Infinite Unknown

Nov. 20 (Bloomberg) — JPMorgan Chase & Co., the largest U.S. bank, plans to fire about 10 percent of its investment banking staff, or about 3,000 people, as the global economy slides into recession, a person familiar with the bank said.

The reductions are in line with New York-based JPMorgan’s rivals, including Goldman Sachs Group Inc., which said it will eliminate about 10 percent of staff. JPMorgan’s cuts will be global and include various groups within the investment bank, the person said, speaking anonymously because the news isn’t yet public. Some employees at the New York-based firm have been notified.

“There are aggressive cuts going on everywhere,” said Rupert Della-Porta, the London-based chief operating officer of research firm Atlantic Equities. “There are marked differences between business conditions now and the forward views that even the most conservative managers had. JPMorgan has to right-size their business model.”

JPMorgan also plans to freeze base salaries next year for most employees who earn more than $60,000 to $70,000, another person said. Tasha Pelio, a spokeswoman for JPMorgan declined to comment. JPMorgan’s decision to fire employees was reported earlier by the Sunday Telegraph and Reuters.

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Tags: Banks, Deutsche Bank, Economy, Goldman Sachs, JPMorgan, Recession, U.S., Unemployment, Wall Street

Pedestrians are reflected in the window of a Citibank branch in Hong Kong’s financial Central District November 18, 2008. REUTERS/Bobby Yip

(Reuters) - The U.S. financial system still needs at least $1 trillion to $1.2 trillion of tangible common equity to restore confidence and improve liquidity in the credit markets, Friedman Billings Ramsey analyst Paul Miller said.

Eight financial companies — Citigroup Inc, Morgan Stanley, Goldman Sachs Group Inc, Wells Fargo & Co, JPMorgan Chase & Co, American International Group Inc, Bank of America Corp and GE Financial — are in greatest need of capital, he said.

“Debt or TARP capital is not true capital. Long-term debt financing is not the solution. Only injections of true tangible common equity will solve the current crisis,” he said in a note dated November 19.

Currently, the U.S. financial system has $37 trillion of debt outstanding, he noted.

Combined, these eight companies have roughly $12.2 trillion of assets and only $406 billion of tangible common capital, or just 3.4 percent, the analyst said in his note to clients.

Miller said these institutions need somewhere between $1 trillion and $1.2trillion of capital to put their balance sheets back on solid ground and begin to extend credit again, given their dependence on short-term funding and the illiquid nature of their asset bases.

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Tags: AIG, Bank of America, Banks, Citigroup, debt, Economy, financial crisis, Goldman Sachs, Government, JPMorgan, Liquidity, Morgan Stanley, Politics, U.S., Wall Street, Wells Fargo & Co.

One hundred riyal notes at a bank in Riyadh, the Saudi Arabian capital. The US has asked four oil-rich Gulf states for close to US$300 billion to help it curb the global financial meltdown, Kuwait’s daily Al-Seyassah has reported.
(AFP/File/Hassan Ammar)

KUWAIT CITY (AFP) - The United States has asked four oil-rich Gulf states for close to 300 billion dollars to help it curb the global financial meltdown, Kuwait’s daily Al-Seyassah reported Thursday.

Quoting “highly informed” sources, the daily said Washington has asked Saudi Arabia for 120 billion dollars, the United Arab Emirates for 70 billion dollars, Qatar for 60 billion dollars and was seeking 40 billion dollars from Kuwait.

Al-Seyassah said Washington sought the amount as “financial aid” to face the fallout of the financial crisis and help prevent its economy from sliding into a painful recession.

The daily said the United States plans to use the funds to help the ailing automobile industry , banks and other companies suffering from the global financial turmoil.

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Tags: Banks, Economy, financial crisis, Government, Kuwait, Meltdown, OPEC, Politics, Qatar, Saudi Arabia, U.S.

Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.

CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved.

Try $4.28 trillion dollars. That’s $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources*.

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Tags: bailout, Banks, Economy, Fed, Federal Reserve, financial crisis, Government, Politics, taxpayers, Treasury

‘But, but, but … that money was only for my friends on Wall Street and not for the people.’
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Henry Paulson, U.S. treasury secretary, left, and Ben S. Bernanke, chairman of the U.S. Federal Reserve, right, listen during a hearing of the House Financial Services Committee in Washington, on Nov. 18, 2008. Photographer: Jim Lo Scalzo/Bloomberg News

Nov. 18 (Bloomberg) — Treasury Secretary Henry Paulson rejected using the government’s financial-rescue program as a “panacea” for economic difficulties, clashing with lawmakers who want the funds to help beleaguered homeowners.

“The rescue package was not intended to be an economic stimulus or an economic recovery package,” Paulson said in testimony to the House Financial Services Committee in Washington. The Troubled Asset Relief Program was designed to stabilize financial markets and the flow of credit and “is not a panacea for all our economic difficulties.”

Representative Barney Frank, who heads the House panel, cut off Paulson during the question-and-answer session, saying “the bill couldn’t have been clearer” in also being aimed at reducing foreclosures. Paulson told lawmakers he has no plans to use the second half of the $700 billion program, indicating it will be up to the incoming Obama administration to resolve the matter.

“We don’t have a lot of time and I don’t usually do this,” Frank said in interrupting Paulson during an exchange on how to deploy TARP cash. “I read sections of the bill that says — write it down — give them assistance,” Frank, a Massachusetts Democrat, told the Treasury chief.

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Tags: bailout, Banks, Ben Bernanke, Chrysler, Congress, Economy, Fed, Federal Reserve, Ford, Foreclosures, General Motors, GM, Government, Henry Paulson, Politics, Treasury, U.S.

New York City-based bank unveils massive layoff plan — the latest step by the embattled firm to slim down in response to the economic slowdown.

NEW YORK (CNNMoney.com) — Citigroup said Monday it planned to cut more than 50,000 jobs, the latest move by the struggling bank to cut costs in order to weather the credit crisis plaguing Wall Street

In an investor presentation on its Web site, the company said it would reduce its staff levels to approximately 300,000 employees. As of the end of September, the New York City-based bank had about 352,000 workers.

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Tags: Banks, Citigroup, Economy, financial crisis, JPMorgan, Stock Market, U.S., Wall Street

Swiss banking giant UBS, under investigation by the U.S. government for allegedly helping Americans hide money from the Internal Revenue Service, is closing thousands of accounts, putting clients at greater risk of being exposed, tax lawyers say.

UBS clients have been receiving calls and letters telling them that their Swiss accounts will soon be liquidated. Those who have concealed funds from the IRS have two basic choices: They can take new and potentially difficult steps to hide the money, heightening their risk of being caught and punished severely, or they can come clean, lawyers say.

The backdrop for UBS’s action is that the U.S. government has been pressing UBS and the Swiss government to disclose the names of thousands of Americans with undeclared accounts, while the Swiss have vowed to uphold Swiss legal protections for bank clients.

However, as a practical matter, whether or not the Swiss formally give up the names, UBS’s decision to close the accounts undermines Switzerland’s legendary code of bank secrecy, lawyers said.

“I think the bank’s actions here are likely to compel clients to come out into the open,” said Scott D. Michel, an attorney with the law firm Caplin & Drysdale. “It is a step in the direction of the erosion of bank secrecy,” he said.

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Tags: Banks, Economy, Government, IRS, Politics, Switzerland, U.S., UBS

The administrators of the UK and European arm of bankrupt investment bank Lehman Brothers are making better money than the bankers.

Lehman’s administrators paid more than the bankers

PricewaterhouseCoopers, which has around 300 employees working on the Lehman administration, is being paid £4m a week, the accounting firm revealed yesterday. By contrast, the monthly wage bill for Lehman’s remaining 1,100 bankers is £8m - £2m a week - though that does not include planned “small retention bonuses”.

PwC has been in charge for nine weeks, taking the cost of the administration so far to £45m. Tony Lomas, the PwC partner leading the process, said it was impossible to estimate the final bill but “it’s going to be an expensive process”.

Asked about timing, he drew comparisons with the administration of Enron’s UK operations, on which he also worked. “We’re still doing bits and pieces on Enron. [That's] seven years old. This is 10 times as big and much more complicated,” Mr Lomas said. At the current rate, the final Lehman bill after seven years would be £1.4bn.

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Tags: Banks, Economy, Lehman Brothers

The federal government began the new budget year with a record deficit of $237.2 billion, reflecting the billions of dollars the government has started to pay out to rescue the financial system.

The Treasury Department said Thursday that the deficit for the first month in the new budget year was the highest monthly imbalance on record. It was far bigger than analysts expected, over four times larger than the October 2007 deficit of $56.8 billion, and more than half the total for all of last year.

The big surge reflected the government spending $115 billion to buy stock in the nation’s largest banks. Those were the first payments made from the $700 billion government rescue program passed by Congress to deal with the most severe financial crisis to hit the country since the 1930s.

The October deficit began a period in which economists are forecasting the red ink for the entire year could well hit $1 trillion, reflecting what many expect to be a severe recession, which will depress tax revenue, and the heavy costs of the financial system bailout.

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Tags: Banks, Barack Obama, Bush administration, Congress, Economy, financial crisis, Government, Politics, Treasury

Nov. 13 (Bloomberg) — Members of Congress, taxpayers and investors urged the Federal Reserve to provide details of almost $2 trillion in emergency loans and the collateral it has accepted to protect against losses.

At least five Republican members of Congress yesterday called for the Fed to disclose which financial institutions are borrowing taxpayer money and what troubled assets the central bank is accepting as collateral. More than 300 more investors and taxpayers also pressed for more disclosure in e-mails and interviews with Bloomberg News.

“There cannot be accountability in government and in our financial institutions without transparency,” Texas Senator John Cornyn said in a statement. “Many of the financial problems we are facing today are the direct result of too much secrecy and too little accountability.”

House Republican Leader John Boehner and Republican Representatives Jeb Hensarling of Texas, Scott Garrett of New Jersey and Walter Jones of North Carolina also are pressing Fed Chairman Ben S. Bernanke to elaborate on the Fed’s emergency lending. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in the separate $700 billion bailout of the banking system that was approved by Congress last month.

European Central Bank President Jean-Claude Trichet today urged greater disclosure to help strengthen the global financial system.

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Tags: Banks, Ben Bernanke, Congress, ECB, Economy, Fed, Federal Reserve, financial crisis, Government, Henry Paulson, Politics, taxpayers, Treasury, Trichet, U.S.