25 European Banks Fail Stress Test

FRANKFURT, Oct 26 (Reuters) - Twenty five of the euro zone's 130 biggest banks have failed a landmark health check and ended last year with a collective capital shortfall of 25 billion euros, the European Central Banks said on Sunday.

A dozen of those banks have already addressed the gap by raising 15 billion euros over the course of this year.

Italy's financial sector faces the biggest challenge with nine of its banks failing the test, according to watchdog the European Banking Authority, which coordinated the fourth EU stress test with the ECB.

Monte dei Paschi had the biggest capital hole to fill at 2.1 billion euros, even after its money raising efforts so far this year.

The EBA said three Greek banks, three Cypriots, two from both Belgium and Slovenia, and one each from France, Germany, Austria, Ireland and Portugal had also fallen short as of the end of last year.

The ECB has spent the last year reviewing the leading banks' assets and subjecting them to rigorous stress tests - an exercise aimed at flushing out any problems before it begins supervising the sector from Nov. 4.

The ECB's pass mark was for banks to have high-quality capital of at least 8 percent of their risk-weighted assets in the most likely economic situation for the next three years, and capital of at least 5.5 percent under a bleaker scenario.

Banks with a capital shortfall will have to say within two weeks how they intend to close the gap. They will then be given up to nine months to do so.

The EBA required 123 lenders from across the EU to submit themselves to theoretical shocks such as a three-year recession and said 24 flunked in total. The ECB's test included a higher number in the euro zone as it also included subsidiaries of big banks.

A CORNER TURNED?

The ECB has staked its reputation on delivering an independent assessment of euro zone banks in an attempt to draw a line under years of financial and economic strife in the bloc.

But there is no certainty that bank lending will now pick up as the ECB hopes, to breathe life into a moribund euro zone economy.

"Thinking that lending somehow can lead GDP is an illusion, and I don't know how that has somehow crept into the policy debate," said Erik Nielsen, global chief economist at Unicredit.

Digging down into bank's balance sheets, the ECB said as of the end of last year, banks' book values needed to be adjusted by 48 billion euros and that non-performing loans had increased by 136 billion euros to 879 billion.

The ECB will not immediately force those lenders with overvalued assets to take remedial action but they will have to hold more capital eventually, leaving less room to expand, lend or pay dividends.

For lending, the more fundamental question is whether the demand for credit is there.

"Businesses need to believe in an increase in the demand for their products before asking for credits, and now that external demand growth is no longer there, this is when the euro zone needs demand stimulus," Nielsen said.

The ECB is about to take on its new regulatory responsibilities but it may be its monetary policy powers that the euro zone needs most. (Additional reporting by John O'Donnell and Paul Carrel in Frankfurt, Huw Jones and Steve Slater in London. Writing by Mike Peacock, editing by Alexander Smith)

Lululemon Partners With Dalai Lama, Enrages Critics

Lululemon can't even donate to charity without miring itself in controversy.

The yoga-wear retailer is getting slammed after announcing a partnership this week with the Dalai Lama Center for Peace and Education. Lululemon will contribute $750,000 to the Tibetan spiritual leader's nonprofit organization over the next three years to expand education initiatives and for "researching the connection between mind-body-heart," according to the company's press release.

Some critics say the alliance is hogwash. They don't think the Dalai Lama's name should be associated with a money-making enterprise and complain he's been "hijacked" and turned into a mere corporate marketing tool.

A mob flocked to Lululemon's official blog, lighting up the comments section with accusations of hypocrisy.

"As he believes that luxuries are not necessities, you believe in $100 yoga pants," one commenter pointed out.

"It is offensive that you have sunk so low as to use the Dalai Lama and his image as part of your branding," another wrote.

"I am put-off by Lululemon’s bizarre effort to hijack the Dalai Lama for brand-building and commercial gain," a third added.

A few who spoke out against the partnership claimed not to like the Dalai Lama, with one calling him "cruel" and another calling him "greedy."

Lululemon appears to disagree. "Both organizations share a common vision for developing the next generation of compassionate leaders in the world and are committed to engaging and empowering healthy communities," the company said in its press release.

Lululemon and the Dalai Lama Center did not respond to requests for additional comment.

Lululemon has a lot on its plate. Last spring, quality control issues sparked a recall of too-sheer yoga pants. Then, last fall, co-founder Chip Wilson irked many customers when he said Lululemon's pants "don't work" for some women's bodies. Earlier this month, Lululemon managed to offend the entire city of Buffalo, New York, by making fun of its NFL team.

One commenter summarized: "Dear Lulu, your product is still in question, don’t get me wrong. Great marketing, done! Now get back to improving your product and winning clients back."

How The Fed Blew Its Most Important Job For Over Three Years

WASHINGTON -- The Federal Reserve was aware of risky practices at JPMorgan Chase as early as 2008 but failed to follow up for more than three years until those risks had snowballed into the company's $6.2 billion London Whale scandal, according to a new report from the central bank's Office of Inspector General.

Financial reform advocates' response to this unhappy but perhaps not surprising news was summed by Dennis Kelleher, president and CEO of Better Markets.

"The remarkable thing here is that the Fed's own people identified the high-risk activities at JPMorgan Chase's offshore units and alerted their supervisors and others that a comprehensive systematic review of those activities should be undertaken quickly," Kelleher said. "And then they didn't. They just didn't do it."

But the implications of the IG report reach well beyond the Whale debacle, highlighting how much power the Fed's New York branch wields and how little influence the public interest has within that branch.

While the Fed Board of Governors, based in Washington, is a public agency, the regional Fed banks are private sector entities. The London Whale report has led bank watchdogs to suggest that, at the very least, the New York Fed presidency should be a fully public position, appointed by the president and confirmed by the Senate.

"The New York Fed is the key on-the-ground supervisor of the largest Wall Street banks, including JPMorgan," Marcus Stanley, policy director at Americans for Financial Reform, told HuffPost. "So I think there are some questions about this hybrid public-private structure given the critical public interest in all these issues."

"Nobody with that much power and authority should be unaccountable to any publicly elected official," said Kelleher.

The London Whale rocked the American financial establishment when JPMorgan began taking sudden, heavy losses in 2012. The bank had placed big risky investment bets on an index of credit derivatives that then backfired. JPMorgan, which declined to comment for this article, was able to shoulder the brutal losses. Yet their speed and severity caused many to question whether the banking system was vulnerable to more and potentially bigger such problems.

Under the Volcker Rule approved by U.S. regulators in 2013, banks would now be barred from making such trades for their own accounts. But rules only matter if they are enforced, and the IG report offers little reason to have confidence in the New York Fed's oversight.

The Fed's IG report lays the London Whale regulatory breakdown at the feet of the New York Fed under multiple leaders. The New York Fed discovered the problematic proprietary trading at JPMorgan in 2008. The following year, it recommended a deep review of the JPMorgan division that ultimately harbored the London Whale trades. That review was never performed, and the New York Fed never coordinated -- as it should have -- with the Office of the Comptroller of the Currency, which also has regulatory authority over JPMorgan.

Part of the problem may be that the top levels of the Fed are not fully staffed for regulatory oversight. The Fed's seven-member Board of Governors has two longstanding vacancies. One of those slots should be held by a new vice chair of supervision. The 2010 Dodd-Frank financial reform law created the job -- effectively a formal regulatory boss at the Fed -- but it has never been filled.

"The Fed board vacancies -- we want reformers for those positions and people who are focused on better regulation of the financial sector," Stanley said. "And this kind of thing shows why."

One person who's been touted as a potential pick for vice chair of supervision is Elise Bean, a longtime staffer with Sen. Carl Levin (D-Mich.), chairman of the Senate Homeland Security and Governmental Affairs Subcommittee on Investigations. Bean has done extensive financial research for the subcommittee, addressing everything from offshore tax evasion to high-frequency trading. In fact, the committee released a much more extensive report on the London Whale mess in March of this year.

But the New York Fed's mishandling of the London Whale situation also raises questions about the central bank's dual structure as both a public and private sector entity. The Fed Board of Governors is a public institution that writes regulations, among other responsibilities, and the governors themselves are appointed by the president and confirmed by the Senate. But much of the Fed's actual regulatory enforcement is delegated to the 12 private sector Fed banks.

These branch banks are controlled by their own nine-member boards. Three of those directors are chosen by the banking industry, three are chosen to represent other industries, and three are selected to broadly represent public interests. The president of each branch is named by the corporate and public interest directors.

In practice, this has meant that banking and other corporate interests are really running the show at most Fed branches. A 2011 Government Accountability Office report found that regional Fed bank directors are disproportionally white men who overrepresent business management, while labor and consumer groups have few voices on those boards. The New York Fed presidency has been held since early 2009 by a former Goldman Sachs banker, William Dudley.

Moreover, not all Fed branches are equal. The New York Fed, cheek by jowl with Wall Street, is by far the most dominant, and its president exercises enormous power. During the financial calamities of 2008, then-New York Fed President Timothy Geithner served as one-third of a crisis team that included then-Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke. Since the New York Fed isn't subject to limits on government pay, Geithner was the best paid of the trio, and he would take a significant pay cut to become treasury secretary in January 2009.

While the Fed Board of Governors is a notoriously secretive institution, the New York Fed is even more protective of its internal operations, officially contending that it's exempt from the Freedom of Information Act because it is not a government agency.

The tension between the Fed's public service functions and its ties to private banks is highlighted by the Fed IG report itself. The central bank's independent watchdog is confining public disclosure of its report to a four-page summary, arguing that the full report has too much "privileged and confidential" information. The Office of Inspector General declined to comment on the decision to keep the full report a secret.

During the debate over Dodd-Frank, many reform advocates called for revamping the Fed's internal structure, but only modest changes were made, and some of those, like naming a vice chair of supervision, have not yet been implemented.

All The Wealth The Middle Class Accumulated After 1940 Is Gone

Here's more proof the middle class is dying.

The middle-class share of American wealth has been shrinking for the better part of three decades and recently fell to its lowest level since 1940, according to a new study by economists Emmanuel Saez of the University of California, Berkeley, and Gabriel Zucman of the London School of Economics.

In other words, remember the surge of the great American middle class after World War II? That's all gone, at least by one measure.

In this case, "middle class" is defined rather expansively as the bottom 90 percent of all Americans. "Wealth" is the total of home equity, stock and bond holdings, pension plans and other assets, minus debt. As such assets are mostly owned by mid- to higher-income households -- and considering most Americans define themselves as "middle-class" -- it seems reasonable to use the bottom 90 percent as a proxy for the "middle class."

Saez and Zucman discussed their paper in a blog post for the Washington Center For Equitable Growth on Monday that included this stark chart:

Debt has been the big force driving net wealth lower for the middle class, according to Saez and Zucman. Brief bubbles in stock and home prices in the 1990s and 2000s only temporarily offset the steady, depressing rise in mortgage, student-loan, credit-card and other debts for the bottom 90 percent.

"Many middle class families own homes and have pensions, but too many of these families also have much higher mortgages to repay and much higher consumer credit and student loans to service than before," Saez and Zucman wrote.

Another important factor has been that incomes have stagnated for most Americans over the past few decades, once adjusted for inflation. Along with rising debt levels, stagnant wages have made it impossible for most families to save very much money.

And who has been the beneficiary of this middle-class misery? The top 0.1 percent of Americans, whose incomes have just kept rising, and whose share of wealth has soared to levels not seen since Jay Gatsby was still staring at the blinking green light at the end of Daisy Buchanan's dock:

In fact, the middle class is not alone in suffering from shrinking wealth. The rest of the top 10 percent of Americans below the 0.1 percent -- the "merely rich," Saez and Zucman call them -- have also suffered from falling household wealth over the past four decades.

This rising inequality of wealth can only lead to more inequality of income and wealth in the future, Saez and Zucman warned, echoing French economist Thomas Piketty. The very rich will just keep getting richer by living on the returns from their wealth, while the rest of us will keep falling behind.

Socialist Party Pushing $20 Minimum Wage Defends $13-An-Hour Job Listing

The Freedom Socialist Party has right-wing bloggers seeing red over a job listing that paid less than the group advocates for a minimum wage.

Earlier this month, the nonprofit posted listings on Craigslist and Indeed to advertise an opening for a part-time web designer. It offered to pay $13 an hour or more, depending on the designer's experience. That's well below the $20 minimum wage the party pushes for in its platform, and lower than the $15 wage it helped pass this year in Seattle. Right-leaning sites promptly seized on what they saw as hypocrisy.

But Doug Barnes, the party's national secretary, told The Huffington Post on Saturday that the group relies heavily on donations from low-wage workers and could not afford to pay much to an inexperienced designer.

"We're practicing what we're preaching in terms of continuing to fight for the minimum wage," Barnes said, making his first public comment on the controversy. "But we can't pay a lot more than $13."

He said the party's revenues would increase if the minimum wage were raised to $20 -- and he'd even prefer $22, at least in Seattle. The city will begin phasing in a $15 minimum wage in April.

"Our donor base would all be affected, and the low-wage workers who support us with $5 to $6 a month would be able to give more," he said. "That would affect our ability to pay higher wages as well."

But Barnes said he removed the $13 starting wage from the Craigslist ad on Friday in response to the online criticism.

"The right-wing attack is very hypocritical," he said. "These are the same people who fought against the minimum wage and support companies like Walmart."

He said the Freedom Socialist Party, which was formed in 1966 as a revolutionary feminist breakaway group from the United States Socialist Workers Party, does not accept donations from corporations.

Moms' Group Calls Out Kroger's Gun Policy In Unprecedented New Ad Campaign

The moms are taking the gun control fight to Kroger's backyard.

On Thursday, Moms Demand Action for Gun Sense in America, a gun control group backed by former New York City Mayor Michael Bloomberg's considerable financial resources, will blanket half a dozen newspapers with ads meant to pressure the grocery giant to stop allowing customers to openly carry firearms in its stores. The ads will be displayed on the newspapers' websites as well as on a billboard in Cincinnati, where Kroger's corporate headquarters is based, according to the group.

The ads will contrast images of shoppers doing things that are currently prohibited in Kroger's stores -- such as eating ice cream and shopping while shirtless -- with images of people carrying rifles. "Guess which one" isn't allowed at Kroger, the tag line says. (Scroll down for full images of the group's ads.)

This is the first time Moms Demand Action has bought ads as part of one of its campaigns to convince a company to enact a no-open-carry policy. Erika Soto Lamb, a spokeswoman for Everytown for Gun Safety, the umbrella group that includes Moms Demand Action, declined to say how much the ads cost, saying only that the amount was in the "six figures."

Moms Demand Action first announced its intention to focus on Kroger two weeks ago, citing several shootings that had happened in or near Kroger stores as the impetus. Kroger has about 2,500 locations in the U.S., and is the nation's largest grocery chain. In response to the announcement, Kroger initially said that it would continue to follow local gun laws, and argued that asking its employees to enforce a no-gun policy would be impractical and dangerous.

Other companies previously targeted by Moms Demand Action initially made similar statements, before reversing course and requesting that gun owners not bring weapons inside their stores or restaurants. Chipotle, Sonic, Target and Starbucks have all changed their policies in response to the group's demands.

While falling short of outright bans -- which business owners generally say would be impossible to enforce -- these new policies suggest that corporate America may fear the economic might of gun control activists more than supporters of permissive open carry laws. (This calculus, so far, does not apply to Congress, where the National Rifle Association and its lobbyists largely hold sway.)

Moms Demand Action's most effective technique has been to circulate photos taken by people who support the right to openly carry weapons in public. Some of the photos depict people holding large rifles as they wait in line to buy a burrito or order a hamburger. Tensions over this practice have flared up in several states, especially Texas, where openly carrying a handgun in public is banned, but carrying long rifles is not.

The earlier campaigns by Moms Demand Action have largely been waged on Twitter and Facebook, though the group has also staged protests at several stores. The Kroger ad buy represents a significant escalation in terms of both financial commitment and visibility. The ads will run as "homepage takeovers" in the online editions of USA Today, The Cincinnati Enquirer, The Columbus Dispatch, the Houston Chronicle, The Detroit News and the Detroit Free Press, according to the group. The ads will also appear in the print editions of several of these papers, as well as The Tennessean.

"These images bring into stark contrast Kroger policies that prohibit skateboards, food and a lack of appropriate attire in stores, but allow the open carry of loaded guns," said Shannon Watts, the founder of Moms Demand Action, in a statement. "Businesses have an obligation to protect their employees and patrons."

Kroger, so far, has rebuffed the group's calls to take its side in the national gun debate.

"We know that our customers are passionate on both sides of this issue and we trust them to be responsible in our stores," spokesman Keith Daily previously told The Huffington Post.

Denny's Offers $300 Grand Slam Breakfast With Champagne In NYC

NEW YORK (AP) — Denny's is popping the cork on its first Manhattan location.

The Daily News reports (http://nydn.us/1qMHWnj) the diner chain's Financial District debut is serving up a special combo putting a pricy bottle of Dom Perignon alongside its down home Grand Slam breakfast.

The newspaper reports the $300 souped-up Slam is one of several unique touches on the menu at the Big Apple Denny's opening Friday.

There are also $11 cocktails alongside hash browns, bacon and pancakes.

Denny's takes Manhattan after years of planning and a legal fight.

Residents of the 24-floor Nassau Street building where the diner has set up shop sued last year to block the move.

A judge rejected their claims that the 1,700-location chain is a haven for violence, disorder and "alcohol-drenched patrons."

Bottoms, and biscuits, up.

___

Information from: Daily News, http://www.nydailynews.com