Friday, July 17, 2009

Altered Readymade: I Sing the Bank Monolithic

Well, I hate to say it, but here we are at death's doorstep - the era of the super banks. When in 1998, Sandy Weill successfully merged his Travelers Group with Citicorp, it was unprecedented for a financial services company in scope and size, bringing together banking and insurance (in "violation" of the Glass Steagall Act of 1933). As gigantic as Citigroup was, there was no way that Weill or any economist could have foreseen what was coming in 2009.

Much like 9/11 paved the way for Cheney to bomb and invade Iraq, EM08 is the petri dish spawning the new super banks. Thus, my worst fears have come true. Conglomeration by the elites - watch out...

Two Giants Emerge From Wall Street Ruins

NY Times

JPMorgan Chase posted a $2.7 billion quarterly profit on Thursday, showing its turnaround.

jp: Yeah, with our money.

Published: July 16, 2009

A new order is emerging on Wall Street after the worst crisis since the Great Depression — one in which just a couple of victors are starting to tower over the handful of financial titans that used to dominate the industry.

On Thursday, JPMorgan Chase became the latest big bank to announce stellar second-quarter earnings. Its $2.7 billion profit, after record gains for Goldman Sachs, underscores how the government’s effort to halt a collapse has also set the stage for a narrowing concentration of financial power.

“One theme here is that Goldman Sachs and JPMorgan really have emerged as the winners, as the last of the survivors,” said Robert Reich, a professor at the University of California, Berkeley, who was secretary of labor in the Clinton administration.

Both banks now stand astride post-bailout Wall Street, having benefited from billions of dollars in taxpayer support and cheap government financing to climb over banks that continue to struggle. They are capitalizing on the turmoil in financial markets and their rivals’ weakness to pull in billions in trading profits.

For the most part, the worst of the financial crisis seems to be over.

jp: Yeah, right. Over thirty states are on the precipice, with Cali - the 6th largest economy in the world - leading the way. Record debt to other countries, record trade deficits, the alt-A and option arm mortgages re-setting, health care a ticking time bomb, credit card debt at a trillion dollars, unemployment well over the "officially" stated 10%, and no end in sight. To say the worst is over is criminal and a lie. Buckle up, people. As we can see in the era of the super banks, we're only at the beginning of this shit storm.

Yet other large banks, including Citigroup and Bank of America, are still struggling to return to health. Both are expected to report a more profitable quarter on Friday, but a spate of management changes and looming losses from credit cards and commercial real estate have thwarted a stronger recovery.

And then there are the legions of regional and small banks that are falling in greater numbers across the country. While many have racked up large losses, they stand to bleed more red ink if the recession wears on. Fifty-three have failed this year, and the Federal Deposit Insurance Corporation is girding for scores to follow.

jp: This is just wrong. Think about it; you're a small credit union who didn't go in for all of the mortgage CDO trickery that the big banks and AIG shitheads gambled on, and yet you stand there and watch as uncle scam throws billions of dollars at them. What kind of message is that sending...?

Uncertainties over the economy mean that Goldman and JPMorgan may be enjoying a fragile dominance, industry experts said. JPMorgan reported big declines in its consumer business on Thursday, and it has set aside more than $30 billion to cover future losses from surging credit card charge-offs and mortgage and home equity losses.

“Nobody is through this until unemployment turns around,” said Moshe Orenbuch, a Credit Suisse banking analyst.

jp Unemployment is just one element. There are many more as cited above.

And if regulation being considered in Washington is passed, banks would face new limits on the amount of their own capital they may trade. That could limit the profits that banks like Goldman and JPMorgan make from their trading businesses, and level the playing field, experts say.

Other former Wall Street stars like Morgan Stanley, which was hurt more by the crisis and has avoided taking big risks in the new era, may also rebound and begin to take on old rivals.

But for now, Goldman Sachs and JPMorgan are surging. “The stronger players are positioned to take advantage of the crisis and they will dominate clearly in the near term,” said James Reichbach, the head of Deloitte’s United States financial practice.

JPMorgan’s renewed strength, like Goldman’s, comes as it vaults ahead of longtime rivals, especially in investment banking, including bond and equity trading, and underwriting debt to help companies issue shares and bonds. Traders took advantage of big market swings and less competition to post big gains in fixed-income and equities.

Michael J. Cavanagh, the chief financial officer at JPMorgan, said its profit and fees from this business were “a record for us in a quarter and a record for anybody at any firm in any quarter.” The bank, he added, was “so very proud of those results.”

jp: Enabled and accomplished with our money.

It has also profited from the demise of weaker banks to enlarge its market share in mortgages and retail banking. On Tuesday, as the CIT Group, a lender to many small businesses, negotiated with the government to avoid collapse, JPMorgan signaled that it was watching.

“It would be an opportunity for us in these states if CIT was unable to continue lending to borrowers,” Tom Kelly, a spokesman at Chase, was quoted by Dow Jones Newswires as saying.

jp: There you go; out with the small, in with the big bully jerkoffs.

And revenue from the retail bank Washington Mutual, which JPMorgan acquired last fall, is starting to help earnings. Morgan is also profiting from its government-assisted purchase of Bear Stearns last year. JPMorgan is now No. 1 globally in equity and debt capital markets, according to Dealogic.

Amid the surge, Jamie Dimon, JPMorgan’s chief executive, has cemented his status as one of America’s most powerful and outspoken bankers. He has vocally distanced himself from the government’s financial support, calling the $25 billion in taxpayer money the bank received in December a “scarlet letter” and pushing with Goldman Sachs, Morgan Stanley and others to repay the money swiftly. Those three banks repaid the money last month.

jp: How much interest did we get?

Yet JPMorgan’s transformation into one of the industry’s strongest players is underpinned by the shelter it received from the government: The bank used the money as a cushion until it was able to raise new capital. “There is no doubt all of us benefited from the government help — all of us,” said a senior executive at another Wall Street bank.

A spokesman for JPMorgan said the bank accepted aid at the request of the government but would not comment beyond that.

jp: Why would you comment on free money bilked at gunpoint from innocent people who have no say?

Few banks have undergone such a turnaround.

jp: Of course; that's what conglomeration is all about, dummy. The mantra was, "Too big to fail," and yet what does uncle scam do? HE GOES ALL IN WITH BIGGER BANKS, OF COURSE! Ladies and gentlemen, welcome to bizarro world, where up is down.

Only a few years ago, JPMorgan was struggling after years of poor management and a failure to digest a series of big acquisitions. But under Mr. Dimon, it cut costs and strengthened its balance sheet.

The payoff began last year. With the industry teetering on the verge of collapse, JPMorgan snapped up Bear Stearns in March 2008 and Washington Mutual last fall in two government-assisted transactions. Clients say that its growing dominance has given it more leverage to charge for lending and other services.

jp: That's key; uncle scam HELPED them conglomerate. After all, if uncle scam was anti-conglomeration, there would have been anti-conglomeration stipulations on the TARP funding to begin with. Ostensibly - but not stated precisely, and that's key - the TARP funding was to be used to provide credit. Well, that went out the window in a nanosecond after receivership.

After aggressively lobbying to repay its taxpayer money, Mr. Dimon has also been driving a hard bargain over the repurchase of warrants the government received from the bank last autumn in exchange for taxpayer support. JPMorgan is now planning to let the Treasury Department auction off the warrants to private investors after the two sides failed to agree on a price.

jp: ??? Who are these private investors??? That was OUR money, and now these warrants are going to be sold off without any kind of disclosure? What do we get, a jar of vaseline?

Mr. Dimon is also gearing up for a series of battles in Washington. One is over tighter regulations for derivatives, a business where the bank generates lucrative fees as one of the industry’s largest players.

Another is the creation of a new consumer protection agency, which could threaten the profitability of the bank’s mortgage and credit card businesses if it introduces tougher regulations.

JPMorgan’s stock has risen 20 percent since early March. It closed Thursday at $35.76.

Eric Dash and David Jolly contributed reporting.