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Joined Nov 11, 2007
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Sheila Bair: Banks Still Need More Capital as They are Still Too Levered

“While 29 out of 30 big banks passed the Federal Reserve’s annual stress test, former FDIC chair Sheila Bair says banks still have plenty of work to do.

The country’s largest banks “are still too levered,” she told Yahoo before the stress test results were released.

“Capital levels have improved since prior to the [financial] crisis, but loan-loss reserves are down significantly as banks keep releasing reserves to drive earnings. They’ll tell you ‘credit quality is getting better, the economy is on the upswing.’ I don’t know about that.”

Banks need more capital and should stop releasing reserves, said Bair, now a director at Banco Santander.

She also expressed concern about off-balance sheet assets at banks with big trading operations, which would include JPMorgan Chase and Goldman Sachs….”

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Renewed Signs of a Slowdown in China Send Global Markets Lower, U.S. Futures Buck the Trend

“(Reuters) – European shares edged lower on Monday after further signs of a slowdown in China, although robust data from France and Germany limited their decline.

The euro briefly strengthened against the dollar and German Bund futures extended losses after data compiler Markit said its March flash composite purchasing managers’ index for France jumped to 51.6 from 47.9 last month.

However, the single currency largely gave up its gains after figures showed private sector growth slowed in Germany. Data from the euro zone as a whole, while suggesting the recovery was becoming more broad-based, dipped compared with February.

Having lagged the recent recovery in much of the euro zone, the French index surged through the 50-point threshold dividing contraction from expansion to hit its highest since August 2011.

However, the data was not enough to lift European shares. The FTSEurofirst 300 index .FTEU3 fell 0.2 percent as investors focused on a fall in Chinese business activity.

The flash Markit/HSBC China Purchasing Manager index fell to an eight-month low of 48.1 in March from February’s 48.5. The index has been below 50 since January.

“As the data shows this morning, China’s slowdown is sharper than what most people had expected, which fuels worries about the impact on global growth,” Philippe de Vandiere, analyst at Altedia Investment Consulting in Paris, said.

“But Chinese authorities have plenty of tools to avoid a hard landing, and we know that the country’s transition to an economic model more focused on consumer spending will lower its growth rate a bit, so no big concern here.”

A string of weak numbers has reinforced concerns over a slowdown in the world’s second largest economy, though the impact on Asian shares was limited as the data raised expectations the Chinese government could stimulate the economy….”

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Russian Article From 2008: “Obama Will Trigger World War III Starting From the Crimea Peninsula”

“Translation from google translate:

Obama begins the third world in the Crimea Remember this page!

December 26 , 16:58 | Arseny Palkin

Lenty.ru: Japan Crimea is not a hindrance
REGNUM: Yatsenuk forced to speak in Russian
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Under the new U.S. President Barack Obama in the Crimea will be implemented scenario of armed conflict. ” It is the American scenario , and under Obama the probability is much higher than under McCain, ” – said at a roundtable in Kiev, Russian political scientist Andrei Okara , said ” New Region ” .
Expert explains : “It became clear when it was announced that what people will represent the Obama team . These are people whose professional registration – Wall Street. These people are engaged in a technology called ” technologies of controlled chaos . ”

According to Okara , after Georgia area ” controlled chaos ” in the first place , was to be the Ukraine, namely – Crimea . ” This is the point of a fire , including global conflicts that escalate into a world war , which, unfortunately , is one of the scenarios , the implementation of which at the moment from the real ” – says the analyst.

His colleague from the Ukrainian Institute of Russia Andrey Blinov agree that Russia is not interested in such a conflict . ” When people talk about the war in the Crimea or in the hamlet St. Michael , I believe that this scenario is marginal . A question more active economic participation of Russian capital is very likely. But it depends on when the crisis is over . If in 2010 , while Russia will be much weaker , “- said the expert .”

 

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James Rickards: International Monetary System Headed for Collapse

“The prognosis for the global financial system isn’t bright, says James Rickards, senior managing director of Tangent Capital Partners and author of the upcoming book, “The Death of Money: The Coming Collapse of the International Monetary System.”

“The international monetary system has actually collapsed three times in the past 100 years: 1914, 1939, and 1971. So these things do happen,” he told Kitco News.

“I’m just trying to prepare the reader for first of all, the fact that it’s coming, and secondly as an investor what you can do now to protect yourself.”

Rickards also said the Federal Reserve doesn’t object to a rising gold price as long as the move is orderly. A gradual move upward would increase inflationary expectations, which is now a goal of the Fed, he said.

The central bank probably doesn’t focus much on gold, Rickards said. “Does [Fed Chair] Janet Yellen wake up in the morning and look at the price of gold first thing? Maybe she should. She probably doesn’t,” he said…..”

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The White House States Russia May Be Getting Ready to Invade the Ukraine

“Russian forces gathering on the border with eastern Ukraine may be poised to invade, the White House warned on Sunday, as the government in Kiev said that the prospect of war with Moscow was continuing to grow after the annexation of Crimea.

Speaking after Nato’s top commander in Europe voiced alarm about the size and preparedness of the Russian troop buildup, President Barack Obama’s deputy national security adviser, Tony Blinken, said President Vladimir Putin may indeed be readying further action.

“It’s deeply concerning to see the Russian troop buildup on the border,” Blinken told CNN. “It creates the potential for incidents, for instability. It’s likely that what they’re trying to do is intimidate the Ukrainians. It’s possible that they’re preparing to move in.”

Thousands of Russian troops held a military exercise near the border even before Putin last week formally annexed Ukraine’s southern Crimea region following a referendum – condemned as illegal by western governments – that endorsed unification with Russia.

General Philip Breedlove, Nato’s supreme allied commander in Europe, said earlier on Sunday that the Russian military force gathered near the Ukrainian border was “very, very sizeable and very, very ready” and could even pose a threat to Moldova, on the other side of the country.

Andriy Deshchytsia, Ukraine’s acting foreign minister, said the chances of all-out war between his government and Moscow “are growing”, adding: “The situation is becoming even more explosive than it was a week ago.”

Deshchytsia told ABC News: “We are ready to respond. The Ukraine government is trying to use all the peaceful diplomatic means … to stop Russians, but the people are also ready to defend their homeland.

“At this moment, when Russian troops would be invading the eastern region,” Deshchytsia went on, “it would be difficult for us to ask people who live there not to respond on this military invasion”.

Russian forces in the Crimean city of Belbek on Saturday aggressively seized a military base that was one of the last strongholds of the Ukrainian military in the region. Moscow, meanwhile, allowed civilian observers from the Organisation for Security and Cooperation in Europe (OSCE) to begin monitoring elsewhere in Ukraine….”

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Documentary: The Age of Big Data

[youtube://http://www.youtube.com/watch?v=0wDt7XRux-A 450 300]

Internet-Censorship-CISPA-Newest-Cyber-Security-Bill-300x194

 

[youtube://http://www.yotube.com/watch?v=Igt-jW4e8ts 450 300]

 

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29 0f 30 Banks Pass the Fed’s Stress Test

“WASHINGTON—The Federal Reserve’s annual test of big banks’ financial health showed the largest U.S. firms are strong enough to withstand a severe economic downturn, a sign that many will get the green light soon to reward investors by raising dividends and buying back shares.

The Fed said 29 of the 30 largest institutions have enough capital to continue lending even when faced with a hypothetical jolt to the U.S. economy lasting into 2015, including a severe drop in housing prices and a spike in unemployment. The Fed’s annual “stress tests” are designed to ensure large banks can withstand severe losses during times of market turmoil.

Only Zions BancorpZION +3.19% a regional lender based in Salt Lake City, posted capital levels during the two-year-downturn scenario that didn’t meet the Fed’s minimum standards. The Fed said Zions had a Tier 1 common capital ratio of 3.5%, below the 5% level the Fed views as a minimum allowance. The ratio measures high-quality capital as a percentage of risk-weighted assets such as mortgages, commercial loans and securities.

The results could buttress the desire of banks—which have seen their profits soar amid an improving economy and severe cost cutting—to return more of that income to shareholders. The six biggest banks earned $76 billion in 2013, just $6 billion shy of their collective all-time high. All U.S. banks earned a record $154.6 billion, according to data compiled by SNL Financial. Some of the biggest financial institutions, including Bank of America Corp.BAC +2.75% and Morgan Stanley,MS +3.08% haven’t boosted dividend payouts since the financial crisis.

The stress-test results will be a factor in the Fed’s decision next week to approve or deny individual banks’ plans for returning billions of dollars to shareholders through dividends or share buybacks. But a good performance on Thursday’s test is no guarantee, since the Fed also will consider more subjective factors such as the strength of a bank’s internal risk management.

On Thursday afternoon, the Fed was expected to privately give banks a preliminary answer on their requests, setting up a week of jockeying for banks that were told “no.” Firms will have until early next week to revise their plans or challenge the Fed’s math before a final decision is issued Wednesday.

Paul Miller, an analyst at FBR Capital Markets, said the results bode well for banks’ approval of capital plans. “There’s nothing in here that I think is a big shocker,” he said. Analysts this year are expecting distributions from banks to be the highest since at least 2007, according to estimates compiled by Thomson Reuters for The Wall Street Journal.

The first stress test took place in the immediate aftermath of the 2008 crisis and helped shore up confidence at a critical juncture for the American financial system. Regulators forced banks to cut their dividends in exchange for billions of dollars in government aid and lenders were prohibited from raising shareholder payouts without U.S. approval.

The Fed said the latest tests show banks are “collectively better positioned” to withstand losses than they were during the financial crisis, after which regulators pushed banks to hold more loss-absorbing capital.

Under the Fed’s “severely adverse” scenario—a deep recession with a rising unemployment rate, steep drop in housing prices and a nearly 50% decline in stock prices over nine quarters—30 banks would have suffered total loan losses of $366 billion, trading losses of $98 billion and a net loss before taxes of $217 billion.

The Fed also raised the bar in this year’s test by….”

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$GS Says Au Will Continuee to Flounder

“One of the star performers of 2014 has been gold.

It started the year around $1200/oz and recently nearly got to $1400/oz before slipping back a bit.

In a new note, Goldman argues that the rise in gold has been driven by three unsustainable factors: Weather-induced economic slowdown in the US, a spike in Chinese demand due to credit concerns, and increased geopolitical tension.

The firm argues that all of these tailwinds will fade and that gold will hit $1050 this year….”

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Is the Collapse of Small Lenders Collateral Damage or a Mathematical Equation ?

“Under the Federal Reserve Act, panics are scientifically created. The present panic is the first scientific one, worked out as we figure a mathematical equation.” ~ Charles Lindbergh

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“Georgia homebuilder Blankenship Homes lost its source of loans for new construction after four local community banks failed since 2009.

“The economy just shut down,” said owner Johnny Blankenship, 54, a builder for more than 30 years in Douglasville, 20 miles west of Atlanta. “We are just starting back to do a few homes. The economy is still very, very slow.”

While the Federal Reserve and U.S. Treasury rescued major banks amid the 2008 financial crisis to avert a meltdown of the nation’s financial system, the bailouts didn’t prevent the collapse of about 500 small lenders. Their disappearance, part of a syndrome of economic weakness, still weighs on growth and employment in dozens of counties across the U.S.

“It will be difficult to fill the void left by failing small banks,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Small bank failures matter a lot to the communities in which they operate, especially in non-urban areas. Small banks are key to small businesses.”

Alert: Stocks to Drop 90%? These 5 Charts Reveal Why… 

Counties that experienced bank failures from 2008 to 2010 saw income growth reduced as much as 1.43 percent, job growth cut as much as 0.5 percentage point and poverty rise as much as 1.4 percent in the following year, Fed economist John Kandrac reported in research presented last October at a community banking conference at the Federal Reserve Bank of St. Louis.

He concluded bank failures had “measurable effects” on economic performance. On average, that meant a drop of as much as $700 in per capita income and a loss of close to 600 jobs in the first year after a failure, Kandrac’s research found.

Small Businesses

The demise of local lenders has inflicted a disproportionate blow on small enterprises, said Mark Gertler, an economist at New York University and co-author of research with former Fed Chairman Ben S. Bernanke on how bank failures contributed to the severity of the Great Depression. Community banks provide almost half of small loans, those under $1 million, to farms and businesses, according to a 2012 Federal Deposit Insurance Corp. report.

Bank failures have been more common in four states that experienced real estate booms and busts or had large concentrations of community lenders. Georgia has had the most failures with 88 since September 2007, followed by Florida’s 70, Illinois’s 56 and California’s 39, according to Trepp LLC, a real estate and financial data provider in New York….”

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El-Erian on Yellen Fed Speak

“On the surface, you would have thought that the stock market would have liked the outcome of the Federal Reserve meeting; and you would have expected that front-end interest rates would have been relatively well anchored. Instead, equities sold off while the yield curve flattened as a result of a selloff in shorter maturities.

Why?

Joshua Roberts | Bloomberg | Getty Images
Mohamed El-Erian

In attempting to answer this question, let us start with a quick summary of what the Federal Open Market Committee decided at the end of its two-day meeting:

* As expected, our central bankers continued to taper their experimental purchases of securities, reducing the pace of monthly purchases by another $10 billion. They remain on track to exit quantitative easing fully by the end of the year.

(Read moreFed tapers, backs away from unemployment target)

* To compensate, they strengthened their forward policy guidance in two ways: by replacing the increasingly outmoded and partial 6.5-percent unemployment threshold with a more holistic approach to the labor market; and by making explicit an inflation indicator that is above the current rate.

* They reiterated their intention to keep policy rates floored for quite a while, even after inflation and unemployment are near their “mandated levels.” During her press conference, Janet Yellen stated that the FOMC could keep interest rates lower than “normal values” and that the glide path would be shallower.

(Read moreWhat’s new in the latest Fed statement)

By any measure, this is quite a dovish outcome — overall and relative to expectations. Unambiguously it signals a Fed that remains dedicated to support the economy, and to do so by continuing to use the asset market channel.

So why didn’t markets like it? I would suggest three inter-related possibilities:

Higher uncertainty premiums: The Fed is in the midst of not one but two policy transitions. It is pivoting from reliance on a direct instrument (QE purchases of securities in the marketplace) to an indirect one (forward policy guidance to convince others to devote their balance sheets) — thereby raising effectiveness questions. It is also moving from a readily-observable unemployment threshold to a set of indicators that include qualitative judgments — thereby raising less predictable interpretation questions….”

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The Gradual Erosion of Civil Liberties, Legal Rights and Government Ethics are Connected

“Rather than deal forthrightly with the reality that unrealistic promises made to their employees cannot be honored, local government has pursued a strategy of legalizing looting.

The gradual erosion of civil liberties, legal rights and government ethics are connected: our rights don’t just vanish into thin air, they are expropriated by government: Federal, state and local. Though much is written about the loss of civil liberties at the Federal level, many of the most blatantly illegal power grabs are occurring in local government.

This expropriation is under the radar of the average citizen because the process slowly chips away the fundamentals of legality and justice: bit by bit, due process and the rights of the individual have been eroded by state and local governments until the fundamental Constitutional protections simply cease to exist.

When local government looting is legalized, the entire system is illegal. Here are three recent examples of blatantly illegal looting by local governments.

First up: privatizing the collection of traffic fines and probation to create a modernized debtor’s prison. We turn to The Nation for the story:

The Town That Turned Poverty Into a Prison Sentence Most states shut down their debtors’ prisons more than 100 years ago; in 2005, Harpersville, Alabama, opened one back up.

 

What happened to Ford in the small town of Harpersville was tangled and unconstitutional– but hardly unique. Similar tales have been playing out in more than 1,000 courts across the country, from Georgia to Idaho. In the face of strained budgets and cuts to public services, state and local governments have been stepping up their efforts to ensure that the criminal justice system pays for itself. They have increased fines and court costs, intensified law enforcement efforts, and passed so-called “pay-to-stay” laws that charge offenders daily jail fees. They have also begun contracting with “offender-funded” probation companies like JCS, which offer a particularly attractive solution—collection, at no cost to the court.Harpersville’s experiment with private probation began nearly ten years ago. In Alabama, people know Harpersville best as a speed trap, the stretch of country highway where the speed limit changes six times in roughly as many miles. Indeed, traffic is by far the biggest business in the town of 1,600, where there is little more than Big Man’s BBQ, the Sudden Impact Collision Center and a dollar store.

In 2005, the court’s revenue was nearly three times the amount that the town received from a sales tax, Harpersville’s second-largest source of income. Fines had become key to Harpersville’s development, but it proved difficult to chase down those who did not pay. So, that year, Harpersville decided to follow in the footsteps of other Alabama cities and hire JCS to help collect.

It was a system of extraction and coercion so flagrant that Alabama Circuit Court Judge Hub Harrington likened it to a modern-day “debtors’ prison.”

Her fines for the three charges added up to $2,922, court papers show. Ward sentenced her–and others who said they couldn’t pay their full fines that day– to probation. Once a means of allowing convicted offenders to stay out of jail on the condition of good behavior, probation had now become a court-sanctioned tool for debt collection.

Burdette reported to the JCS office in nearby Childersburg, where she paid her probation officer $100. Of that, $45 went toward her fine, $10 toward a one-time “start-up fee,” and the last $45 went to JCS as a monthly fee for service.

Next up: illegal search and seizure under the pretext of traffic violations. As if “driving while black” isn’t bad enough, now “driving with cash” is pretext enough to be stripped of your rights and your property stolen by local government:

 

Lawsuits over cash seizures settled in Nevada

 

Tan Nguyen of Newport, Calif., and Michael Lee of Denver said in lawsuits filed in U.S. District Court in Reno they were stopped last year on U.S. Interstate 80 near Winnemucca about 165 miles east of Reno under the pretext of speeding. They said they were subjected to illegal searches and told they wouldn’t be released with their vehicles unless they forfeited their cash.The lawsuits claimed the cash seizures were part of a pattern of stopping drivers for speeding as a pretext for drug busts in violation of the Constitution.

Nguyen was given a written warning for speeding but wasn’t cited. As a condition of release, he signed a “property for safekeeping receipt,” which indicated the money was abandoned or seized and not returnable. But the lawsuit says he did so only because Dove threatened to seize his vehicle unless he “got in his car and drove off and forgot this ever happened.”

“He wasn’t charged with anything. He had no drugs in his car. The pretext for stopping him was he was doing 78 in a 75,” John Ohlson told KRNV-TV. “It’s like Jesse James or Black Bart,” he told AP in an interview last week.

The district attorney’s statement said both men were stopped legally and that “every asset that was seized pursuant to those stops was lawfully seized.”

Exhibit # 3: guilty until proven innocent: State of California seizes cash from “suspected” tax evaders with no evidence, no court action, no recourse. I have documented in detail how the jackboot of the State of California has pressed on the necks of thousands of law-abiding citizens whose only crime was moving out of California.

The State of California presumes anyone moving out of the state who still has a source of income in California–for example, a few dollars of interest earned on a bank account–owes California income tax on all their presumed income, even if they have filed income tax returns in another state.

If this isn’t the acme of illegal seizure and denial of basic rights, i.e. presumed innocent until proven guilty, then what is?…..”

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Markets Do Not Trust Yellen as Rates Rise

Janet Yellen said the Federal Reservewasn’t altering policy when it overhauled the way it signals changes in borrowing costs. Investors didn’t buy it.

In her first press conference as Fed chair, Yellen emphasized that dropping a 6.5 percent unemployment threshold for considering an interest-rate increase “does not indicate any change in the committee’s policy intentions.”

Rather than paying heed to Yellen’s assertion, investors seized on an increase in Fed officials’ own interest-rate forecasts and Yellen’s comment that that borrowing costs could start rising “around six months” after it stops buying bonds. Yields on two-year Treasury notes climbed as much as 10 basis points, the most since June 2011.

The market reaction highlights the perils faced by central bankers when they retreat to language investors consider vague after setting precise numerical markers for changes in policy. Lacking specific guidance in the Fed’s policy statement, investors swung toward the next best thing: Fed officials’ own forecasts for the benchmark federal funds rate.

“With the shift to qualitative guidance, the only quantitative metric we have is the fed funds projections from the Fed,” said Dean Maki, chief U.S. economist for Barclays Plc in New York and formerly an economist at the central bank. “So while the statement and Chair Yellen in the press conference said little had changed, the Fed’s projections suggested that there was a notable change in the Fed’s outlook.”

Broad Range

The Federal Open Market Committee said it will no longer link borrowing costs to a specific unemployment rate, saying it would instead consider a broad range of indicators on the labor market, inflation and financial markets.

“We know we’re not close to full employment, not close to an employment level consistent with our mandate, and unless inflation were a significant concern, we wouldn’t dream of raising the federal funds rate-target,” Yellen said at the press conference in Washington…..”

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Fiscal Times: US War on Mortgage Fraud Is a Sham

“The Justice Department’s much ballyhooed battle against mortgage fraud in the years following the 2008 housing meltdown was mostly a sham, with gross exaggerations about its success from top government officials including Attorney General Eric Holder, according to The Fiscal Times.

The department’s own Office of the Inspector General (OIG), an internal agency watchdog, studied the results of the government’s mortgage industry investigations in the wake of the economic disaster that still haunts many Americans.

What the OIG found was that the Justice Department did not assign the high priority to mortgage fraud that was commonly believed, the Times said. To the contrary, the Justice Department’s FBI “ranked mortgage fraud as the lowest ranked criminal threat in its lowest crime category,” according to the OIG.

Editor’s Note: 250% Gains Bagged Using Secret Calendar (See Video)

In fact, through the FBI received $196 million to battle mortgage fraud from 2009 through 2011, the agency actually reduced the number of agents assigned to the matter and the number of pending investigations.

The Fiscal Times reported that “perhaps the most damning finding to emerge” from an OIG audit came at a 2012 news conference in which Holder maintained that 530 people had been charged with mortgage fraud the previous year, including 172 executives, and that 110 civil cases had been launched – a major undertaking involving $1 billion in losses and 73,000 “homeowner victims.

But after months of prodding from the OIG, the Justice Department admitted that only 107 people had been charged with mortgage fraud, and the losses added up to just $95 million…..”

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Putin Announces Procedures to Annex Crimea

“(Reuters) – Russian President Vladimir Putin, defying Ukrainian protests and Western sanctions, told parliament on Tuesday that Russia will move forward with procedures to annex Ukraine’s Crimean region.

Putin signed an order “to approve the draft treaty between the Russian Federation and the Republic of Crimea on adopting the Republic of Crimea into the Russian Federation”. The order indicated the president would sign the treaty with Crimea’s Russian-installed leader, who is in Moscow to request incorporation into Russia, but it gave no date.

The move followed a disputed referendum in Crimea on Sunday, staged under Russian military occupation, in which a Soviet-style 97 percent of voters were declared to have voted to return to Russian rule, after 60 years as part of Ukraine.

By pressing ahead with steps to dismember Ukraine against its will, Putin raised the stakes in the most serious East-West crisis since the end of the Cold War.

But Ukraine’s interim prime minister, Arseniy Yatseniuk, sought to reassure Moscow on two key areas of concern, saying in a televised address delivered in Russian that Kiev was not seeking to join NATO, the U.S.-led military alliance, and would act to disarm Ukrainian nationalist militias.

On Monday, the United States and the European Union imposed personal sanctions on a handful of officials from Russia and Ukraine accused of involvement in Moscow’s military seizure of the Black Sea peninsula, most of whose 2 million residents are ethnic Russians.

Russian politicians dismissed the sanctions as insignificant and a badge of honor. The State Duma, or lower house, adopted a statement urging Washington and Brussels to extend the visa ban and asset freeze to all its members.

Leonid Slutsky, one of the lawmakers on the sanctions list, hailed Crimea’s decision as historic. “Today we see justice and truth reborn,” he said.

Japan joined the mild Western sanctions on Tuesday, announcing the suspension of talks with Russia on investment promotion and visa liberalization.

Putin was to address a special joint session of the Russian parliament on the Crimea issue on Tuesday…..”

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