Back when rates looked cheap, it became habit to sell financing and swaps and the like to municipalities (perhaps not the brightest municipalities) for infrastructure projects. Now that the terms of the related debt are blowing up badly, states like Alabama want their money bank, and JP Morgan on a platter.
The potential sanctions by the U.S. Securities and Exchange Commission, disclosed yesterday in two sentences of a 162-page quarterly regulatory filing, relate to a series of bond and interest-rate swap sales in 2002 and 2003 for sewers in Jefferson County, which covers about 1,125 square miles including Birmingham, the state’s largest city with more than 240,000 residents.
Since credit markets seized up in 2007, Jefferson County’s annual sewer debt payment more than doubled. At least seven former JPMorgan bankers are under scrutiny in a Justice Department criminal antitrust investigation of the sale of unregulated derivatives to local governments across the U.S., federal regulatory records show.
We suspect this will be but the first of these, as the big banks shamelessly pursued business in this area and there are a lot of deals that have blown up badly since municipalities signed on the dotted line.
JPMorgan May Face SEC Charges Over Alabama Bond Deals [Bloomberg]
That as it travels through the galaxy it manages to suck towards its center, all the nearby available mass until, growing and growing, it finally manages attractions of such force that not even bid-ask spreads can escape it. It is… too big to fail and you will see more of it, once a few of them fail and get acquired.
J.P. Morgan Chase & Co. Chief Executive Jamie Dimon on Monday said he expects America’s biggest banks will continue to gain market share, and that the financial industry is ripe for more consolidation.
Mr. Dimon, speaking on a conference call with investors and analysts, said the financial crisis will continue to restructure the banking industry for some time. He expects more deals will be done, and doesn’t rule out an acquisition for his own company that will add more branches.
He expects deals might pick up once major U.S. players receive results of the government’s stress tests this week. The nation’s 19 biggest financial companies are expected to receive their results late Wednesday.
J.P. Morgan’s Dimon Expects Bank Consolidation to Accelerate [The Wall Street Journal]
To LB from JD:
Here’s my notes from our late night edit session. I’ve got to send this to the printer posthaste. Let me know what you think or if I missed anything.
Let’s face it. 2008 blew. In the annals of annual reports, 2008 has the feel of anal warts. (See what I did there? Still, you’re right. Too up-beat given the new positive press on anal cancer). In last year’s shareholder letter, I referred to feeling like we had ridden bare-assed across 60 meters of broken glass covered asphalt (Big auto is on the outs. Let’s go with the airplane metaphors instead). the “turbulence” and “unprecedented” nature of events that had taken place during the preceding months. Despite the fact that we predicted a quick recovery. Though our estimates of the duration of the crisis were totally off. Our analysts dropped the ball on ourWe did not know when the cycle would end or the extent of the damage it would cause. But we did know that we had to “prepare for assrape the likes of which even a warf whore could not appreciate (Tim is sensitive about this term. Let’s elide it). a severe economic downturn.” When it became obvious that government money was going to be available in size. Never one to turn away a profit. Collectively, we resolved to navigate through the tough conditions, to help our clients in every way we could and to show leadership in the industry, as has been our legacy during times of crisis. After 12 moons. (You’re right. Too pagan now that Bush is out of office. Worked nicely last year though.) It is now a year later. What transpired was largely unprecedented and virtually inconceivable. Our firm tried to meet every challenge, and, in the process, we distinguished ourselves in our service to clients and communities. Let us therefore brace ourselves to our duties, and so bear ourselves that if the firm and its subsidiaries last for a thousand years, men will still say, ‘This was their finest hour.’ (I loved it last night, it sounds very… British this morning) Although our financial results were weak in absolute terms (but fairly good in relative terms), reflecting terrible market conditions, I believe–and I hope you agree–that this year may have been one of our finest.
Like any firm, we would like to live a long life. Longevity has its place. But I’m not concerned about that now. I just want to do Adam Smith’s will. And He’s allowed me to go up to the mountain. And I’ve looked over. And I’ve seen the promised land. I may not get there with you. But I want you to know tonight, that we, as a firm, will get to the promised land. (I still don’t understand what your objection to this line has to do with the new President, but if it upsets you so much, fine). The way forward will not be easy. We do not know what the future will bring, but we do know that it will require everyone–the banks, the regulators and the government — to work together and get it right. As we prepare for a very tough 2009, with most signs pointing to continued deterioration of the economy, we still remain long-term optimists about our future and that of our country. Whatever may come, we will meet the challenge.
(I really am not sure I like the new version as much. It lacks… punch. But I agree, in times like these it’s better to stay a bit under the radar. I still don’t understand why the “Mountaintop” piece doesn’t work with this Administration, but you know that storming out on me like that always gets you your way so fine).
- JD
Annual Letter To Shareholders / Proxy Statement [JP Morgan Chase]
MARIA BARTIROMO: JAMIE, THANKS FOR JOINING US.
JAMIE DIMON: MY PLEASURE.
BARTIROMO: CAN YOU CHARACTERIZE WHERE WE ARE RIGHT NOW IN THIS ECONOMIC SLOWDOWN, IN THIS TIGHT CREDIT ENVIRONMENT?
DIMON: YOU KNOW, MARIA, I THINK IT’S ALMOST IMPOSSIBLE TO DO BECAUSE I’VE NEVER REALLY SEEN PEOPLE FORECAST THE FUTURE. THE REAL INFLEXION POINT IS THE ECONOMY. YOU KNOW, WE’VE HAD A PRETTY SHARP DOWNTURN. AND I THINK IT’S BEING SEEN AROUND THE WORLD. AND THE REAL QUESTION IS DOES IT LEVEL OFF FROM HERE OR DOES IT GET A LITTLE BIT WORSE BEFORE IT LEVELS OFF?
BARTIROMO: AND YOU TALK TO SOMEONE LIKE NORO RUBINI (PH), HE SAYS THAT THE WORST IS AHEAD.
DIMON: HE MAY BE RIGHT. YOU KNOW, I MEAN, AS– AS A PRESIDENT OF A COMPANY, WE PREPARE FOR THE WORST AND HOPE FOR THE BEST. SO– YOU KNOW, I THINK THE BEST YOU’RE GONNA REALLY HOPE FOR IS TWO BAD QUARTERS AND THEN A– AND THEN A RECOVERY. I MEAN, IT COULD BE WORSE THAN THAT. BUT I THINK AT LEAST THAT IS IN THE CARDS.
BARTIROMO: SO EVEN WITH THE STIMULUS PACKAGE BEING TALKED ABOUT AND, YOU KNOW THIS EFFORT TO GET THE BANKS TO LEND, A LOT OF PEOPLE SAY, LOOK, THE BANKS STILL AREN’T LENDING ENOUGH. IS JP MORGAN LENDING?
DIMON: YES. SO I DON’T REALLY THINK THAT IS TRUE ABOUT THE BANKS NOT LENDING. AND IF YOU LOOK AT ACTUALLY AGGREGATE NUMBERS, THE BANKS’ BALANCE SHEETS ARE ABOUT WHAT THEY WERE BEFORE. I SPEAK TO A LOT OF BANKERS, A LOT OF BANKS MAKING LOANS. IN FACT, JP MORGAN ALONE IN THE LAST 90 DAYS HAS MADE OVER $150 BILLION OF LOANS, INCLUDING $50 BILLION– WHICH LIKE WE HAVE OUT TODAY IN THE INTER-BANK MARKET. SO I THINK WHAT HAPPENED IS A LOT OF BANKS ARE LENDING. BUT A LOT OF OTHER PEOPLE WHO LENT TO THE MARKETS, MONEY MARKET FUNDS, BOND FUNDS, AREN’T. SO I THINK PEOPLE GET A LITTLE CONFUSED ABOUT WHO’S OUT THERE LENDING AND WHO’S NOT AND– WE’RE– WE’RE GONNA TRY TO GET MORE INFORMATION OUT ‘CAUSE I THINK IT’S A GOOD QUESTION PEOPLE ASK IS, “ARE YOU LENDING?” AND– YOU KNOW, WE ARE.
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According to our vibrant tip-line:
[JP Morgan] open-sourced the CDS analytics engine because no one remembers which precise version of the “binaries” (compield source) code was originally handed over to Bloomberg to fuel the CDSW page. Seriously.
Earlier: Open Source CDS Analytics?
The big JD leaves town for a few days to pontificate and ski and the office just melts down and starts giving away critical intellectual capital. Boy is he going to be mad when he gets back.
In this particular case, to the gleeful joy of finance geeks everywhere, JP Morgan has assigned ownership of its Credit Default Swap Analytical Engine to the International Swaps and Derivatives Association, which plans to make it available as open source. That’s pretty sexy.
“J.P. Morgan has invested a lot of intellectual capital in this analytical engine. Its willingness to assign this to ISDA for us to make it available as open source to the entire industry demonstrates our collective commitment to the integrity of the CDS product,” said Robert Pickel, Executive Director and Chief Executive Officer, ISDA. “ISDA and its members are vigilant to public concerns around transparency. This is yet another measure of increased standardization in CDS.”
ISDA Announces Agreement [IDSA.org] via Alea
JP Morgan has “plenty of capital,” thank you very much.
And if you people don’t stop talking about this nationalization thing, you are going to fuck the whole thing up for us. Someone should just rewrite Basel II, make a nice speech about it and get the hell out of our way. I mean seriously.
Plus, we are the only people lending (to our related entities). So enough with this “you better start lending again” crap. You going to come up here and make me?
Anyhow, are we done yet? I’ve got some skiing I’d like to do.
JP Morgan says has ‘plenty of capital’ [Reuters]
From an inquisitive reader:
“Is it really true that at the JPM Life Sciences conf in San Fran they gave out a mug with instructions that feel free to use the water cooler but no drinks or snacks or cocktail parties will be provided.”
You tell us.
The WaMu name on the 5,000-seat theater at Madison Square Garden is likely to change because of the seizure of Washington Mutual by federal regulators on Thursday.
The nation’s largest savings and loan — which came to symbolize the excesses of mortgage lending — was sold almost in its entirety to JPMorgan Chase for $1.9 billion.
There was no word on Friday if the Chase name — which is also on the Arizona Diamondbacks baseball stadium in Phoenix — will replace WaMu or if it will go without a name until another corporation makes a deal.
Hard not to gloat, isn’t it? I suppose Dimon better not laugh too loudly, however. Or the Citi clan, for that matter. You people could be next.
WaMu’s Troubles Likely to Mean Name Change at Garden
That didn’t take very long. Almost as fast as Barclehs got their logo on the digital Lehman walls.
Seriously, what the fuck is feeling the “Whoo hoo!”TM supposed to mean? And who the hell puts that right above a sympathetic hurricane outreach message?
The new WaMu website look, after the jump.
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When the country’s three largest banks reached agreement on Friday on how to structure a $75 billion fund to prop up distressed securities, an exhausted group of its top planners gathered in a Bank of America conference room to toast their success with 12-packs of Bud Light.
But the celebration might have come too soon.
Having settled on the fund’s composition, officials from Bank of America, Citigroup and JPMorgan Chase will now have to raise more than $60 billion of the fund from dozens of financial institutions around the globe in the next few weeks. The goal is to have the fund operating by the end of the year. But the big question is: Will it actually help?
The answer, some analysts and big investors say, is probably not much. The backup fund will not save troubled structured investment vehicles, or SIVs, that hold billions of dollars in packaged loans, though it could delay their demise. It may help calm the turbulent credit markets by preventing a sharp sell-off of securities, though analysts say the fund will probably not be able to offset the deteriorating prices of the securities.
Ripped straight from today’s headlines? Not really. Try November of 2007, actually. And that bailout plan bit the dust too.
Who the hell drinks Bud Light at the closing party? Well, I suppose it was only the end of a structuring party. Maybe the good stuff was packed away for a bigger event. Still, I have a sneaking suspicion that Bank of America’s catering department keeps the cold ones stocked all the time, not just for special occasions. Still think that the post-merger integration with Merrill is going to go smoothly?
