estimated to raise at least $200 billion over 10 years, according to a person with knowledge of the details. Levin told reporters he was sharing ideas with fellow senators and had asked the congressional Joint Tax Committee to estimate budget costs and savings for the provisions.

Republicans (and plenty of Democrats) like to talk about revenue-neutral corporate tax reform, in which every dollar raised if offset by a reduction in the corporate tax rate. Levin has consistently opposed this approach, and for good reason.

Corporate profits are currently at record highs while corporate taxes have plummeted. Corporations paid just a 12.1 percent effective tax rate in 2011. The corporate income tax used to make up about one-third of federal revenue, but today it makes up less than 9 percent. The corporate income tax used to follow along with corporate profits, but the two have become decoupled, with negative impacts for the federal budget:

As former White House economist Jared Bernstein noted, “locking in these historically low revenue levels, either as a share of GDP, total receipts, or profits, would be yet another self-inflected wound.”

Economy

Democratic Senators Will Call For Stronger Rule Against Risky Bank Trades After Investigation Of JP Morgan Chase

Sen. Carl Levin (D-MI)

The Senate panel responsible for probing the $9 billion “London Whale” trading loss that shook JP Morgan Chase earlier this year will release its findings before the end of the year and will call for a stronger Volcker Rule, sources told Bloomberg. The rule is a piece of the 2010 Dodd-Frank financial reform law that bans taxpayer-backed banks from certain types of risky trades.

Michigan Sen. Carl Levin (D), who chairs the Senate Permanent Subcommittee on Investigations, said at the time of the loss that the draft version of the Volcker Rule had a loophole so large “a Mack truck could drive right through it.” Now, according to Bloomberg, he and Sen. Jeff Merkley (D-OR) will push regulators to close loopholes in the rule and strengthen it to prevent trades like the London Whale loss, which could have caused larger market problems at smaller or more vulnerable banks.

At the same time, some Republican senators are still pushing to further weaken the rule, which was watered down so much by bank lobbyists and Republicans that its namesake, former Federal Reserve Chair Paul Volcker, said he didn’t like it.

Massachusetts Sen. Scott Brown (R) cast the deciding vote for the Dodd-Frank law, but not before he successfully weakened the Volcker Rule by inserting certain exemptions for big banks. Since then, Brown has continued to lobby regulators to take even more teeth out of the rule. Brown’s efforts amount to “significant loosening of the regulations and [are] absolutely serving the interests of people who do not want to have meaningful reform,” according to Simon Johnson, and MIT professor and reform advocate.

LGBT

Looking Back And Looking Forward On The Anniversary Of ‘Don’t Ask, Don’t Tell’ Repeal

(Photo Credit: Brian Clark, The Virginian-Pilot)

One year ago today, lesbian, gay, and bisexual members of the military were first able to openly identify their orientations and their partners without fearing that they would lose their job as a result. The implementation of the repeal of “Don’t Ask, Don’t Tell” marked an important threshold for the dignity of the gay community and the respect granted them by society.

In the past year, there have been a number of firsts for the military as a result of the repeal, including the first reinstatement of someone who had been discharged under the policy, the first same-sex homecoming kiss, and the Pentagon’s first recognition of Pride month.

Still, many questions linger for the LGBT community. As Chris Geidner noted this week, the Defense Department has yet to address same-sex partner benefits for servicemembers. Republicans continue to try to overextend the Defense of Marriage Act’s limitations on the religious liberty of soldiers and chaplains. And despite DADT repeal, people who are transgender are still prohibited from serving their country because the military still deems such identities to be mental disorders. Though a big hurdle was conquered, LGBT people still experience disenfranchisement in the military.

To mark today’s occasion, here’s a look back at ThinkProgress’ exclusive interviews conducted live at last year’s repeal day celebration hosted by the Servicemembers Legal Defense Network. Among everybody present, hope for a better tomorrow was in the air:

Rep. Tammy Baldwin (D-WI)

BALDWIN: Once we see openly gay servicemen and women serving proudly in uniform, risking their lives for their country that they love and believe in, I think that just changes the dynamic forever.

Col. Grethe Cammermeyer

CAMMERMEYER: It’s probably the best day that I can think of for the American military as well as for American in general. What I said some months ago when it was first overturned… Until the repeal, we in the service represented the flag. Now, the flag represents us.

Sen. Chris Coons (D-DE)

COONS: I frankly think [conservatives] profoundly misread the young people of America, who are far more open and tolerant, welcoming, and inclusive than generations before them, particularly around LGBT issues. I think they miss what is a basic cultural shift in the direction of tolerance.

Sen. Carl Levin (D-MI)

LEVIN: “Change” has kind of been our middle name here in America. It’s another milestone on a road to a better county and a greater country, but it’s also proof that we can deal with our mistakes and correct them and pull together and be a better country when we do pull together.

Sen. Mark Udall (D-CO)

UDALL: If Americans of all backgrounds, all regions speak up and draw attention to those discriminatory thoughts and policies, they’re going to fall through their own weight. They’re not going to last. They never do.

John Berry, White House Director of the Office of Personnel Management

BERRY: My dad was in the 1st Marine Division at Guadalcanal. And before he passed away at 86, he was talking to me one night about this issue, and he said, “You know, I don’t know what all this fuss about gays in the military is all about.” He says, “You know, back then, we didn’t call them ‘gays,’ but they were there and they served and died as bravely as anybody else.”

For those of you who are serving, thank you. For those of you who have served, thank you. For those of you who will serve, God bless you. God bless each of you for your service. God bless all who serve our country. God bless our President, and God bless the United States of America.

NEWS FLASH

Senate Committee Investigating JP Morgan’s $9 Billion ‘Fail Whale’ Trade | The Senate Permanent Subcommittee on Investigations has begun a probe into JP Morgan Chase’s $9 billion “London Whale” trading loss, Reuters reports. The committee, chaired by Sen. Carl Levin (D-MI), is interviewing current and former JP Morgan employees about the failed trade, which shook the bank and renewed calls for a stronger financial regulations. Levin’s investigation will likely “focus on the risks the CIO’s trading activities posed to taxpayers, regardless of whether any of the activity is determined to be criminal,” according to the Reuters source. Levin’s previous investigation of Goldman Sachs in the wake of the financial crisis revealed the bank’s “shitty deals” and helped set the stage for the passage of the Dodd-Frank law.

NEWS FLASH

Sen. Levin Won’t Change Parts of NDAA Struck Down By Federal Court | According to Huffington Post reporter Michael McAuliff, Senator Carl Levin (D-MI) said no changes need to be made to the National Defense Authorization Act when his committee takes up re-authorization this week. A federal judge decided last week that the law was unconstitutional because the indefinite detention portions of the law could be used to curtail the First Amendment rights of journalists, scholars, and activists. Levin dismissed the ruling and prefers appealing the decision to making changes to the law.

–Alex Brown

NEWS FLASH

Senate Armed Forces Chairman: Drop Limbaugh From Military Network | Sen. Carl Levin (D-MI), the chairman of the Senate Armed Services Committee, said yesterday that he would like to see the American Forces Network, which broadcasts TV and radio to American servicemen, stop carrying Rush Limbaugh’s radio program. “I would hope the people that run it see just how offensive this is and drop it on their own volition,” he told CNN. “I’d love to see them drop it, but I don’t think I’d legislate it.” “I think that is probably an issue that should be left to the folks that run that network,” Levin explained. A group of female veterans, organized by VoteVets, called on the Armed Forces Network to drop Limbaugh Monday.

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