Justin Bieber definitely makes a bunch in the bank, but he doesn’t seem to know so much about banking. When the teenybopper star and his crew hit Susan Sarandon’s ping-pong club SPiN Wednesday, they were directed to a private room away from the masses, but told they’d have to give up the space at 6:30 p.m. for a private party. When the time came, a spy says, a SPiN staffer popped into Bieber’s VIP room to tell him it was time to go. The singer’s posse didn’t want to leave and started to kick up a fuss, but they were told, “We’re really sorry, the room is booked . . . J.P. Morgan is having a private party.” Our spy says Bieber then piped up and shot back, “Why does he get the room and not us?” [NYP via Tracy Alloway, related]
J.P. Morgan named finance executive Marianne Lake to succeed Douglas Braunstein as chief financial officer of the largest U.S. bank. The appointment makes Ms. Lake one of the most powerful women on Wall Street as the New York company shuffles its leadership and recovers from a massive trading loss. The 43-year-old Ms. Lake currently is chief financial officer for the bank’s consumer unit. J.P. Morgan said that Mr. Braunstein will become a vice chairman of the company following Ms. Lake’s transition to the CFO position in first quarter 2013…Ms. Lake is known within the company as smart and assertive in the style of Mr. Dimon. “She talks so fast because she knows her numbers so well,” said a person close to the bank. [WSJ]
Mortgage-backed securities are sort of conceptually simple – put mortgages in a pot, stir, sell layers of resulting goop – but complex in execution; they have not only economic but also legal and accounting and bankruptcy purposes and so their offering documents are long and boring and filled with dotted and dashed lines and arrows and boxes and originators selling to sponsors selling to depositors selling to trustees selling to underwriters selling to investors. All those arrows serve as a finely calibrated series of one-way gates; each link in that chain is meant to shield the person before the link from something, some real or imaginary claim from the people coming after the link, allowing originators/sponsors/etc. to tell themselves “I never need to worry about those mortgages again!”
Hahahaha no they totally do. Today the Journal and the FT have stories about a possible JPMorgan SEC settlement on some Bear Stearns mortgage practices, specifically (per JPM’s filings) “potential claims against Bear Stearns entities, JPMorgan Chase & Co. and J.P. Morgan Securities LLC relating to settlements of claims against originators involving loans included in a number of Bear Stearns securitizations”. If you’re keeping score these are:
- not the thing where Bear maybe did a shoddy job underwriting mortgages, and
- not the New York state lawsuit involving, besides the shoddy underwriting, Bear Stearns’ settlements of claims against originators, but rather
- the SEC’s investigation of what seem to be those same settlements of claims against originators.1
JPMorgan did its third-quarter earnings call this morning, and even though the London Whale was a pretty minor presence on the call I was still going to throw up a picture of a whale here because (1) why stoke Jamie’s ego further and (2) who doesn’t like whales, but then the operator asked for closing remarks, and Jamie Dimon closed the call by saying “I’m just surprised no one mentioned how handsome Doug Braunstein looked in that article in the Wall Street Journal,”1 and, well, that happened, and we’re each going to have to deal with it in our own way, but in any case, Doug Braunstein, ladies and gentlemen.
I HAVE NOT FORSAKEN YOU WHALEDEMORT and we’ll talk about him in a bit when I can get my emotions in check but for now I guess we owe it to that handsome cherub to your left to talk about JPMorgan’s business a bit so let’s do that.
JPMorgan’s business: It is good! Records were set, expectations exceeded, the stock … um, opened down, but got better. (Then got worse again! I don’t know.) The other day I suggested that underwriting 30-year investment-grade bonds is sort of a bad business because you make 87.5bps now, but then your client is all set for 30 years, so it’s really only 3bps a year, which is not much compared to basically any other method of providing money to companies, except ironically actually lending them money (if they are high investment grade), which is just a pure loser. I more or less stand by that in a big-picture sense, but of course 30 years is well into IBGYBG territory and it feels great to make 87.5bps now, so now you’re happy. JPMorgan is I guess underwriting a lot of 30-year bonds; more to the point it’s underwriting a lot of 30-year mortgages.
A toy model you could have of the mortgage market is: Read more »
JPMorgan Sold An Equity Derivative To A Tulsa Oil Heiress Too Unsophisticated To Appreciate Its BeautyBy Matt Levine
A core belief here at Dealbreaker HQ is that we’d be really good rich people.1 No conservative 401(k)s and unborn-children-college-funds for us; we’d dedicate ourselves to lives of sybaritic excess. For me, that means that if someone wants to die and leave me an oil fortune, I’ll be putting Morandis on the wall, DRCs in the cellar, and variable prepaid forwards in the trust fund. Everyone needs a little beauty in their life, and also in their trust fund.
That must have been what motivated JPMorgan to pitch Skelly oil heiress and “acute stress syndrome” sufferer2 Ann Fletcher to enter into variable prepaid forwards on the Exxon Mobil stock in her trust. That or:
The value of the Trust prior to entering into the May 2000 VPF was $14,392,000. As of June 30, 2003, the sum of the Trust’s repayment obligations under the three VPFs had grown to $10,336,050. The value of the Trust at the time the Bank resigned as co-trustee [in March 2006] was $12,515,085.57. The Trust’s associated decline in principal was $1.88 million.
The Bank produced emails and spreadsheets to show that the Bank earned $1,127,189 from the VPFs. Expert testimony indicates that the Bank earned as much as $2,000,000 in profit.
So, I dunno, I feel like 7.8% in profits over 6 years is a not bad result on a pretty vanilla equity financing trade?
You can read the opinion, some of which strikes me as being pretty clearly wrong but hey I am not an Oklahoma trusts lawyer,3 here. Baaaaaasically there was a trust, and it had stock, and the idea was to pay the dividends of the stock to Fletcher during her lifetime and then, when she died, to give half the stock to her children and the other half to charity. At some point someone – JPMorgan? Fletcher? – conceived the idea that Fletcher should get much more money during her lifetime, basically by selling stock and pocketing the proceeds, leaving of course much less stock for the children and charity. So that happened. Read more »
JPMorgan Chase Chief Executive Jamie Dimon said his company has lost up to $10 billion as a result of the government asking him to buy teetering Wall Street firm Bear Stearns during the financial crisis. “Someone said the Fed did us a favor to finance some of this or something like that. No no no. We did them a favor,” Dimon said, speaking at a Council on Foreign Relations event. “I’m going to say we’ve lost $5 billion to $10 billion on various things related to Bear Stearns now. And yes, I put it in the unfair category,” the CEO added. [CNBC]