Entries in Banks (57)


Washington State Banks Faced With a Pot Dilemma

iStockphoto(OLYMPIA, Wash.) -- Now that marijuana has been legalized in Washington State, banks, which are federally regulated, are in a tough position as marijuana is still banned by federal laws.

Bank tellers are instructed and trained not to accept money that smells like pot.

David Straus, president of Fortune Bank, says he won't open an account to a known pot dealer, but says that it’s likely that other banks will.

“I think there will be banks that will take it, but I think there's got to be a lot more clarity before most banks will get involved in something that's illegal at the federal level,” Straus said.

“Right now it just doesn't make sense to me to take that kind of risk.”

This is a problem for people like John Davis, who runs a medical marijuana dispensary in Seattle. Davis says that in order to deposit money he makes through his now-legal business, he needs to immediately seal his cash in a safe to prevent it from smelling like marijuana.

Copyright 2013 ABC News Radio


Senators: 'Prosecution-Free Zone' for Big Banks?

Sion Touhig/Getty Images(WASHINGTON) -- Members of a U.S. Senate banking committee blasted federal regulators Thursday for allowing Europe's largest bank to dodge a potentially crippling criminal prosecution after it had allegedly laundered millions of dollars for terrorist financiers, rogue states, and Mexican drug cartels.

The U.S. Department of Justice's recent decision not to prosecute London-based HSBC, despite what officials said was a mountain of evidence against the bank, signaled that there is, "a prosecution-free zone for large banks in America," said Sen. Jeff Merkley, an Oregon Democrat.

"If you're caught with an ounce of cocaine, the chances are good you're going to jail," said Sen. Elizabeth Warren, D-Mass. "Evidently, if you launder nearly $1 billion for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night."

What appeared to distress the senators the most were statements from the Justice Department indicating that the decision not to prosecute HSBC was made in part out of fears that a prosecution could destabilize the world economy.

Attorney General Eric Holder confirmed that reasoning in comments before a different Senate panel Wednesday when he said, "It does become difficult for us to prosecute when we are hit with indications that if we do... it will have a negative impact on the national economy, perhaps even the world economy."

On the receiving end of Thursday's tongue lashing from senators at the Banking, Housing and Urban Affairs Committee hearing were officials from the U.S. Treasury Department, the Federal Reserve and the Comptroller of the Currency -- three of the nation's most powerful financial regulators -- but no representatives from the Justice Department.

All three of the regulators said the decision forgo a prosecution of HSBC in favor of a record $1.92 billion settlement was reached with minimal input from them -- and instead was the domain of Justice Department lawyers. Sen. Mark Warner, D-Va., accused the men of playing "pass the potato."

Warner said the regulators had plenty of tools in their arsenal to go after HSBC, but failed to use them.

There was little question that a criminal prosecution was the most aggressive approach the government could have taken in response to HSBC's actions. A conviction would have automatically launched a process that could have led to the government revoking the bank's license to do business in the United States, which in turn could have put HSBC out of business.

But the senators were incredulous that a bank of HSBC's size and reach around the globe could avoid prosecution for that reason – that they were, in Merkley's words, "too big to prosecute."

Warren grilled the regulators on this point, asking if they could identify a case of money laundering egregious enough to trigger a prosecution.

"What I'd like is your opinion," she pressed. "How many billions of dollars of drug money do you have to launder before someone will consider shutting down a bank?"

David Cohen, the Treasury's under secretary for terrorism and financial intelligence, seemed to equivocate in his first attempt at a reply. Warren came right back at him.

"I'm not hearing your opinion on this," she said. "What I'm asking is, what does it take even to say: 'Here is where the line is and if you cross that line you're at risk of having your bank shut down?'"

Cohen did not provide an answer. He said only that Justice officials sought guidance from the Treasury Department about the broader economic impact a prosecution of HSBC could have, but that his office declined to provide an answer.

"We informed the Justice Department that...we were not in a position to offer any meaningful guidance to department in that matter," he said.

The response seemed only to further perturb Warren, who was elected to the Senate last fall on a promise to crack down on Wall Street, and who found in Thursday's hearing an opportunity to show she is pursuing that mandate.

"So you just said to the Justice Department, 'You're on your own in figuring this out,'" she said, not waiting for a reply.

Sen. Heidi Heidkamp, a North Dakota Democrat, asked the three witnesses to give the Senate their word that they would to push harder for a prosecution in the future.

"If we leave here without a commitment from all of you that you will vigorously encourage, and suggest, and recommend, that the Justice Department prosecute cases that must be prosecuted in order to insure equal justice under the law in this country, then we failed," she said.

None of the men offered that pledge.

As the dressing down continued, members of the committee said they wanted to see Justice Department officials brought before them to offer their explanation for why the HSBC case ended with a settlement. Whether that will occur remains to be seen. Advocates who have pushed for the U.S. to take a tougher posture against banks that launder money said they hope the committee continues to push.

"What is clear is that the system isn't working," said Stefanie Ostfeld, a policy advisor with Global Witness, an international advocacy organization that works to root out financial crimes and corruption. "There is no incentive for bankers to comply with the law when there are no personal consequences for getting it wrong. Until senior bankers are held legally responsible for the bank's compliance, the U.S. financial system will remain vulnerable to terrorist finance and the proceeds of corruption and drug trafficking."

Only one Republican from the banking committee attended Thursday's hearing. Sen. Mark Kirk of Illinois stopped short of grilling the regulators, but joked with Warren that the two should consider opening their own bank for terrorists and drug lords.

"I think we can make a killing that way, and face no danger of prosecution," he said, smiling.

Copyright 2013 ABC News Radio


Iran Behind Hacking of Banking Sites?

iStockphoto/Thinkstock(NEW YORK) -- Recent hits on dozens of online banking sites may be the work of government-backed hackers in Iran, according to U.S. security officials. 

Since last September, hackers have cause slowdowns and other disruptions to widely-used banking sites.  Citigroup, Wells Fargo, Capital One, HSBC and Bank of America are among the sites that were hit. 

According to The New York Times, "the skill required to carry out attacks on this scale has convinced United States government officials and security researchers that they are the work of Iran, most likely in retaliation for economic sanctions and online attacks by the United States."

Copyright 2013 ABC News SRadio


Big Banks Waiving Fees for Customers Affected by Sandy

Ryan McVay/Photodisc/Thinkstock(NEW YORK) -- In the wake of Hurricane Sandy, several big banks -- like Citi, Wells Fargo, Bank of America and TD Bank -- are waiving some of their normal fees for customers in states affected by the monster storm.

One example is Chase Bank, which says customers in Washington, D.C., Virginia and much of the North East this week won't be charged for overdrawing their checking accounts or making a late credit card payment. 

Citi is waiving fees at least until next Monday for affected customers who use overdraft protection, have insufficient funds, or who are late in paying their credit cards.

Wells Fargo says some of its branches that lost power are still open, as employees use flashlights and hand stamp deposit and withdrawal forms.

And TD Bank is not charging early withdrawal penalties for customers who want to cash in their certificates of deposit.

Copyright 2012 ABC News Radio


Rule Would Protect Banks Against Mortgage Borrower Suits

Digital Vision/Thinkstock(NEW YORK) -- A regulatory change under consideration by bureaucrats in Washington would give banks new legal protections against being sued by borrowers.  Mortgage customers, for example -- those deemed most able to repay -- would effectively be prohibited from suing to stop foreclosures.

Kathleen Day, spokesperson for The Center for Responsible Lending, a consumer group, explains that the “legal shield” being contemplated by the Consumer Financial Protection Bureau (CFPB) would serve to implement the overriding purpose of the Dodd-Frank act: to force banks to take into consideration a borrower’s ability to repay when deciding whether to issue them a mortgage.

That assessment would include, for example, a review of a prospective borrower’s employment history and other outstanding credit obligations.

If and when a borrower who had been deemed able to repay were to bring suit to stop a foreclosure of his home, the judge in the case would be compelled to rule against the borrower and in favor of the bank.

It’s easy to see why lenders want such protection.  According to a Wall Street Journal story on the new shield, the seven biggest lenders in the U.S. have had to pay in excess of $76 billion on mortgage-related litigation since the popping of the housing bubble (as estimated by Credit Suisse Group).

Day stresses that the Consumer Financial Protection Bureau has not yet drafted a proposal for the shield.

“It’s just being talked about,” she says.  “It’s something under discussion.”

The CFPB, asked for comment by ABC News, has not responded.

Copyright 2012 ABC News Radio


Georgia Family Tries to Buy Back Foreclosed Home from Bank

The Gearing Family(HELEN, Ga.) -- Of the nearly 1.9 million homes that went into foreclosure last year, few owners had any thoughts about sticking around. They packed up their bags and left.

But not the Gearings of Helen, Ga., a small town about 25 miles from the North Carolina border. They are trying to buy back their foreclosed home from the bank to avoid an eviction on Nov. 5, but nothing about the process has been easy.

Jeannette and Bill Gearing and their seven children, by their own account, were doing "very well" six years ago. In 2006, they built and moved into their five-bedroom dream home. Then the recession hit.

Bill Gearing, 54, a salesman, had invested a large portion of the family's savings in real estate beginning in the late 1990s, including a farm and their home. He also had started a small business in early 2005; it provided farm equipment and had a fully stocked nursery.

The $1.4 million mortgage on their 5,500-square-foot home has monthly payments of nearly $7,000. With a major drought in the area and the economic downturn in full swing by 2009, Bill's customers began to go out of business and so did his company. The mortgage payments were too much for the family.

They filed for Chapter 7 bankruptcy in February 2011. Their home was foreclosed on the following July.

"My husband did very well," said Jeannette Gearing, 42. "We worked very hard, obviously. We're just victims of the economy just like everyone else. It affected everybody on all levels."

Her husband continued to work as a salesman, but he makes about a quarter of what he used to earn. To try to earn more money, Jeannette has cleaned houses and worked as a substitute teacher while taking care of her children, ages seven to 17. An aunt who has Alzheimer's disease also lives with the family.

Jeannette said there didn't seem to be any options to save their home because the mortgage was so high.

"We just didn't know who to call," she said.

A loan modification seemed overwhelming as well.

"My husband started packing when we were notified of the foreclosure," she said. "I didn't give up."

Earlier this year, the Gearings found renewed hope when a family friend contacted them and said he would be willing to purchase the home at its current market value so they could continue to live in it. They would pay the friend, who has so far chosen to remain anonymous, back over time. While the Gearings' financial situation hasn't improved much, they now say they have hope that they can stay in their home.

Meanwhile, the number of foreclosure filings in the country dropped to a five-year low in September, according to the foreclosure listings firm RealtyTrac.

The family friend compared their home to other neighboring homes that have sold for much less than their original worth, and submitted a cash offer of $300,000 to an attorney they thought represented U.S. Bank.

But it was complicated. The Gearings said they had difficulty figuring out who owned their home after the foreclosure. A number of financial firms seemed to have some involvement in the ownership of it.

Initially, they had tried contacting U.S. Bank, which was identified on their foreclosure filings. A friend of the Gearing children started a petition on, initially asking U.S. Bank to allow them to purchase the home. The petition was signed by nearly 200,000 people.

They eventually learned that U.S. Bank was only the trustee for their foreclosed home, which is owned by a trust. They later were directed to Chase, which they confirmed only earlier this month is the mortgage servicer.

A spokeswoman for Chase said the bank has spoken to the family to try to resolve the issue.

"In servicing a property, we follow the investors' guidelines to avoid foreclosure when possible and to minimize the loss in the case of foreclosure," Chase said in a statement. "After foreclosure, we seek to sell the home for fair market value."

The family said Chase has now said it may be willing to entertain an offer if an independent appraisal is conducted on the home first. On Thursday, Chase sent a real estate agent to assess the home's value. On Tuesday, an appraiser is scheduled to visit.

Jeannette said she has looked at apartments in the area so the children can continue going to school, but she has struggled to find spaces large enough for the family. If they are evicted, she said they would still likely try to buy the home. But moving with seven children and their aunt is something the Gearings would like to avoid.

When asked if the Gearings' family friend would be willing to pay a higher price to meet the appraisal value, Jeannette Gearing said they would be willing to pay a "fair" price for the home.

"I'm glad something is happening," she said. "Hopefully it will be a good thing and we can get something resolved."

Copyright 2012 ABC News Radio


Morgan Stanley CEO Says Banking Industry Is 'Overpaid'

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Morgan Stanley CEO James Gorman has folks in the banking sector buzzing with his comments that the industry is "still overpaid."

"There's way too much capacity and compensation is way too high," Gorman told the Financial Times. "As a shareholder I'm sort of sympathetic to the shareholder view that the industry is still overpaid."

A spokeswoman for Morgan Stanley declined to elaborate or make Gorman available for comment. Gorman's doing pretty well though. He received a $10.5 million pay package in 2011, a pay cut of 25 percent from 2010. He's was the 23rd highest-paid CEO in America last year, according to Bloomberg Markets magazine.

Earlier this year, Deutsche Bank co-chief executives Anshu Jain and Juergen Fitschen said compensation reform was one of their three key objectives.

Gorman's comments come a week before the major U.S. banks report their third-quarter earnings. JPMorgan Chase and Wells Fargo will be the first with their earnings releases next Friday, Oct. 12.

Back in July, Morgan Stanley reported a 50 percent drop in its second-quarter earnings to $591 million. The company reported revenue had dropped to $6.95 billion from $9.21 billion the prior year.

Brian Foley, pay consultant and managing director of Brian Foley & Co. in White Plains, N.Y., said with little evidence in the financial markets that the tide has turned, Gorman's comments seem somewhat foreboding.

"My sense is that what's coming in the third quarter is likewise not going to be pretty or even uglier," he said.

Anthony Polini, analyst with investment firm Raymond James, said he agreed with Gorman that there are too many banks in the U.S., but he disagreed that the banking industry as a whole is underpaid.

"The banking industry is overregulated, not overcompensated," Polini said.

Although, Polini conceded, it depends which industry one uses as a comparison.

Comparing to professional athletes and film stars would make most bankers look like they got the short end of the stick, he said.

By international standards, Polini said executives at Bank of America, the second-largest U.S. bank measured by assets, are not overcompensated. Its CEO, Brian Moynihan, receives compensation of $8.1 million, which includes a salary of $950,000, $6.1 million in performance-based stock, $420,000 worth of tax and financial advice and use of the company's aircraft.

"It's all who you compare them to," he said. "I'll take a stand and say I think teachers should make a lot more money."

Polini also points out that the large number of U.S. banks, approximately 7,000 which are dominated by a handful of national corporations, could mean greater competition and choices for consumers.

"Excess capacity is a bad thing on one hand, but if you're looking for a low-interest bank or convenience, even if you live in the suburbs, you probably don't have to drive to a bank," he said. "You could probably walk to one."

Low interest rates have been negatively affecting banks, but Polini said he expects banks to report positive quarterly earnings in terms of commercial loan growth and mortgage banking.

"It doesn't mean that the outlook is going to get much better. We still have a weak economy and a low-interest rate environment," he said.

Copyright 2012 ABC News Radio


Hackers, Possibly from Middle East, Block US Banks' Websites

Jin Lee/Bloomberg via Getty Images(NEW YORK) -- The financial and banking industries are on high alert Thursday night as a massive cyberattack continues, with potentially millions of customers of Bank of America, PNC and Wells Fargo finding themselves blocked from banking online.

"There is an elevated level of threat," said Doug Johnson, a vice president and senior adviser of the American Bankers Association. "The threat level is now high."

"This is twice as large as any flood we have ever seen," said Dick Clarke, an ABC News consultant and former cybersecurity czar.

Sources told ABC News that the so-called denial of service attacks had been caused by hackers from the Middle East who had secretly transmitted signals commandeering thousands of computers worldwide.

Those computers -- or "zombies" -- were then used to overwhelm bank websites with a barrage of electronic traffic.

Different banks have been targeted on different days.

Thursday was PNC Bank's turn: For three hours, ABC News tried to get on the PNC website to no avail.

On Facebook, a frustrated customer, Cynthia Schirm, wrote, "Trying to pay bills. This is ridiculous."

"Hopefully it can be up soon," wrote Stacy Briggs-Gerlach. "Never realized how dependent I am on it!!!"

A group of hackers calling themselves Izz ad-Din al-Qassam warned the financial industry that it was going to attack in retaliation for the controversial film "The Innocence of Muslims," which provoked outrage across the Muslim world earlier this month.

The U.S. said it suspected that hackers in Iran were also involved.

"This is the first time that we know about, where a Middle Eastern entity, perhaps a Middle Eastern government, has attacked websites, critical infrastructure, in the United States," Clarke said.

Even though hackers have not been able to steal any money during these attacks, authorities say they fear the next generation of widescale cyber assaults could be more devastating.

"If they get inside the banks, they can move money around and cause financial chaos," Clarke said.

ABC News obtained a Sept. 17 FBI alert warning that foreign hackers were targeting bank and credit union workers.

In a number of those cases, the hackers stole employee login credentials and then wired themselves between $400,000 and $900,000.

Sources told ABC News that the U.S. government was actively working to locate and disrupt the massive attacks.

Copyright 2012 ABC News Radio


Break Up Big Banks, Says Mega-Bank Pioneer

Koichi Kamoshida/Getty Images(NEW YORK) -- One of the architects of mega banking is now calling for the breakup of the world’s largest banks.

Sandy Weill, the former CEO of Citigroup, told CNBC on Wednesday, “What we should probably do is go and split up investment banking from banking, have banks be the deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.”

In the late ’90s, Weill was a global banking pioneer, building Citi into a financial supermarket.  Now, “I am suggesting that they be broken up so that the taxpayer will never be at risk,” said Weill, adding his voice to a growing chorus of regulators and financial experts.

“Our system has been hijacked and we need to change it,” says Neil Barofsky, the former special inspector general in charge of oversight of the Troubled Asset Relief Program (TARP).  Breaking up the banks, he says, “is widely accepted.”

Barofsky, who makes his case in the new book, Bailout, claims “the only people who have not accepted this it seems like is the big banks themselves and the politicians they seem to affectively control in Washington.”

Copyright 2012 ABC News Radio


Nationwide Utility Bill Scam Spreads to Midwest

Fuse/Thinkstock(NEW YORK) -- Utility companies in the Midwest are warning customers of an ongoing con that has already affected thousands on the West and East Coast in which a scammer claims households are eligible for an energy credit offered by President Obama to obtain personal information.

The Iowa Utility Association and three utility companies say a scam that falsely claims President Obama, who happens to be in Cedar Rapids on Tuesday, is providing energy credits by applying payments to utility companies with fake accounts provided by the scammers.

Scott Reigstad, a spokesman for Wisconsin Power and Light Company, an Alliant Energy company, said about 100 customers have been scammed since July 5.

"Nationally, the scams have been happening for months, some through social media, text messages, or fliers," he said.

Though many people wouldn't think of providing personal information to strangers on the phone, the scammer's pitch may be more persuasive than you think, especially if they already know the name of your utility company. "These credits that supposedly the president has offered seem fairly attractive to some people," said Mark Douglas, president of the Iowa Utility Association. "Because they offer the chance to reduce a utility bill, people are very willing to release that personal information."

Victims' stories vary, but the goal of the scam is to extract enough personal information from you to initiate identity theft.

"We had people reporting they have received calls from people saying they were utility representatives and they needed banking information now or their power would shut off," said Douglas.

Most of the scammed Alliant customers were contacted by phone through voice recordings or a person and were provided a bank routing number to pay their utility companies. Victims of the scam are instructed to provide their Social Security numbers in some instances, Reigstad said.

About 49 customers of MidAmerican Energy Company, Iowa's largest energy company, according to the firm, have tried to make payments with a non-working routing number used in the scam. Those customers were from cities including Des Moines, Waterloo, Iowa City, Davenport and Rock Island, Ill.

"Payments made using the routing number will not be applied to customers' bills," said Tina Potthoff, media relations manager with MidAmerican. "We are trying to reach out to customers to make sure no one else falls victim to this."

Starting in late June, customers began calling MidAmerican Energy Company to inquire about the non-existent government program.

"We've seen this at other utilities," Potthoff said. "The best possible way to put a stop to this is prevention and education."

The advice from MidAmerican and the other utility companies is to never provide personal information that the utility company should already have. If you're suspicious of someone who calls you and claims to represent your utility company, "hang up on the caller and give us a call so they know we are on the other end of the line," Potthoff said.

"If you're ever in doubt, give us a phone call as soon as possible," she said.

It's unclear where the scam originated, though Potthoff said the utility companies are working with local law enforcement to try to get to the bottom of it.

San Diego Gas & Electric issued an alert to customers warning of the scam on May 15. Pennsylvania Electric Company, PECO, released a warning to customers on June 28. Florida Power & Light Company issued a release last week and said 30,000 customers had tried to use the credit when making a payment.

For about six days in late May to early June, PSE&G, a utility company in New Jersey, noted customers were trying to or did pay their bills with the fake routing number and the payment bounced back because it was not a legitimate way to pay.

Bonnie Sheppard, spokeswoman from PSE&G in New Jersey, said about 10,000 customers tried to pay their bill with the scam "credit."  The company, which serves three-quarters of New Jersey's population, has over 2 million electric customers and nearly 2 million gas customers.

While customers in Iowa have mostly been contacted by telephone, victims have unwittingly encouraged their friends to join in the scheme by social media and word of mouth, said Potthoff of MidAmerican Energy.

"People think they are getting a good deal but they are publicizing a scam," Potthoff said.

Copyright 2012 ABC News Radio

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