JP Morgan Sell Call On National Bank Of Greece

The following posting on Zero Hedge just needs to be highlighted:

After 70% Plunge, JPMorgan Cuts National Bank Of Greece From Buy To Sell

• This is Wall Street value added at its purest. The day when the stock price of National Bank of Greece (NBG) is trading within millimeters of its all time low set during the March 2009 lows, and following a 70% straight decline from highs hit in September of last year, JPMorgan analyst Paul Formanko has officially submitted his bid for the client wealth destroyer of the century title (despite the guaranteed shoe-in of every Goldman Sachs "sellside analyst" for this title), by downgrading the soon to be insolvent Greek firm (which as even Formanko acknowledges has >200% of core equity exposure to GGBs) from Overweight to Underweight. The stock which now trades at around €10/share was initiated by Paul with an Overweight in May 2008, a rating from which he has never wavered, with just his price target moving up and down. His most recent PT on NBG: €25/share. Yet something happened between yesterday and today: Paul decided that the firm is no longer worth his old price target... or even half of it. His new expected price: €9.80, a 60% discount for all those who were dumb enough to listen to Paul as recently as yesterday, not just when he slapped a €45 price target at initiation in May 2008, or a €36 PT in September of 2009. And just to prove that Paul is man of action, he has also gone and downgraded every single Greek bank in his coverage universe from Overweight or Neutral to Underweight with a comparable price target cut.

Do read the rest of the posting: here

Are You Pissed With The Bankers' Pay???

So they (JP Morgan) made $3.59 billion.

But get this.. they are setting aside $7.3 billion to pay their staff!

Which means the bank is on track to payout $29 billion in pay and bonus!!!!

Does this make sense?

WTF is wrong with our world today?

Where and what are they lawmakers doing?

Is the world really ruled by the bankers now???

Is any sane person out there who is NOT ANGRY WITH WHAT THESE BANKERS are doing?

Hell yes! I am utterly pissed!

Sigh.

JPMorgan heralds return to bumper bonuses

• JPMorgan Chase heralded a return to the golden days of Wall Street bonuses after delivering $3.59bn (£2.25bn) in profits and setting aside $7.3bn to pay staff.
  
  By James Quinn, US Business Editor
  Published: 4:01PM BST 14 Oct 2009
  
  The global banking conglomerate – best known in Britain as the parent company of investment bank JP Morgan – has now set aside $21.8bn in compensation for employees for the first nine months of the year. Should it keep it up, the bank will be on track to hand out as much as $29bn in pay and bonuses this year
  
  The news – combined with expected confirmation on Thursday that Goldman Sachs is on track to pay out as much as $22-23bn in its bonus pot this year – is likely to reignite the row over bankers' pay.
  
  Across the board, Wall Street banks are expected to collectively dole out more than $140bn by the end of the year, a record figure for the US banking sector, beating the previous high of 2007.
  
  JP Morgan Chase appears set to dole out as much as $29bn in compensation at the year-end, a 27pc rise on the last two years, when its total pay pool has amounted to approximately $22.7bn each year.
  
  This year’s bumper pay-out, which will be paid in mid to late December, is therefore likely to equate to $131,304 for each of the bank’s 220,861 employees, compared to a $100,906 pay-out for the 224,961staff the bank at the end of the last year.
  
  JP Morgan received $25bn in financial support from the US government, money it repaid in June, and has handed over a package of linked warrants to the Treasury, which will auction them off to the highest bidder by the end of the year.......

Posted this morning: Bankers To Be Paid Much, Much More In Bonuses!

JP Morgan Caught With Pants Down!

Highlighted by Jesse: J P Morgan Chase Caught Speculating with Customer Money

Money From Nothing And Are The Banks For Free?

On Bloomberg: JPMorgan $29 Billion WaMu Windfall Turned Bad Loans Into Income

• May 26 (Bloomberg) -- JPMorgan Chase & Co. stands to reap a $29 billion windfall thanks to an accounting rule that lets the second-biggest U.S. bank transform bad loans it purchased from Washington Mutual Inc. into income.
  
  Wells Fargo & Co., Bank of America Corp. and PNC Financial Services Group Inc. are also poised to benefit from taking over home lenders Wachovia Corp., Countrywide Financial Corp. and National City Corp., regulatory filings show. The deals provide a combined $56 billion in so-called accretable yield, the difference between the value of the loans on the banks’ balance sheets and the cash flow they’re expected to produce.
  
  Faced with the highest U.S. unemployment in 25 years and a surging foreclosure rate, the lenders are seizing on a four- year-old rule aimed at standardizing how they book acquired loans that have deteriorated in credit quality. By applying the measure to mortgages and commercial loans that lost value during the worst financial crisis since the Great Depression, the banks will wring revenue from the wreckage, said Robert Willens, a former Lehman Brothers Holdings Inc. executive who runs a tax and accounting consulting firm in New York.
  
  “It will benefit these guys dramatically,” Willens said. “There’s a great chance they’ll be able to record very substantial gains going forward.”
  
  When JPMorgan bought WaMu out of receivership last September for $1.9 billion, the New York-based bank used purchase accounting, which allows it to record impaired loans at fair value, marking down $118.2 billion of assets by 25 percent. Now, as borrowers pay their debts, the bank says it may gain $29.1 billion over the life of the loans in pretax income before taxes and expenses.
  
  Purchase Accounting
  
  The purchase-accounting rule, known as Statement of Position 03-3, provides banks with an incentive to mark down loans they acquire as aggressively as possible, said Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine.
  
  “One of the beauties of purchase accounting is after you mark down your assets, you accrete them back in,” Cassidy said. “Those transactions should be favorable over the long run.”
  
  JPMorgan bought WaMu’s deposits and loans after regulators seized the Seattle-based thrift in the biggest bank failure in U.S. history. JPMorgan took a $29.4 billion writedown on WaMu’s holdings, mostly for option adjustable-rate mortgages and home- equity loans.
  
  “We marked the portfolio based on a number of factors, including housing-price judgment at the time,” said JPMorgan spokesman Thomas Kelly. “The accretion is driven by prevailing interest rates.”
  
  Wachovia ARMS
  
  JPMorgan said first-quarter gains from the WaMu loans resulted in $1.26 billion in interest income and left the bank with an accretable-yield balance that could result in additional income of $29.1 billion.
  
  Wells Fargo arranged the $12.7 billion purchase of Wachovia in October, as the Charlotte, North Carolina-based bank was sinking from $122 billion in option ARMs. As of March 31, San Francisco-based Wells Fargo had marked down $93 billion of impaired Wachovia loans by 37 percent. The expected cash flow was $70.3 billion.
  
  The Wachovia loans added $561 million to the bank’s first- quarter interest income, leaving Wells Fargo with a remaining accretable yield of almost $10 billion.
  
  Government efforts to reduce mortgage rates and stabilize the housing market may make it easier for borrowers to repay loans and for banks to realize the accretable yield on their books. With mortgage rates below 5 percent, originations surged 71 percent in the first quarter from the fourth, a pace that may accelerate during 2009, said Guy Cecala, publisher of Inside Mortgage Finance in Bethesda, Maryland.
  
  Recapturing Writedowns
  
  Wells Fargo, the biggest U.S. mortgage originator, doubled home loans in the first quarter from the previous three months, in part through refinancing Wachovia loans.
  
  “To the extent that the customers’ experience is better or we can modify the loans, and the loans become more current, that could help recapture some of the writedown,” Wells Fargo Chief Financial Officer Howard Atkins said in an April 22 interview.
  
  Banks still face the risk that defaults may exceed expectations and lead to further writedowns on their purchased loans. Foreclosure filings in the U.S. rose to a record for the second straight month in April, climbing 32 percent from a year earlier to more than 342,000, data compiled by Irvine, California-based RealtyTrac Inc. show.
  
  Accretable Yield
  
  The companies bought by Wells Fargo, JPMorgan, PNC and Bank of America were among the biggest lenders in states with the highest foreclosure rates, including California, Florida and Ohio. Housing prices tumbled the most on record in the first quarter, leaving an increasing number of borrowers owing more in mortgage payments than their homes are worth, according to Zillow.com, an online property data company.
  
  “We’ve still got a lot of downside to work through this year and probably through at least part of next,” said William Schwartz, a credit analyst at DBRS Inc. in New York. “If I were them, I wouldn’t be claiming any victory yet.”
  
  The difference in accretable yield from bank to bank is due to the amount of impaired loans, the credit quality of the acquired assets and the state of the economy when the deals were completed. Rising and falling interest rates also affect accretable yield for portfolios with adjustable-rate loans.
  
  PNC closed its $3.9 billion acquisition of National City on Dec. 31, after the Cleveland-based bank racked up more than $4 billion in losses tied to subprime loans. PNC, based in Pittsburgh, marked down $19.3 billion of impaired loans by 38 percent, or $7.4 billion, and said it expected to recoup half of the writedown. After gaining $213 million in interest income in the first quarter and making some adjustments, the company has an accretable-yield balance of $2.9 billion.
  
  ‘Being Prudent’
  
  “We’re just being prudent,” PNC Chief Financial Officer Richard Johnson said in a May 19 interview.
  
  Johnson said he expects the entire accretable yield to result in earnings. The company has taken into “consideration everything that can go wrong with the economy,” he said.
  
  Bank of America, the biggest U.S. bank by assets, has potential purchase-accounting income of $14.1 billion, including $627 million of gains from Merrill Lynch & Co. and the rest from Countrywide. Bank of America bought subprime lender Countrywide in July, two months before the financial crisis forced Lehman Brothers into bankruptcy and WaMu into receivership.
  
  As market losses deepened, Bank of America had to reduce the returns it expected the impaired loans to produce from an original estimate of $19.6 billion.
  
  Countrywide Marks
  
  “The Countrywide marks in hindsight weren’t nearly as aggressive,” said Jason Goldberg, an analyst at Barclays Capital in New York, who has “equal weight” investment ratings on Bank of America and PNC and “overweight” recommendations for Wells Fargo and JPMorgan.
  
  Bank of America spokesman Jerry Dubrowski declined to comment.
  
  The discounted assets purchased by JPMorgan and Wells Fargo make the stocks more attractive because they will spur an acceleration in profit growth, said Chris Armbruster, an analyst at Al Frank Asset Management Inc. in Laguna Beach, California.
  
  “There’s definitely going to be some marks that were taken that were too extreme,” said Armbruster, whose firm oversees about $375 million. “It gives them a huge cushion or buffer to smooth out earnings.”
  
  

Recommendation From Warren Buffett!

Lazy Saturday once more.

LOL! And a thousand apologies for the cheesy and misleading title.

To understand what had cause the current financial crisis, here is the letter that Warren Buffett recommended during Berkshire Annual meeting.

JP Morgan Chase 2008 Shareholder Letter

• III. FUNDAMENTAL CAUSES AND CONTRIBUTIONS TO THE FINANCIAL CRISIS
  
  After Lehman’s collapse, the global financial system went into cardiac arrest. There is much debate over whether Lehman’s crash caused it – but looking back, I believe the cumulative trauma of all the aforementioned events and some large flaws in the financial system are what caused the meltdown. If it hadn’t been Lehman, something else would have been the straw that broke the camel’s back.
  
  The causes of the financial crisis will be written about, analyzed and subject to historical revisions for decades. Any view that I express at this moment will likely be proved incomplete or possibly incorrect over time. However, I still feel compelled to attempt to do so because regulation will be written soon, in the next year or so, that will have an enormous impact on our country and our company. If we are to deal properly with this crisis moving forward, we must be brutally honest and have a full understanding of what caused it in the first place. The strength of the United States lies not in its ability to avoid problems but in our ability to face problems, to reform and to change. So it is in that spirit that I share my views.
  
  Albert Einstein once said, “Make everything as simple as possible, but not simpler.” Simplistic answers or blanket accusations will lead us astray. Any plan for the future must be based on a clear and comprehensive understanding of the key underlying causes of – and multiple contributors to – the crisis, which include the following:
  
  • The burst of a major housing bubble
  • Excessive leverage pervaded the system
  • The dramatic growth of structural risks and the unanticipated damage they caused
  • Regulatory lapses and mistakes
  • The pro-cyclical nature of virtually all policies, actions and events
  • The impact of huge trade and financing imbalances on interest rates, consumption and speculation
  
  Each main cause had multiple contributing factors. As I wrote about these causes, it became clear to me that each main cause and the related contributors could easily be rearranged and still be fairly accurate.
  
  It was also surprising to realize that many of the main causes, in fact, were known and discussed abundantly before the crisis. However, no one predicted that all of these issues would come together in the way that they did and create the largest financial and economic crisis of our lifetime.
  
  Even the more conservative of us, and I consider myself to be among them, looked at the past major crises (the 1974, 1982 and 1990 recessions; the 1987 and 2001 market crashes) or some mix of them as the worstcase events for which we needed to be prepared. We even knew that the next one would be different – but we missed the ferocity and magnitude that was lurking beneath. It also is possible that had this crisis played out differently, the massive and multiple vicious cycles of asset price reductions, a declining economy and a housing price collapse all might have played out differently – either more benignly or more violently.
  
  It is critical to understand that the capital markets today are fundamentally different than they were after World War II. This is not your grandfather’s economy. The role of banks in the capital markets has changed considerably. And this change is not well-understood – in fact, it is fraught with misconceptions. Traditional banks now provide only 20% of total lending in the economy (approximately $14 trillion of the total credit provided by all financial intermediaries). Right after World War II, that number was almost 60%. The other lending has been provided by what many call the “shadow banking” system. “Shadow” implies nefarious and in the dark, but only part of this shadow banking system was in the dark (i.e., SIVs and conduits) – the rest was right in front of us. Money market funds, which had grown to $4 trillion of assets, directly lend to corporations by buying commercial paper (they owned $700 billion of commercial paper).
  
  Bond funds, which had grown to approximately $2 trillion, also were direct buyers of corporate credit and securitizations. Securitizations, which came in many forms (including CDOs, collateralized loan obligations and commercial mortgage-backed securities), either directly or indirectly bought consumer and commercial loans. Asset securitizations simply were a conduit by which investment and commercial banks passed the loans onto the ultimate buyers.
  
  In the two weeks after the Lehman bankruptcy, money market and bond funds withdrew approximately $700 billion from the credit markets. They did this because investors (i.e., individuals and institutions) withdrew money from these funds. At the same time, bank lending actually went up as corporations needed to increasingly rely on their banks for lending. With this as a backdrop, let’s revisit the main causes of this crisis in more detail.

You need to read the rest of the letter in detail to understand the main causes Jamie is talking about here. It's a real good read.

For example Jamie talks on how and why JP Morgan fared better. See page 10.

• We didn’t write option ARMs (adjustable rate mortgages) because we did not think they were a consumer-friendly product. Although we made plenty of mistakes in the mortgage business, this was not one of them.

And on CDOs.

• We never built up the structured finance business. While we are a large player in the asset-backed securities market, we deliberately avoided the structured collateralized debt obligation (CDO) business because we believed the associated risks were too high. Structured finance in its most complicated forms, such as “CDO-squared,” has largely disappeared after unleashing a myriad of problems on the financial system. They will not be missed.

And lastly, the financial commandment!

• We avoided short-term funding of illiquid assets, and we essentially do not rely on wholesale funding. (Of our $1 trillion of deposits, approximately $300 billion is referred to as “wholesale,” but it essentially is comprised of deposits that corporate clients leave with us in the normal course of business – i.e., they are “sticky” and not like brokered certificates of deposit or “hot money” that move on a whim for one basis point.) Simply put, we still follow the financial commandment: Do not borrow short to invest long.

Did JP Morgan Got 'Bailed Out'??

On today's FinancialSense market wrap commentary, market commentator Rob Kirby wrote a highly interesting piece called, And the Band Played On

The following passages were most interesting.

• Late last week, I wrote about a very strange occurrence – the reporting of J.P. Morgan “transferring” 138 billion dollars to Lehman, after Lehman had already filed for Chapter 11 bankruptcy early last Monday morning.
  
  This bears repeating.
  
  The advance was reportedly “to allow” Lehman to settle securities trades with clients. J.P. Morgan was then immediately reimbursed by the Federal Reserve for the same 138 billion.
  
  What was not originally reported, or likely not understood at the time due to the types of securities that Lehman did most of their business in [Credit Derivatives], it is a virtual certainty that J.P. Morgan [the largest derivatives player in the world with 8.1 Trillion in Credit Derivatives alone] was the “client” [the other side of the Lehman trades that needed to be settled].
  
  The critical piece of information that completes the daisy-chain: The world only learned about J.P. Morgan’s 138 billion advance from a bankruptcy court document, where Lehman was asking the court for the authority to give the settlement of claims of J.P. Morgan “special status.”
  
  Here’s how this flow-of-funds looks visually:
  
  
  It is highly likely [or a certainty on my planet] that J.P. Morgan was INSOLVENT and was “BAILED OUT” last Monday, September 15, to the tune of 138 billion dollars. This would explain why the Fed and Treasury dictated that Lehman fail – to disguise or otherwise obfuscate the recapitalization of or illicit transfer of 138 billion to A MUCH SICKER, TEETERING ENTITY, J.P. Morgan Chase.
  
  This makes sense. Investment banks are dropping like flies, owing to their involvement in credit derivatives – this is a fact.
  
  J. P. Morgan is – HANDS DOWN – the largest derivatives player in the world with a book of 90 Trillion in notional value on March 31, 2008 – with 9% of the book composed of Credit Derivatives. That amounts to a cool 8.1 Trillion worth of Credit Derivatives. We know this from the Office of the Comptroller of the Currency’s Quarterly Derivatives Report – pg. 24.

read rest of his article here ...

Some Bear Issues

Posted on CNBC JP Morgan Agrees to Buy Bear Stearns for $2 a Share

• JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2 million--or $2 a share--a stunning collapse for one of the world's largest and most venerable investment banks. The last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system

$2 a share?

Here's an interesting point from Bloomberg news. JPMorgan Chase Buys Bear Stearns for $270 Million

• Joseph Lewis, the second-largest shareholder in Bear Stearns Cos., wasn't planning to reduce his stake, a person close to him said March 11. Lewis, a 71-year-old billionaire, has put in more than $1 billion into the firm since September, paying as much as $150 for a share.

Mr. Lewis isn't going to be happy camper!

And one of the big issue is on the current bailout of Bear Stearns. One of the interesting comments was from John Mauldin's piece, Muddle Through and Your Long Term Returns , posted on the weekend.

• The next crisis? I read a very chilling piece from Michael Lewitt this morning. He speculates on what if the rumors were true that Bear Stearns is basically bankrupt. Bear is in the too big to fail category. They are at the heart of the chain of Credit Default Swaps which run like fault lines throughout the world's financial system. If Bear were allowed to collapse, it would simply cascade throughout the world so fast it would truly make the current level of the credit crisis seem small potatoes.
  
  So, why can I be so sanguine? Because the regulators (the Fed and the SEC) would step in and whatever large bank was failing would be merged or bought very fast. Liquidity and assets would be provided. The Fed and the rest of the world's central banks get that we are in a crisis. They will do what is necessary. Those of us sitting in the cheap seats in the back of the plane may not like it, as it will look like a bailout of the big guys who caused the problem, but you have to maintain the integrity of the system. A hedge fund here or there can go, but not one of the world's premier banks.

And of course the most interesting piece was Who Traded 55,000 Bear $30 Puts Tuesday?

• This past Tuesday, when Bear Stearns(BSC - Cramer's Take - Stockpickr) was trading around $65 a share, there was huge put volume in the March $30 strike. Over 55,000 contracts traded that day at an average price of 15 cents a contract. This is an extremely unusual trade in terms of the number of contracts and how far out-of-the money those options were at the time. This begs the question of why someone would execute such a transaction.

!!!!

• First, it's important to understand that buying a put gives you the right to sell the stock at the strike price. So to buy a put that requires the stock to decline over 50% is essentially a bet that the company is possibly on the brink of going out of business or about to deliver some terrible news.
  
  Remember, these options expire on March 20, so that left only 10 days for some event to occur that would cause these puts to go into the money and have some value. So it appears that as rumors began swirling early in the week that Bear was having liquidity problems and might possibly be bordering on insolvent, someone took that to heart and bought the puts as disaster insurance. And today came news that several banks, including Goldman Sachs (GS - Cramer's Take - Stockpickr), would no longer act as a counterparty to any transactions with Bear. The inability to execute trades would essentially put Bear Stearns out of business.

Incredible!

Yes, some trader just made insane money (easily over 20 million!)... but comeon... surely they 'knew'!!!!!

Btw where is Auntie Martha?