Latin music star Jenni Rivera believed dead in plane crash

Fans of Mexican-American singing star Jenni Rivera held a vigil Sunday night in Lynwood









MEXICO CITY — Mexican American singer Jenni Rivera, the "diva de la banda" whose commanding voice burst through the limits of regional Latin music and made her a cross-border sensation and the queen of a business empire, was believed to have died Sunday when the small jet carrying her and members of her entourage crashed in mountainous terrain.


Rivera, a native of Long Beach, was 43. Mexico's ministry of transportation did not confirm her death outright, but it said that she had been aboard the plane and that no one had survived the crash. Six others, including two pilots, also were on board.


"Everything suggests, with the evidence that's been found, that it was the airplane that the singer Jenni Rivera was traveling in," said Gerardo Ruiz Esparza, Mexico's secretary of communications and transportation. Of the crash site, Ruiz said: "Everything is destroyed. Nothing is recognizable."








Word of the accident ricocheted around the entertainment industry, with performer after performer expressing shock and grief. Fans gathered outside Rivera's four-acre estate in Encino.


"She was the Diana Ross of Mexican music," said Gustavo Lopez, an executive vice president at Universal Music Latin Entertainment, an umbrella group that includes Rivera's label. Lopez called Rivera "larger than life" and said that based on ticket sales, she was by far the top-grossing female artist in Mexico.


"Remember her with your heart the way she was," her father, Don Pedro Rivera, told reporters in Spanish on Sunday evening. "She never looked back. She was a beautiful person with the whole world."


Rivera had performed a concert in Monterrey, Mexico, on Saturday night — her standard fare of knee-buckling power ballads, pop-infused interpretations of traditional banda music and dizzying rhinestone costume changes.


At a news conference after the show, Rivera appeared happy and tranquil, pausing at one point to take a call on her cellphone that turned out to be a wrong number. She fielded questions about struggles in her personal life, including her recent separation from husband Esteban Loaiza, a professional baseball player.


"I can't focus on the negative," she said in Spanish. "Because that will defeat you. That will destroy you.... The number of times I have fallen down is the number of times I have gotten up."


Hours later, shortly after 3 a.m., Rivera is believed to have boarded a Learjet 25, which took off under clear skies. The jet headed south, toward Toluca, west of Mexico City; there, Rivera had been scheduled to tape the television show "La Voz" — Mexico's version of "The Voice" — on which she was a judge.


The plane, built in 1969 and registered to a Las Vegas talent management firm, reached 11,000 feet. But 10 minutes and 62 miles into the flight, air traffic controllers lost contact with its pilots, according to Mexican authorities. The jet crashed outside Iturbide, a remote city that straddles one of the few roads bisecting Mexico's Sierra de Arteaga national park.


Wreckage was scattered across several football fields' worth of terrain. An investigation into the cause of the crash was underway, and attempts to identify the remains of the victims had begun.


Rivera, a mother of five and grandmother of two, was believed to have been traveling with her publicist Arturo Rivera, who was not related to her, as well as with her lawyer, hairstylist and makeup artist; reports of their names were not consistent. Their identities were not confirmed by authorities. The pilots were identified as Miguel Perez and Alejandro Torres.


In the world of regional Latin music — norteño, cumbia and ranchera are among the popular niches — Rivera was practically royalty.


Her father was a noted singer of the Mexican storytelling ballads known as corridos. In the 1980s he launched the record label Cintas Acuario. It began as a swap-meet booth and grew into an influential and taste-making independent outfit, fueling the careers of artists such as the late Chalino Sanchez. Jenni Rivera's four brothers were associated with the music industry; her brother Lupillo, in particular, is a huge star in his own right.


Born on July 2, 1969, Rivera initially showed little inclination to join the family business. She worked for a time in real estate. But after a pregnancy and a divorce, she went to work for her father's record label and found her voice, literally and figuratively.


She released her first studio album in 2003, when she was 34.


Her path had not been easy, but rather than running from it, she wrote it into her music — domestic violence; struggles with weight; raising her children alone, or "sin capitan," without a captain. She was known for marathon live shows that left audiences exhilarated and exhausted; by the fifth hour of one recent performance, she was drinking straight from a tequila bottle and launching into a cover of "I Will Survive."


In a witty and sometimes baffling stew of Spanish and English, she sang about her three husbands, about drug traffickers, in tribute to her father, in tribute to her gynecologist.


She became, in a most unlikely way, a feminist hero among Latin women in Mexico and the United States and a powerful player in a genre of music dominated by men and machismo. Regional Mexican music styles had long been seen as limiting to artists, but Rivera shrugged off the labels and brought traditional-laced music — some of which sounded perilously close to polka — to a massive pop audience.





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What Should We Name NASA's New Mars Rover?



With the monumental success of NASA’s Curiosity rover, the agency recently decided to build a younger sibling for the probe out of spare parts.


During a surprise press conference on Dec. 4, NASA associate administrator of science John Grunsfeld announced plans for the new rover that will launch to Mars in 2020. Some in the scientific community reacted by wondering if NASA was completely addicted to Mars, blind to the fact that there are other planets in the solar system. But most are firmly behind the new rover, with folks already rallying around the idea that it will take the first step in a long-held dream of the planetary science community, a Mars sample-return mission.


The public reaction ranged from excitement (“Awesome, another rover!”) to jaded indifference (“Big whoop, another rover.”). Twitter had a field day coming up with silly names for the as-yet nameless rover, many of which were collected under the hashtag #newmarsrovernames. While NASA will no doubt sponsor a contest for young students to christen the probe, that doesn’t mean we can’t have some fun in the meantime.


Here we’ve collected some of the best online responses to NASA’s big announcement. Take a look and vote on which one you think is best below.



Punny Names


Just about everyone and their robot dog suggested a pun, with the number one choice being “Red” as in “Red Rover.” On the other hand, Curiosity is getting a little brother, so what could be more appropriate than Brover? Several folks wanted NASA to embrace the robot’s freedom of sexual expression with the name Bi-Curiosity. And a good number of names played off the idea of curiosity and its feline-murdering ways with The Cat.


Many humorous suggestions centered on the fact that the new rover would be very similar to the old one, with names like Mimicry, Accompany, Supplantation, I’m Curious Too, and the mouthful Revor, Son of Rover, Picker-upper-er of Dirt and Hopefully Other Stuff.


Sarcastic Names


Our favorite online Curiosity doppelganger @SarcasticRover led the charge on curmudgeonly names, writing “How about “Apathy” – young people love that, right?” on Twitter shortly after the announcement.


A great number of the public seemed to favor Redundancy, though Mediocrity, Indifference, and Superfluous made appearances on the internet as well. One Twitter user best summed up these folks, suggesting we call the new rover Meh.


Geeky Names


You can always count on space geeks to be geeky. We got a few mentions of Sagan for the scientist fanboys out there and Serenity for the Joss Whedon acolytes. Stephen Colbert also got a mention with Colbert Rides Again, a possible reference to the man’s namesake treadmill on the International Space Station.


A few people picked up on NASA’s job creator obligations and singular Mars focus, suggesting Job Security and I Should Be On Titan.


Positive Names


Not all suggestions centered on fun and games. The new rover is expected to be just as popular and inspirational as the last and at least one Twitter user threw down a list of beautiful names such as Serendipity, Vitality, Veracity, Agility, Infinity, Audacity, and Tenacity.


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Tech guru McAfee’s legal appeals win him respite in Guatemala






GUATEMALA CITY (Reuters) – U.S. software pioneer John McAfee, facing deportation from Guatemala to Belize to answer questions over the death of a neighbor, has bought himself some time with legal appeals, the Guatemalan government said on Sunday.


McAfee’s lawyers have filed a request with a local court to grant him leave to stay in Guatemala until his legal appeals against deportation have been settled, which could take months.






“The government of Guatemala respects the courts and we have to wait for them to make a decision,” said Francisco Cuevas, a spokesman for the Guatemalan government.


The government initially said it would deport him straight away after rejecting McAfee’s request for asylum on Thursday.


Guatemala has been holding the former Silicon Valley millionaire since he was arrested on Wednesday for illegally entering the country with his 20-year-old Belizean girlfriend.


Officials in Belize want to question McAfee as a “person of interest” in the killing of fellow American Gregory Faull, his neighbor on the Caribbean island of Ambergris Caye.


The court has up to 30 days to rule on his request, but McAfee’s lawyers said on Sunday they expect a ruling in the American’s favor as early as Monday.


“We are filing a series of papers with the court to attempt to keep me here long enough for the world to see the injustice of sending me back to Belize,” McAfee said in an online news conference on Sunday evening.


McAfee has been evading Belizean officials for nearly a month, saying he fears they want to kill him, and that he is being persecuted for speaking out about corruption in the country’s ruling party. Belize’s prime minister has rejected McAfee’s claims, calling him paranoid and “bonkers.”


McAfee’s attorney, Telesforo Guerra, said that if his request with the court is successful, McAfee would be allowed to stay in the country until the legal suits have been resolved.


His lawyers have filed several injunctions against government officials, alleging McAfee’s rights were violated because his asylum request was not given proper consideration.


McAfee said on Saturday he wanted to return to the United States, and Guerra said he had filed a motion that would require Guatemalan authorities to deport him there and not to Belize.


The eccentric tech pioneer, who made his fortune from the anti-virus software bearing his name, has been chronicling life on the run in a blog, www.whoismcafee.com.


(Editing by Dave Graham; editing by Todd Eastham)


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News Analysis: A Debate on Coated Aspirins and Aspirin Resistance





Millions of Americans take low-dose aspirin every day to prevent heart attacks and strokes. But a study published last week challenges some cherished beliefs about the familiar remedy, leaving some consumers to wonder if they should throw out their coated pills and others concerned that they unnecessarily may be taking expensive substitutes.




The study, published in the journal Circulation, by researchers at the University of Pennsylvania, tested 400 healthy people for evidence that aspirin did not work in them, a phenomenon called “aspirin resistance.” Aspirin prevents blood platelets from sticking together, which can lead to heart attacks and strokes. Previous studies have estimated that anywhere from 5 to 40 percent of the population is resistant to aspirin’s effects.


But the study essentially found that the condition doesn’t exist: they could not document a single case of true aspirin resistance in their sample. What had appeared to be aspirin resistance, they said, actually was caused by the coating commonly used on aspirin pills intended to protect the stomach. The coating slowed the drug’s absorption into the body.


The study didn’t evaluate whether coated aspirin was less likely to prevent heart attacks or strokes, said Dr. Garret FitzGerald, one of the authors. And people who took the coated aspirin in his study eventually showed a response to it.


But people who seek out coated aspirin may be doing so unnecessarily, he said, especially since previous studies have not consistently shown that the coating even prevents gastric problems.


“There’s no rationale for you to be on coated aspirin,” said Dr. FitzGerald, who is a cardiologist and chairman of pharmacology at the University of Pennsylvania.


Some cardiologists have begun advising patients to seek out uncoated aspirin because other studies have suggested that the uncoated type may be more effective. But finding it isn’t so easy. Even cheaper store brands, like those sold by CVS and Wal-Mart, come with a so-called enteric coating. One of the few uncoated aspirins on the market is St. Joseph’s chewable variety — the old orange-flavored baby aspirin.


But other experts, like Dr. Steven E. Nissen, a cardiologist at the Cleveland Clinic, see no real harm in taking coated aspirin, which is cheap and readily available. Many major studies of aspirin have been conducted using the coated variety.


The new study also calls into question the very idea of aspirin resistance. Testing for the condition became more widespread in the early 2000s, as expensive prescription alternatives like the blood thinner Plavix (also called clopidogrel) gained popularity. Many cardiologists suspected that the timing was not a coincidence.


“Before clopidogrel, we had never heard of aspirin resistance,” said Dr. Sanjay Kaul, a cardiologist at Cedars-Sinai Medical Center in Los Angeles. “It seemed to be that this was driven mostly by marketing considerations.” The new study raises the possibility that many patients may have been falsely told that aspirin doesn’t work on them, Dr. Kaul and other experts said.


The University of Pennsylvania study was partially financed by Bayer, the world’s largest manufacturer of branded aspirin, much of which is coated. In a statement, Bayer challenged some of the study’s conclusions and methods, and also said there was evidence that the enteric coating can reduce gastric side effects.


Critics of Dr. FitzGerald’s study also argue that he should have studied aspirin resistance in patients with conditions like heart disease, rather than in healthy people.


But even these critics acknowledge that testing for resistance is probably not worthwhile. Dr. Nissen, who is critical of Dr. FitzGerald’s study, doesn’t test his patients for aspirin resistance. But he said he would be reluctant to switch a patient from another drug back to aspirin now if a test had previously shown they were aspirin-resistant. Changing treatments is always risky, he said.


“If the patient is not bleeding, is not having a complication, am I going to take it away?” Dr. Nissen wondered. “That’s the dilemma we face.”


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Euro Watch: Italian Political Turmoil Weighs on Markets





ROME — Italian bond and stock prices fell on Monday after a weekend of political turmoil in Italy gave rise to fears that the country was headed for renewed instability.




Shares of Italian banks, which are big holders of their government’s bonds, were among the hardest hit.


The action came on the first day of trading after Prime Minister Mario Monti said over the weekend that he would soon step down after Silvio Berlusconi’s party pulled its support from the government. Mr. Berlusconi, Mr. Monti’s predecessor, has said that he will run again for prime minister.


Mr. Berlusconi, a four-time prime minister, left office a year ago as markets pushed Italy to the brink of financial collapse. Mr. Monti, an economist who was appointed as his temporary successor, has restored Italy’s credibility with investors, who have given the country a break on its borrowing costs. But those gains have come at the cost of painful austerity measures that have given Mr. Berlusconi an opening to attack.


The Milan benchmark index, MIB, fell more than 2 percent on Monday. Italian banks, which as big holders of government bonds remain sensitive to declines in the prices of those bonds, were among the big losers. Intesa Sanpaolo, the most active stock, fell 5.7 percent, as did Unicredit.


Mr. Monti, who joined other leaders in Oslo on Monday to receive the Nobel Peace Prize awarded to the European Union, said at a news conference that the market reactions “need not be dramatized.”


“I am confident that the Italian elections,” he said, will result in a government “that will be responsible and oriented toward the E.U. and this will be in line with efforts the Italian government has made so far.”


The decline in bond prices sent their yields, or interest rates, higher — an indicator of the Italian government’s borrowing costs. The spread between interest rates on Italian 10-year sovereign bonds and equivalent German securities, the European benchmark for safety, grew to 3.5 percentage points on Monday. That was up from 3.25 points late Friday, suggesting that investors were growing more wary of holding Italian debt.


The Italian 10-year bonds, for which the yield spiked to a dangerous high above 7 percent this year, ended Monday’s trading at 4.8 percent, up 29 basis points. A basis point is one-hundredth of a percent.


Bonds of Spain, which is the other big economy of concern in the euro zone, also came under renewed pressure on Monday, following Mr. Monti’s announcement.


A barometer of euro zone blue-chip stocks, the Euro Stoxx 50 index, fell 0.2 percent.


A dismal economic report on Monday served as a reminder that despite Mr. Monti’s success with investors, the real economy continues to suffer. Italian industrial production fell a seasonally adjusted 1.1 percent in October from September, and by 6.2 percent from a year earlier, Istat, the national statistics agency, reported from Rome.


Some analysts said they believed that Mr. Berlusconi’s re-emergence as a political leader had as much to do with spooking investors as Mr. Monti’s unexpected decision to resign. Nicholas Spiro, managing director of Spiro Sovereign Strategy, a research firm, wrote Monday in a note that Mr. Berlusconi remained “the bogeyman of investors,” who “epitomizes the dysfunctional nature of Italian politics.”


Angela Merkel, the German chancellor, was to meet on Monday with Mr. Monti on the sidelines of the Nobel ceremony, said Georg Streiter, a spokesman for the chancellor.


Ms. Merkel pushed to have Mr. Monti succeed Mr. Berlusconi. But she ended up facing Mr. Monti’s own economic reform ideas, which focused more on growth and job creation than the austere fiscal discipline championed by Ms. Merkel.


As a rule, the German government does not comment on its partners’ domestic politics, but Foreign Minister Guido Westerwelle warned that an attempt to scale back Italy’s reform push could result in further destabilization in the euro zone.


“Italy cannot remain stagnant on two-thirds of its reform process,” Mr. Westerwelle said through a spokesman. “This would throw not only Italy, but the rest of Europe, into turbulence.”


On Monday, the interest rate spread of Spanish 10-year bonds over equivalent German bonds rose to 4.27 percentage points from 4.16 points on Friday. The yield on the benchmark Spanish 10-year rose 10 basis points to 5.5 percent; it reached 7.1 percent in July amid concerns that Spain would be forced into a full bailout after having to negotiate a €100 billion, or $129 billion, rescue package for its banks in June.


Luis de Guindos, the Spanish economy minister, warned that Italy’s political turmoil would have an impact on his country.


“When doubts emerge over the stability of a neighboring country like Italy, which is also seen as vulnerable, there’s an immediate contagion for us,” he said Monday morning on Spanish national radio.


Asked whether Spain would itself seek further European rescue funding, he instead said, “The help that Spain needs is that the doubts over the future of the euro be removed.”


Speaking before the Nobel ceremony on Monday, the European Commission president, José Manuel Barroso, said Italy must “continue on the road of structural reforms.” The elections, Mr. Barroso said on Sky News, “must not be used to postpone reforms.”


David Jolly reported from Paris. Raphael Minder contributed reporting from Madrid and Melissa Eddy from Berlin.


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3 killed, 4 wounded in Tulare County shooting









Three people were fatally shot and four others wounded, including two young children, Saturday night on the Tule River Reservation in Tulare County, authorities said.

The suspect, who fled with his two young daughters, was later shot by sheriff’s deputies and taken into custody, according to the Tulare County Sheriff’s Department. The two girls, who were among those shot, were rescued.

The incident began about 7:45 p.m. when the Sheriff’s Department received a 911 call about shots fired in the 100 block of Chimney Road of the Tule River Indian Reservation about 60 miles northeast of Bakersfield, according to a Sheriff’s Department statement.

In a trailer on the property, deputies discovered an adult male and an adult female who had been fatally shot, authorities said. A male juvenile who suffered a gunshot wound was transported to a hospital. 

At a shed on the property, deputies found another male victim who had been fatally shot, authorities said.

The suspect, identified as Hector Celaya, 31, of the Tule River Indian Reservation, fled the scene in a Jeep Cherokee with his two daughters, Alyssa, 8, and Linea, 5, authorities said. An Amber Alert was issued around 11 p.m.

Detectives used Celaya’s cellphone to locate him.

A deputy spotted the vehicle and after failing to make a traffic stop, a slow-speed pursuit began, authorities said.

The suspect eventually stopped and fired his weapon at deputies, who returned fire and struck the suspect twice, seriously wounding him, authorities said.

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Wired Science Space Photo of the Day: Star Formation in Carina











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British TV astronomer Patrick Moore dies






LONDON (Reuters) – British astronomer Patrick Moore, who helped map the moon and inspired generations of star gazers with decades of television broadcasts, died on Sunday aged 89.


Moore presented BBC television‘s landmark “The Sky at Night” program for more than 50 years, making him the longest-running presenter of a single show in broadcasting history.






His old-fashioned appearance and rapid-fire delivery endeared him to television viewers and captured the imagination of future astronomers who paid tribute to the presenter and prolific author.


“Patrick would just sit in front of the camera for a whole episode … and just tell you about a constellation, about the stars, their names, their history,” British astronomer David Whitehouse told Sky News.


“It was captivating and the best example of communication and an expert sharing his enthusiasm that I have ever experienced.”


A space enthusiast from his early childhood, Moore’s television career coincided with the start of the space race between Russia and the United States.


“He was broadcasting before we actually went into space and he saw a change in our understanding of the universe,” British space scientist Maggie Aderin-Pocock told the BBC.


Moore, rarely seen without his trademark monocle, was also an enthusiastic musician and xylophone player and once accompanied a violin-playing Albert Einstein on the piano.


He never studied for a degree, building up his expertise through his own, single-minded enthusiasm, constructing an observatory in the garden of his southern England home.


His television show marked many astronomical landmarks, and he was broadcasting live when the first picture of the far side of the moon were returned by a Russian satellite.


Television schedulers were not always sympathetic to the significance of developments in space.


During the NASA Apollo 8 mission, Moore told viewers they were about to hear the voices of first men round the Moon in “one of the greatest moments in human history,” only to be interrupted by BBC switching the broadcast to a daily children’s show.


(Reporting by Tim Castle; Editing by Andrew Heavens)


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New Taxes to Take Effect to Fund Health Care Law





WASHINGTON — For more than a year, politicians have been fighting over whether to raise taxes on high-income people. They rarely mention that affluent Americans will soon be hit with new taxes adopted as part of the 2010 health care law.




The new levies, which take effect in January, include an increase in the payroll tax on wages and a tax on investment income, including interest, dividends and capital gains. The Obama administration proposed rules to enforce both last week.


Affluent people are much more likely than low-income people to have health insurance, and now they will, in effect, help pay for coverage for many lower-income families. Among the most affluent fifth of households, those affected will see tax increases averaging $6,000 next year, economists estimate.


To help finance Medicare, employees and employers each now pay a hospital insurance tax equal to 1.45 percent on all wages. Starting in January, the health care law will require workers to pay an additional tax equal to 0.9 percent of any wages over $200,000 for single taxpayers and $250,000 for married couples filing jointly.


The new taxes on wages and investment income are expected to raise $318 billion over 10 years, or about half of all the new revenue collected under the health care law.


Ruth M. Wimer, a tax lawyer at McDermott Will & Emery, said the taxes came with “a shockingly inequitable marriage penalty.” If a single man and a single woman each earn $200,000, she said, neither would owe any additional Medicare payroll tax. But, she said, if they are married, they would owe $1,350. The extra tax is 0.9 percent of their earnings over the $250,000 threshold.


Since the creation of Social Security in the 1930s, payroll taxes have been levied on the wages of each worker as an individual. The new Medicare payroll is different. It will be imposed on the combined earnings of a married couple.


Employers are required to withhold Social Security and Medicare payroll taxes from wages paid to employees. But employers do not necessarily know how much a worker’s spouse earns and may not withhold enough to cover a couple’s Medicare tax liability. Indeed, the new rules say employers may disregard a spouse’s earnings in calculating how much to withhold.


Workers may thus owe more than the amounts withheld by their employers and may have to make up the difference when they file tax returns in April 2014. If they expect to owe additional tax, the government says, they should make estimated tax payments, starting in April 2013, or ask their employers to increase the amount withheld from each paycheck.


In the Affordable Care Act, the new tax on investment income is called an “unearned income Medicare contribution.” However, the law does not provide for the money to be deposited in a specific trust fund. It is added to the government’s general tax revenues and can be used for education, law enforcement, farm subsidies or other purposes.


Donald B. Marron Jr., the director of the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, said the burden of this tax would be borne by the most affluent taxpayers, with about 85 percent of the revenue coming from 1 percent of taxpayers. By contrast, the biggest potential beneficiaries of the law include people with modest incomes who will receive Medicaid coverage or federal subsidies to buy private insurance.


Wealthy people and their tax advisers are already looking for ways to minimize the impact of the investment tax — for example, by selling stocks and bonds this year to avoid the higher tax rates in 2013.


The new 3.8 percent tax applies to the net investment income of certain high-income taxpayers, those with modified adjusted gross incomes above $200,000 for single taxpayers and $250,000 for couples filing jointly.


David J. Kautter, the director of the Kogod Tax Center at American University, offered this example. In 2013, John earns $160,000, and his wife, Jane, earns $200,000. They have some investments, earn $5,000 in dividends and sell some long-held stock for a gain of $40,000, so their investment income is $45,000. They owe 3.8 percent of that amount, or $1,710, in the new investment tax. And they owe $990 in additional payroll tax.


The new tax on unearned income would come on top of other tax increases that might occur automatically next year if President Obama and Congress cannot reach an agreement in talks on the federal deficit and debt. If Congress does nothing, the tax rate on long-term capital gains, now 15 percent, will rise to 20 percent in January. Dividends will be treated as ordinary income and taxed at a maximum rate of 39.6 percent, up from the current 15 percent rate for most dividends.


Under another provision of the health care law, consumers may find it more difficult to obtain a tax break for medical expenses.


Taxpayers now can take an itemized deduction for unreimbursed medical expenses, to the extent that they exceed 7.5 percent of adjusted gross income. The health care law will increase the threshold for most taxpayers to 10 percent next year. The increase is delayed to 2017 for people 65 and older.


In addition, workers face a new $2,500 limit on the amount they can contribute to flexible spending accounts used to pay medical expenses. Such accounts can benefit workers by allowing them to pay out-of-pocket expenses with pretax money.


Taken together, this provision and the change in the medical expense deduction are expected to raise more than $40 billion of revenue over 10 years.


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As Recovery Inches Ahead, Banks Face a New Reckoning


The nation’s largest banks are facing a fresh torrent of lawsuits asserting that they sold shoddy mortgage securities that imploded during the financial crisis, potentially adding significantly to the tens of billions of dollars the banks have already paid to settle other cases.


Regulators, prosecutors, investors and insurers have filed dozens of new claims against Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and others, related to more than $1 trillion worth of securities backed by residential mortgages.


Estimates of potential costs from these cases vary widely, but some in the banking industry fear they could reach $300 billion if the institutions lose all of the litigation. Depending on the final price tag, the costs could lower profits and slow the economic recovery by weakening the banks’ ability to lend just as the housing market is showing signs of life.


The banks are battling on three fronts: with prosecutors who accuse them of fraud, with regulators who claim that they duped investors into buying bad mortgage securities, and with investors seeking to force them to buy back the soured loans.


“We are at an all-time high for this mortgage litigation,” said Christopher J. Willis, a lawyer with Ballard Spahr.


Efforts by the banks to limit their losses could depend on the outcome of one of the highest-stakes lawsuits to date — the $200 billion case that the Federal Housing Finance Agency, which oversees the housing twins Fannie Mae and Freddie Mac, filed against 17 banks last year, claiming that they duped the mortgage finance giants into buying shaky securities.


Last month, lawyers for some of the nation’s largest banks descended on a federal appeals court in Manhattan to make their case that the agency had waited too long to sue. A favorable ruling could overturn a decision by Judge Denise L. Cote, who is presiding over the litigation and has so far rejected virtually every defense raised by the banks, and would be cheered in bank boardrooms. It could also allow the banks to avoid federal housing regulators’ claims.


At the same time, though, some major banks are hoping to reach a broad settlement with housing agency officials, according to several people with knowledge of the talks. Although the negotiations are at a very tentative stage, the banks are broaching a potential cease-fire.


As the housing market and the nation’s economy slowly recover from the 2008 financial crisis, Wall Street is vulnerable on several fronts, including tighter regulations assembled in the aftermath of the crisis and continuing investigations into possible rigging of a major international interest rate. But the mortgage lawsuits could be the most devastating and expensive, bank analysts say.


“All of Wall Street has essentially refused to deal with the real costs of the litigation that they are up against,” said Christopher Whalen, a senior managing director at Tangent Capital Partners. “The real price tag is terrifying.”


Anticipating painful costs from mortgage litigation, the five major sellers of mortgage-backed securities set aside $22.5 billion as of June 30 just to cushion themselves against demands that they repurchase soured loans from trusts, according to an analysis by Natoma Partners.


But in the most extreme situation, the litigation could empty even more well-stocked reserves and weigh down profits as the banks are forced to pay penance for the subprime housing crisis, according to several senior officials in the industry.


There is no industrywide tally of how much banks have paid since the financial crisis to put the mortgage litigation behind them, but analysts say that future settlements will dwarf the payouts so far. That is because banks, for the most part, have settled only a small fraction of the lawsuits against them.


JPMorgan Chase and Credit Suisse, for example, agreed last month to settle mortgage securities cases with the Securities and Exchange Commission for $417 million, but still face billions of dollars in outstanding claims.


Bank of America is in the most precarious position, analysts say, in part because of its acquisition of the troubled subprime lender Countrywide Financial.


Last year, Bank of America paid $2.5 billion to repurchase troubled mortgages from Fannie Mae and Freddie Mac, and $1.6 billion to Assured Guaranty, which insured the shaky mortgage bonds.


But in October, federal prosecutors in New York accused the bank of perpetrating a fraud through Countrywide by churning out loans at such a fast pace that controls were largely ignored. A settlement in that case could reach well beyond $1 billion because the Justice Department sued the bank under a law that could allow roughly triple the damages incurred by taxpayers.


Bank of America’s attempts to resolve some mortgage litigation with an umbrella settlement have stalled. In June 2011, the bank agreed to pay $8.5 billion to appease investors, including the Federal Reserve Bank of New York and Pimco, that lost billions of dollars when the mortgage securities assembled by the bank went bad. But the settlement is in limbo after being challenged by investors. Kathy D. Patrick, the lawyer representing investors, has said she will set her sights on Morgan Stanley and Wells Fargo next.


Of the more than $1 trillion in troubled mortgage-backed securities remaining, Bank of America has more than $417 billion from Countrywide alone, according to an analysis of lawsuits and company filings. The bank does not disclose the volume of its mortgage litigation reserves.


“We have resolved many Countrywide mortgage-related matters, established large reserves to address these issues and identified a range of possible losses beyond those reserves, which we believe adequately addresses our exposures,” said Lawrence Grayson, a spokesman for Bank of America.


Adding to the legal fracas, the New York attorney general, Eric T. Schneiderman, accused Credit Suisse last month of perpetrating an $11.2 billion fraud by deceiving investors into buying shoddy mortgage-backed securities. According to the complaint, the bank dismissed flaws in the loans packaged into securities even while assuring investors that the quality was sound. The bank disputes the claims.


It is the second time that Mr. Schneiderman — who is also co-chairman of the Residential Mortgage-Backed Securities Working Group, created by President Obama in January — has taken aim at Wall Street for problems related to the subprime mortgage morass. In October, he filed a civil suit in New York State Supreme Court against Bear Stearns & Company, which JPMorgan Chase bought in 2008. The complaint claims that Bear Stearns and its lending unit harmed investors who bought mortgage securities put together from 2005 through 2007. JPMorgan denies the allegations.


Another potentially costly headache for the banks are the demands from a number of private investors who want the banks to buy back securities that violated representations and warranties vouching for the loans.


JPMorgan Chase told investors that as of the second quarter of this year, it was contending with more than $3.5 billion in repurchase demands. In the same quarter, it received more than $1.5 billion in fresh demands. Bank of America reported that as of the second quarter, it was dealing with more than $22 billion in unresolved demands, more than $8 billion of which were received during that quarter.


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