U.S. government to sue JPMorgan in mortgage case

The U.S. Justice Department is preparing to sue JPMorgan Chase & Co over mortgage bonds it sold in the run-up to the financial crisis, a sign the bank's legal troubles are not yet over.

A lawsuit, first reported by Reuters, could come as early as Tuesday, people familiar with the matter said on Monday.

JPMorgan spokesman Brian Marchiony and Justice Department spokeswoman Adora Andy Jenkins declined to comment.

The bank disclosed in August that federal prosecutors in California were conducting criminal and civil investigations into the bank's mortgage securities.

In those investigations, government lawyers have concluded that JPMorgan committed civil violations of securities laws in offering mortgage bonds from 2005 to 2007 that were backed by subprime and other risky residential mortgages.

The expected charges come less than one week after the largest U.S. bank paid $1 billion to resolve investigations into its "London Whale" trading scandal and issues surrounding the wrongful billing of credit-card customers. Read more >>

Long-feared mortgage meltdown is here

Third-quarter bank earnings will feel an unwelcome jolt as mortgage volume has fallen off a cliff. Banks large and small have been preparing investors for difficult revenue comparisons by preannouncing the bad news. JPMorgan Chase CFO Marianne Lake at a conference on Sept. 9 said the bank expected its mortgage origination business to post a net operating loss for the second half of 2013.

Cardinal Financial of McLean, Va., late on Thursday announced that its third-quarter mortgage loan originations had declined by roughly 40 percent from the second quarter, and that "the marketing gain percentage for mortgages sold has decreased during the third quarter due to increasing competitive pressure related to the changing market conditions."

Cardinal also said "Expense reduction and revenue enhancement measures have been and will continue to be implemented to offset the decrease in mortgage production and the decline in the marketing gain percentage," but that the bulk of the benefit of the cost declines wouldn't be realized until the fourth quarter. The bank was downgraded by several sell-side analysts on Thursday and Friday, and its shares dropped 5 percent Friday to close at $16.76  Read more >>

Federal energy regulator accuses JPMorgan of manipulating electricity market

JPMorgan Chase Tower (Dallas) (Photo credit: Wikipedia)

The U.S. power market regulator took a step toward charging JPMorgan with gaming electricity prices on Monday, confirming months of media reports about "manipulative" trading schemes that have rattled the bank.

The "notice of alleged violations," which outlines bidding strategies used by traders in California and the Midwest, is an intermediate step by the regulator, but brings details of the investigation into public view.

The U.S. Federal Energy Regulatory Commission (FERC) staff has found "eight manipulative bidding strategies" used by a JPM affiliate in 2010 and 2011, the regulator said.

JPMorgan declined to comment. The notice comes as little surprise after weeks of reports that JPMorgan and FERC are in talks to settle the alleged trading infractions for as much as $400 million. It did not contain any mention of specific traders or commodities chief Blythe Masters, who had been mentioned in media reports as having been at risk of being singled out. Read more >>

JP Morgan’s Food Stamp Empire

JP Morgan Chase Tower (Photo credit: mheisel)

In 2010, President Obama signed into law the Healthy, Hunger-Free Kids Act. The bill added $4.5 billion to child-nutrition programs over the next decade, put in place nutrition standards for school lunch programs and vending machines, and implemented training for the cafeteria workers who feed 31 million students a day through the National School Lunch and School Breakfast programs. It received bipartisan support, and was hailed as a compassionate victory for America’s poorest children.

The bill was also, however, a potentially good development for mega bank JP Morgan Chase. Why, you may be wondering, would one of the nation’s biggest banks benefit from a bill meant to feed poor children? A closer look at the legislation reveals the answer. The bill mandates that “all state agencies implement Electronic Benefit Transfer (EBT) systems by October 1, 2020” for those receiving money through the Women, Infants, and Children (WIC) program. And which company administers nearly half of all states’ EBT programs? You guessed it: JP Morgan Chase. Read more >>

JPMorgan Chase Faces Full-Court Press of Federal Investigations

As the nation’s strongest bank, JPMorgan Chase used to be known for carrying special sway with regulators. Now it increasingly finds itself in the cross hairs of federal authorities.

At least two board members are worried about the mounting problems, and some top executives fear that the bank’s relationships in Washington have frayed as JPMorgan becomes a focus of federal investigations.

In a previously undisclosed case, prosecutors are examining whether JPMorgan failed to fully alert authorities to suspicions about Bernard L. Madoff, according to several people with direct knowledge of the matter. And nearly a year after reporting a multibillion-dollar trading loss, JPMorgan is facing a criminal inquiry over whether it lied to investors and regulators about the risky wagers, a case that could accelerate when the Federal Bureau of Investigation and other authorities interview top JPMorgan executives in coming weeks.

All told, at least eight federal agencies are investigating the bank, including the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the Securities and Exchange Commission. Federal prosecutors and the F.B.I. in New York are also examining potential wrongdoing at JPMorgan. Read more >>

Taxpayers Give Big Banks $83 Billion a Year

On television, in interviews and in meetings with investors, executives of the biggest U.S. banks -- notably JPMorgan Chase & Co. Chief Executive Jamie Dimon -- make the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

Granted, it’s a hard concept to swallow. It’s also crucial to understanding why the big banks present such a threat to the global economy.

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. Read more >>

Handful of billionaires are quietly dumping their American stocks and fast

Warren Buffett (Photo credit: MarkGregory007)

Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.

Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.

With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.

Unfortunately Buffett isn’t alone.

Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee. Read more >>

China’s Inflation Accelerates as Food Prices Soar

China’s inflation accelerated more than forecast to a seven-month high as the nation’s coldest winter in 28 years pushed up vegetable prices, a pickup that may limit room for easing to support an economic recovery.

The consumer price index rose 2.5 percent in December from a year earlier, the National Bureau of Statistics said today in Beijing. That compares with the 2.3 percent median estimate in a Bloomberg News survey of 42 economists and a 2 percent gain in November. The decline in the producer-price index eased to 1.9 percent.

“With growth momentum firming up and inflation picking up, the likelihood of any further easing has disappeared and the next interest-rate move will probably be an increase,” which could come as early as the fourth quarter, Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong, said in a telephone interview.

Inflation may temporarily accelerate to more than 3 percent next month, Zhu said, reflecting the impact of cold weather on food prices and the weeklong Chinese Lunar New Year holiday, which fell in January last year. Read more >>

More Bank Layoffs Coming: 'Bad as I've Seen It': Whitney

Banks have been behind the curve in terms of downsizing, with their employees paying for it now through a rash of furloughs, analyst Meredith Whitney told CNBC.

The industry has seen a recent spate of big layoff announcements, including 16,000 from Bank of America alone. Though banks already have jettisoned about half a million workers since the beginning of the financial crisis in 2008, Whitney said more are to come as the shrinking big institutions struggle to compete.

"The banks have been overstaffed for a really long time. If you think about all of the other industries that have gotten more competitive, more profitable, the banking sector and the insurance sector have been laggards behind it, and they employ a lot of people," Whitney said on "Closing Bell."

New banking regulations, particularly the Dodd-Frank financial reform bill, have seen the banks shrinking in order to avoid the too-big-to-fail syndrome that caused the industry to push the country into recession. Read more >>

Billionaires Dumping Stocks, Economist Knows Why

Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.

Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.

With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome. Unfortunately Buffett isn’t alone.

Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee. Read more >>

Cronyism, political donations likely behind Obama, Holder failure to charge any bankers

Daily Caller
A new report from the conservative Government Accountability Institute (GAI) finds that President Barack Obama’s and Attorney General Eric Holder’s failure to criminally charge any top Wall Street bankers is likely a result of cronyism inside the Department of Justice and political donations made to Obama’s campaign.

Banks face billions more in Libor losses

Banks implicated in the Libor-fixing scandal will likely take billions more in losses as a result of pending litigation and regulatory penalties, according to industry analysts at Morgan Stanley. The analysis -- which the authors admit is crude -- is based in part on the experience of Barclays, the British bank which admitted that its staffers attempted to manipulate the London Interbank Offered Rate.

Many of the world's major banks, including Deutsche Bank (DB), Royal Bank of Scotland (RBS), Credit Suisse (CS), Citigroup (C, Fortune 500), UBS (UBS) and JPMorgan Chase (JPM, Fortune 500) have disclosed that they are being investigated.

Barclays has agreed to pay $453 million to U.S. and U.K. regulators, a settlement which provided the basis for Morgan Stanley's calculation that at least ten additional banks could be fined between $420 and $651 million by regulators. Other banks implicated in the scandal -- but not included in the Morgan Stanley analysis -- could also face penalties.

Banks that have not yet settled with regulators will likely pay a premium, as Barclays received preferential treatment from regulators because it was cooperative and settled quickly. The other banks, according to the analysis, should expect to pay 30% more. Under another scenario, the banks could face even higher fines after the U.K. Serious Fraud Office completes its investigation. Read more >>

Some lose homes because they owe a few hundred in back taxes

The elderly and other vulnerable homeowners are losing their homes because they owe as little as a few hundred dollars in back taxes, according to a report from a consumer group. Outdated state laws allow big banks and other investors to reap windfall profits by buying the houses for a pittance and reselling them, the National Consumer Law Center said in a report being released Tuesday.

Local governments can seize and sell a home if the owner falls behind on property taxes and fees. The process helps governments make ends meet at a time when low property values and the weak economy are squeezing tax revenue. But tax debts as small as $400 can cause people to lose their homes because of arcane laws and misinformation among consumers, says John Rao, the report's author and an attorney with NCLC.

The consequences are "devastating for individuals, families and communities," Rao said. He said states should update laws so speculators can't profit from misinformed homeowners and people who have difficulty managing their finances. The rules for property tax sales can be confusing, especially to elderly people who can't keep track of their finances and people in minority-heavy communities that were targeted by subprime lenders. Read more >>

Bankers constantly lying, defrauding; most still not in jail

Barclays, JPMorgan and the rest of the megabanks reach new heights in malfeasance, suffer few consequences
By Alex Pareene

Has there ever been a better time to be a disastrously inept banker? Well, probably — over the course of human civilization it’s almost always been a pretty good time to be a banker — but today’s finance titans seem uniquely immune to punishment of any sort.

Federal Reserve Board Members Gave Their Own Banks $4 Trillion in Bailouts

Following the 2008 financial crisis, the Federal Reserve provided more than $4 trillion in near zero-interest loans and other help to banks and businesses whose executives also served as directors for the national bank.

At least 18 current and former Fed regional bank directors had a direct stake in the trillion-dollar bailout given to teetering institutions, according to a report produced by the Government Accountability Office, but released by Senator Bernie Sanders (I-Vermont).

“This report reveals the inherent conflicts of interest that exist at the Federal Reserve,” Sanders said in a prepared statement. “At a time when small businesses could not get affordable loans to create jobs, the Fed was providing trillions in secret loans to some of the largest banks and corporations in America that were well represented on the boards of the Federal Reserve Banks.” Read more >>

The (Big) Business of Food Stamps: “Here’s Where the Profits Come in”

Aaron Task  
Daily Ticker 
In 2011, a record 46 million people - or 1 in 7 Americans -- participated in the Supplemental Nutrition Assistance Program (SNAP), better known as Food Stamps. The increased use of Food Stamps is a huge social and political issue for America, and it's also big business. In 2011, the U.S. government spent $72 billion on Food Stamps.

Among the beneficiaries, food producers such as Cargill, PepsiCo., Coca-Cola and Kraft, as well as retailers like Wal-Mart. Of course, Wall Street gets a cut too, led by JPMorgan Chase, which administers the SNAP benefits in 24 states.

In the accompanying video, I discuss the (big) business of Food Stamps with Marion Nestle, professor of Nutrition, Food Studies, and Public Health at New York University and author of several books, most recently Why Calories Count.

Acceleration Of Financial Meltdown Can't Be Stopped

A picture of a bank run outside a branch of Northern Rock in Birmingham, United Kingdom in 2007, when there was speculation about problems with bank.

Steve Quayle
The Iron boot has been firmly planted to the pedal of this runaway tractor trailer that is heading off the cliff. All of the Euro banks including my former associates at the Royal Bank of Scotland (RBS)  are all prepped and ready for the Euro collapse.

What we in the inside are calling "Spanish Flue" is now running hot with temperatures that are setting ten year yields sky high. What many do not realize is that Bankia's demise has started a breach in all the firewalls and safety measures that are in place in the Eurozone. This had an immediate effect on the Italian markets as you can now see the pandemonium that is there.

When The Derivatives Market Crashes U.S. Taxpayers Will Be On The Hook

Recently, JP Morgan made national headlines when it announced that it was going to take a 2 billion dollar loss from derivatives trades gone bad.  Well, it turns out that JP Morgan did not tell us the whole truth.  As you will see later in this article, most analysts are estimating that the losses will eventually be far larger than 2 billion dollars. 

But no matter how bad things get for JP Morgan, it will not be allowed to fail.  JP Morgan is the largest bank in the United States, so it is essentially the "granddaddy" of the too big to fail banks. If JP Morgan gets to the point where it is about to collapse, the U.S. government and the Federal Reserve will rush in to save it.  Because of this "security blanket", banks such as JP Morgan feel free to take outrageous risks. 

Today, JP Morgan has more exposure to derivatives than anyone else in the world.  If they win, they win big.  If they lose, U.S. taxpayers will be on the hook.  Not only that, but thanks to Dodd-Frank, U.S. taxpayers are on the hook for bailing out the major derivatives clearinghouses if there is ever a major derivatives crisis.  So when the derivatives market crashes (and it will) you and I will be left holding a gigantic bill. Read more >>

JPMorgan Securities Investigated In Japan SESC Probe

J.P. Morgan Chase & Co. faces a new regulatory headache, as Japan's securities watchdog is probing the company for possibly leaking insider information, a person familiar with the matter said.

J.P. Morgan was a lead underwriter for Nippon Sheet Glass Co. in 2010 when the glass maker issued new shares, and the company's stock dropped sharply in the days leading up the announcement. Japan's Securities and Exchange Surveillance Commission Tuesday announced it was seeking to fine an asset management company called Asuka Asset Management Ltd. for short-selling shares based on illegally obtained information in advance of the offering from an underwriter.

While Asuka gained Y60.5 million, or about $760,000, from the insider trading, the watchdog only recommended a fine of Y130,000, or about $1,600, because of the small amount of fees earned from its clients on the trades. Read more >>

Corzine Shows There’s No Justice on Wall Street

Terry Keenan
NYPost
What does it take to get prosecuted in this town?

Just how many federal regulators have pored over financial documents and calling records, dissected trading ledgers for suspicious money movements and probed years of voice mails and e-mails, to no avail? Oh, to be sure, a few investigations have resulted in civil fines being paid with the caveat of not admitting or denying any wrongdoing. It’s less than a slap on the wrist.