Jamie Dimon calls it "a doozy."
And it was
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JPMorgan Chase's 'Jamie the Great': tap dancing with derivatives | Opinion | The Seattl... - 2 views
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Three top executives of British firms were sacked in revolts of shareholders, who also rose up against giving new executives millions in "golden hellos."
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Dimon's admission on "Meet the Press" that his team was "sloppy" and "stupid" and used "bad judgment" in incurring the loss
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led to the rolling of three heads at the bank, an FBI investigation, and a congressional ramp-up for more chiding hearings
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While the trade was "poorly vetted and poorly executed," he said it wouldn't make a dent in the "fortress balance sheet."
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hould our company really be spending shareholder funds on, some $7 million last year alone, on lobbying efforts to thwart the Dodd-Frank legislation and the work of regulators to write the rules stemming from that legislation?"
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the group endorsed Dimon's pay package of $23 million and let him keep his dual titles of chairman and CEO
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he's known as the favorite banker of the president, who called Dimon "one of the smartest bankers we got"
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New York City's chief audit officer is urging Dimon to "claw back" salary and bonuses paid to the top executives who dragged the bank into the excessive risk
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loathe to "act like a judge and jury" with Ina Drew, the head of the investment office who resigned on Monday, given that she lost $2 billion on that deal while she was making $9 billion on others
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You have to earn respect every day. It's never how great we are. It's always the good, the bad and the ugly
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TEXT-S&P: U.S. shadow banking supervisory framework is emerging | Reuters - 2 views
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Shadow banking encompasses a wide variety and complex set of financial entities and products that may still present an important systemic risk, but it hasn't yet filled the void traditional banking has left
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The term "shadow banking" first became prevalent in the aftermath of the financial crisis, and it lacks a universally consistent definition.
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Shadow banking encompasses not only special-purpose vehicles that are beyond the Federal Reserve's supervision
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However, the term can oversimplify investment vehicles and products that are complex and interact very differently with the formal banking system.
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The first is to what extent shadow banking might replace traditional banking in the U.S. financial sector.
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The second question is whether banking regulators will effectively and quickly implement a supervisory framework that can contain systemic risk by eliminating regulatory arbitrage and providing greater transparency.
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Shadow banking mimics traditional banking, though it doesn't have the protection, implicit or explicit, of a government guarantee that is available to depository institutions.
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regulators are attempting to establish better oversight over the shadow banking sector to lower the possibility of future interventions, to reduce contagion to the formal banking sector, and to eliminate reliance on government support,
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In fact, many of the proposed regulatory reforms aim to increase investors' risk sensitivity and better align incentives among investors, originators, and intermediaries."
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Shadow banking is explained in this article and it is put into question whether shadow banking has the ability to replace the traditional banking system. The question of regulations regarding shadow banking is also asked and whether such regulations can be quickly and efficiently implemented. Shadow banking mimics traditional banking but it lacks the protection of a government guarantee that is available to depository institutions.
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BofA to try converting foreclosures into rentals - Los Angeles Times - 1 views
articles.latimes.com/...la-fi-home-rental-20120324
foreclosures rentals Bank of America banking pilot project
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Bank of America Corp. has tentatively joined a nascent housing industry movement in which homes in or near foreclosure are sold to investors as rental properties.
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often would be better for homeowners, communities and the banks themselves to keep troubled borrowers on as renters rather than kick them out
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whether getting a loan off its books with a quick sale at a deep discount is a better deal financially than the foreclosure process,
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TwinRock Partners, a private Newport Beach firm, recently told potential investors that more than 100 homes it has acquired and rented out over the last two years have produced annualized returns of 8.7%, with the potential for big resale profits if housing prices recover
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Bank of Canada fears weak growth in global economy - The Globe and Mail - 1 views
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rich countries like the United States and much of Europe do too little to attack their budget and trade deficits, or if emerging giants in Asia refuse to relax capital controls or allow their currencies to appreciate more quickly.
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Essentially, global economic output would be 8 per cent -- or $6-trillion (U.S.) -- less by 2015 if a range of G20 commitments reinforced late last year at a summit in Cannes, France, are not implemented.
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“Fiscal consolidation in the United States and Europe, flexible exchange rates and structural policies to stimulate domestic demand in the emerging-market economies of Asia,
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Delays, meanwhile, could have “severe negative consequences,” leading to “a significantly weaker global economy” and a less stable global financial system.
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The clear message here is both sides of this delicate dance not only need to do their part but, just as crucial, they need to co-ordinate their efforts.
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A lot of this will sound familiar to anyone who follows global economics from the point of view of the Bank of Canada. Governor Mark Carney also chairs the Financial Stability Board, a G20-linked body tasked with making international finance less of a threat to the wider economy, so he has spoken on these issues many times and outlined the potential benefits of adopting stricter banking rules. But the message about global co-ordination is still ti
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Chinese imports barely grew in April, causing the country's trade surplus to balloon to $18.4-billion (U.S.) from $5.3-billion the previous month, indicating that consumers and businesses in the faster-growing emerging markets are still not ready to pick up
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China, until recently, had made strides in narrowing its current-account surplus (which reflects the country’s over-reliance on exports as opposed to domestic spending).
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But it is smaller and weaker than it was at its pre-crisis peak, and will probably never regain that past form. So its ability to drive global growth is limited
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The Bank of Canada predictions for the future are grim. If the range of commitments made last year in Cannes, France are not fulfilled, the worldwide economy will shrink by 8%, or $6 trillion dollars, by 2015. China's imports barely grew in April pushing the countries trade surplus to $18.5 billion, from $5.3 billion. China is over-dependent on the consumers outside of its borders while its domestic consumption is extremely low.
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Banking regulations cost more than they deliver | Mail Online - 2 views
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It must be the evil capitalists, they suggested, and not Labour's appalling spending record that was to blame for Britain's struggling response to the recession.
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worrying tendency to meet recession with excessive regulatory response to banks, in order to justify taxpayer-funded bailouts.
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Where banks are concerned, regulatory responses are often commercially restricting, difficult to comply with, and ineffective in lowering commercial risk.
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Apart from restricting credit through profit loss on regulatory compliance, it may also result in the shift of risk to general credit transactions, as banks seek to recoup profits lost from overregulated areas such as hedging products.
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On the back of the J.P. Morgan's billion dollar losses, there is now a temptation in the EU to pass a measure similar to the Volcker rule in the U.S Dodds-Franck Act.
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The Volcker rule, in the U.S., prevents banks from using additional profits on deposits for a high-risk bet strategy
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Banks have made it clear that this sort of regulation is difficult to comply with, as bet-style transactions and a pure hedge are very difficult to distinguish
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These seek to distinguish between retail and other banking operations, and to increase reserves in banks to protect the taxpayer.
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One might observe that the inflationary costs of low interest rates to encourage lending, and over-regulation that effectively reduces it (and also comes with public-sector administrative costs) are not exactly compatible on principle.
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It would be better for banks to crash and burn where they deserve to, and for governments not to get involved in second-guessing market risk, through unworkable regulation, for political gain.
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Further, politicians ought to realise that the best way to protect the taxpayer is not to get involved in bailouts at all.
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The banks are apparently being over-blamed in the causation of the worldwide economic crisis by politicians. They are using the hype of the economic crisis in their favor and assigning all the blame to the banks which is in turn now leading to increases in regulations over the banking industry. Over-regulation will hurt the banking industry by reducing the number of option and easy with which they can utilize their money.
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Hedge Funds Are Shadow Banks in Need of Regulation, Bafin Says - Bloomberg - 1 views
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Hedge funds act as shadow banks and should be added to the list of organizations in need of regulation
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So-called shadow banking that takes place outside the scope of regulators is being targeted by financial watchdogs on concern that it may be used to evade a global clampdown on excessive risk-taking
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German banks that lend to local economies dominated by medium-sized companies are seeking to loosen standards for risk weighting of these loans
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12-year-old Ontario girl slams modern banking system, becomes YouTube hit - thestar.com - 1 views
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Canada’s banking system has been the subject of international praise from economists grappling with global turmoil, but one 12-year-old girl begs to differ
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earning a reputation as a financial pundit after her tirade against her homeland’s borrowing practices
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aim at Canada’s modern day financial system and champions a greater role for the country’s central bank
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governments began borrowing from private banks instead at considerably higher interest rates than those available through the central bank
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arguing borrowing from the Bank of Canada would shore up depleted government resources and usher in an era of prosperity for Canada
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Such a change in monetary policy, combined with crucial changes in tax policy, would make available tens of billions of dollars that are urgently needed to rebuild our public infrastructure, protect our environment, and strengthen Medicare and other social programs so vital in meeting human needs
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Critics of Crowell’s arguments contend inflation rates would soar if the central bank was able to lend money below commercial interest rates
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Mortgages: More than half of Canadians to carry household debt into retirement | Mortga... - 1 views
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People are more sophisticated in their approach to personal finance today than the previous generation
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People are living longer, working longer and making real estate plans longer or further into their lives
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Another trend, one which was not considered by the industry before, is people moving into more expensive, upscale homes after retirement
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Another part of the trend could very well be strategic. With rates on a five-year closed mortgage at about 3.5%, paying down that debt might not seem as high a priority for many homeowners
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The extremely low level of interest rates is acting both as an inducement for people to take on more debt than they would have in the past and on the flipside not encouraging them to save as in the past
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People could end up working longer and it might also mean there will be that much less equity in the home you’ll be leaving to heirs
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the issue is how it’s affecting retirement with half of Canadian homeowners saying their debt load was hindering their ability to plan and save
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HSBC chief to subject UK banking operation to performance tests | Business | The Guardian - 0 views
www.guardian.co.uk/...ng-operation-performance-tests
bank HSBC Guardian UK retail banking stresstest
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As he gave an update of the bank's strategy – which has led to 14,000 job cuts as he cuts costs to make the bank more efficient – Gulliver said the UK business would be subjected to his performance tests once it was known how the final details of the Independent Commission on Banking (ICB) were implemented.
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Gulliver described the UK as essential for retail banking and he said on Thursday that the business was one of the best performing, describing it as a "home" market.
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He is intending to achieve $3.5bn (£2bn) of savings within three years to bolster the bank's return on equity to 12-15%. It was 11% last year.
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China's easing aimed at housing market - MarketWatch - 0 views
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The People’s Bank of China announced on Saturday it plans to lower then the ratio of reserves bank must set aside as deposits at the central bank by a half percentage point, effective Friday.
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Investment in real estate was up 18.7% in the first four months of the year, cooling significantly from a 23.5% gain in the first three months of the year, according to official figures released Friday. The data weren’t broken down on a monthly basis.
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The numbers indicated property developers were cutting back on land purchases, with outlays on sites of 182 billion yuan ($28.81 billion) in the January-to-April period, a drop of nearly 14% from a year earlier.
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Standard Chartered said developers’ concerns over the property market were reflected in data showing residential investment hitting the wall in April, growing just 4% during the month, compared to a 15.1% year-on-year rise in March.
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Rattled Greeks not alone in massive bank savings exodus | Economy | News | Financial Post - 0 views
business.financialpost.com/...in-massive-bank-savings-exodus
bank EuropeanCrisis Greece runonbanks deposits
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Worries about a run on Greek banks has rattled Athens this week, after savers withdrew at least 700 million euros on Monday alone, according to minutes of Papoulias’s comments to political leaders posted on the presidency’s website.
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Greece’s banks have lost 72 billion euros in deposits since the start of 2010, or about 30%, according to data compiled by Thomson Reuters.
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And on Thursday, Spain’s Bankia was reported to have seen more than 1 billion euros drained by its customers in the past week.
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Cash flooded into Britain; more than 140 billion euros was deposited in four big banks alone. The UK benefits from its position outside the eurozone and its Asia-focused banks HSBC and Standard Chartered are seen as particular safe-havens. Other banks to see big inflows included Barclays, Germany’s Deutsche Bank, Switzerland’s Credit Suisse and UBS and Russia’s Sberbank and VTB.
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JPMorgan's Trading Loss Is Said to Rise at Least 50% - 0 views
dealbook.nytimes.com/...ss-is-said-to-rise-at-least-50
banking America NYtimes JP Morgan derivatives
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The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses.
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In March, the company raised the quarterly dividend by 5 cents, to 30 cents, which will cost the bank about $190 million more this quarter.
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At the bank’s annual meeting in Tampa, Fla., on Tuesday, Mr. Dimon did not definitively rule out cutting the dividend, although he said that he “hoped” it would not be cut.
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“JPMorgan Chase has a big hedge fund inside a commercial bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner. “They should be taking in deposits and making loans, not taking large speculative bets.”
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In its simplest form, traders said, the complex position assembled by the bank included a bullish bet on an index of investment-grade corporate debt, later paired with a bearish bet on high-yield securities, achieved by selling insurance contracts known as credit-default swaps.
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The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank's initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan's chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters.
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Canadian banks not immune to housing bubble: OSFI official | Mortgages | Personal Finan... - 0 views
business.financialpost.com/...o-housing-bubble-osfi-official
canadian banks housing bubble mortgages finance canada
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Canada’s banks, ranked the soundest on the planet by the World Economic Forum, aren’t immune to collapses triggered by falling housing prices
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Previous failures of Canadian financial institutions were due to bad real estate lending and sharp falls in housing prices, and these can happen again
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“Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.”
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Finance Minister Jim Flaherty has tightened mortgage rules three times and put the federal housing agency’s books under regulator oversight
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Bank of Canada Governor Mark Carney has repeatedly warned household debt is the economy’s biggest domestic risk.
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“The market may break because the fundamentals are not sound (i.e. overvaluation of homes), not because of OSFI guidance,” Melessanakis wrote in response.
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Canadian existing home sales rose 0.8% in April from the previous month and 11.5% from a year earlier
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Flaherty reduced the amortization period on mortgages backed by the government to 30 years from 35, the third time since 2008 he has tightened rules for home loans
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Flaherty introduced legislation April 26 that includes measures to strengthen oversight of Canada Mortgage & Housing Corp.
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The law allows OSFI to review CMHC’s books at least once a year, and prohibits banks from using insured mortgages to back covered bonds,
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Canadian banks should not be “lulled into a false sense of security” by steps policy makers are taking to prevent another financial crisis
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in some places like Vancouver, maybe Toronto, obviously you’re going to have greater risk there of price volatility,”
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last financial institution failure in Canada occurred in 1996, when Security Home Mortgage Corp. collapsed
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Eighteen financial institutions failed in the 1990s, including Confederation Life Insurance Co., which had $19.2-billion in assets at the end of 1993. There were 23 failures in the 1980s, including Northland Bank, which had $1-billion in assets
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Spain banking sector shaken by report of bank run | CanadianBusiness.com - 0 views
www.canadianbusiness.com/...r-shaken-by-report-of-bank-run
Spain EuropeanCrisis banks banking nationalization runonbanks
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Confidence in Spain's banks and its teetering economy was shaken Thursday after a newspaper reported that depositors were rushing to withdraw their money from Bankia, a troubled bank that was effectively nationalized just one week ago.
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Political turmoil in Greece has increased the likelihood that it could leave the 17-country monetary union, a move that could have ripple effects throughout Europe and the world's financial markets.
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Bankia SA, the country's fourth-largest lender, saw its shares fall as much as 27 percent during trading in Madrid after the El Mundo newspaper reported the bank was hit with more than €1 billion ($1.27 billion) of withdrawals since the government announced the takeover.
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Greek president Karolos Papoulias warned party leaders during unsuccessful coalition talks that about €700 million ($898 million) in deposits have flown out of Greek banks since the May 6 elections, according to a report from Greece's central bank governor, George Provopoulos
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the interest rate on Spanish 10-year bonds stood at a worryingly high 6.29 percent. It has risen sharply from below 5 percent in March and is edging toward the 7 percent mark that is considered unsustainable in the longer term.
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Are low interest rates causing low savings rates? | Fox Business - 0 views
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recent study found that nearly half of American workers are not contributing to any form of retirement plan.
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People who fail to save money will pay for their short-sightedness in the future, but the decline of savings can also be seen as a logical response to a low-interest-rate environment
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average personal savings rate in the U.S. slipped to 3.9 percent in the first quarter of 2012 -- the lowest level in over four years
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With interest rates running well below the rate of inflation, money in a savings account or other deposit vehicle is actually losing purchasing power with each passing day
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Bond yields are not much higher, and stocks haven't been very rewarding so far in the 21st century either
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However, getting the most for your money is only one consideration. Having resources to support your retirement is also an important function of saving, and in this respect people with low savings rates are not behaving rationally.
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while low interest rates may seem to discourage saving money, they actually make it more imperative.
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other important point of this context is that outside of the government, most people no longer have an employer pension plan to fall back on.
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shift from defined benefit to defined contribution retirement plans put the responsibility for saving solely on the employees
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by choosing more immediate consumption over saving for retirement, people are supporting their current lifestyles at the expense of the future.
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Banking rules may encourage riskier trading, warns ratings agency | Business | The Guar... - 0 views
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agency also warned that borrowing costs for customers could rise as banks try to maintain their profitability
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might even be a shift to the capital markets to raise funds and banks could move into the less regulated areas of finance, known as "shadow banking"
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Banks need to meet the new capital requirements, known as Basel III and being implemented as a result of the 2008 banking crisis, by the end of 2018,
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The impact of holding extra capital – about 23% more than their current holding of $2.5tn – could reduce returns on equity to 8.5% from the 10.8% average of the 29 banks during the period 2005-2011
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29 banks will in total need to find $566bn on the assumption that these crucial banks need a 10% capital cushion
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JP Morgan (JPM) and Systemic Risk - 0 views
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one likely scenario ([1], [2]) involves derivatives constructed from the riskier components of some European corporate bonds.
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recent paper by Stanford Professor Darrell Duffie highlights an unresolved weakness in the U.S. financial system
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Each day something like $100 billion in such short-term lending is intermediated by two clearing banks
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Duffie believes the system is inherently unstable, as dealer banks depend crucially on the ability and willingness of the clearing banks to provide short-term financing each new day
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Here is Duffie’s recommendation for how to make the tri-party clearing system more stable: Given the systemic importance of tri-party clearing agents, and given their high fixed costs and additional economies of scale, tri-party repo clearing services for U.S. dealers and cash investors should probably operate through a dedicated regulated utility. Although this would likely increase operating costs for market participants, it would enable investment in more advanced clearing technology and financial expertise, allowing greater resilience of the tri-party repo market in the face of financial shocks such as the default of a major dealer. The moral hazard associated with lending of last resort to a dedicated utility is much reduced relative to the case of a financial institution with a wide scope of risk-taking activities.
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this week’s news should remind us that more needs to be done to ensure financial stability and that the incentives of private participants align with the public’s best interests
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Banking industry faces calls for tougher regulation after massive loss at JPMorgan - Wi... - 0 views
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the colossal misfire was cited as proof that big banks still do not understand the threats posed by their own speculation
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JPMorgan is the largest bank in the United States and was the only major bank to remain profitable during the 2008 financial crisis
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the $2 billion loss came from a hedging strategy that backfired, not an opportunistic bet with the bank's own money
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recharged a debate about how to ensure that banks are strong and competitive without allowing them to become so big and complex that they threaten the financial system
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The JPMorgan loss did not cause anything close to the panic that followed the September 2008 failure of the Lehman Brothers
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they involved "synthetic credit positions," a type of the complex financial instruments known as derivatives
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Corker, a leader of a failed effort last year to block a Federal Reserve rule that slashed bank profits from debit cards, called for a hearing "as expeditiously as possible"
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A mistake was made. Money is going to be lost. It's not customer money. It's not government money. It's JPMorgan's money, the shareholders of JPMorgan
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changes promoted by the Obama administration were in many cases similar to what the financial industry had sought before the crisis
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Dimon said that Paul Volcker, the former Federal Reserve chairman for whom the rule is named "doesn't understand capital markets."
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"Acting like everyone who's been successful is bad and that everyone who is rich is bad — I just don't get it," he said at a conference earlier this yea
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sent an email to JPMorgan's 270,000 worldwide employees assuring them that the company was "very strong."
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