Infinite Unknown

Reporting from New York — JPMorgan Chase & Co. said Monday that it would cut 9,200 jobs at Washington Mutual Bank, which it acquired Sept. 25 after WaMu became the nation’s largest bank to fail amid the continuing credit crisis.

The most cuts will come at Washington Mutual’s Seattle headquarters, where 3,400 pink slips are going out, and at the bank’s San Francisco center, where 1,600 jobs are being eliminated, JPMorgan spokesmen said.

The other 4,200 firings will be spread throughout the United States, with fewer than 300 in Southern California, they said.

No branch closures are planned in California as JPMorgan integrates Washington Mutual, so retail customers in the state will continue to see the same faces as always, the spokesmen said.

Continue reading »

Tags: Banks, Credit Crisis, Credit Crunch, Economy, JPMorgan, Unemployment, Washington Mutual

On Friday November 21, the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events with whom we have contact. The trigger was the bank which only two years ago was America’s largest, Citigroup. The size of the US Government de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major US and perhaps European banks thought to be ‘too big to fail.’

The clumsy way in which US Treasury Secretary Henry Paulson, himself not a banker but a Wall Street ‘investment banker’, whose experience has been in the quite different world of buying and selling stocks or bonds or underwriting and selling same, has handled the unfolding crisis has been worse than incompetent. It has made a grave situation into a globally alarming one.

‘Spitting into the wind’

A case in point is the secretive manner in which Paulson has used the $700 billion in taxpayer funds voted him by a labile Congress in September. Early on, Paulson put $125 billion in the nine largest banks, including $10 billion for his old firm, Goldman Sachs. However, if we compare the value of the equity share that $125 billion bought with the market price of those banks’ stock, US taxpayers have paid $125 billion for bank stock that a private investor could have bought for $62.5 billion, according to a detailed analysis from Ron W. Bloom, economist with the US United Steelworkers union, whose members as well as pension fund face devastating losses were GM to fail.

Continue reading »

Tags: AIG, Bailout, Banks, Bush administration, Chrysler, Citigroup, Derivatives, Derivatives market, Dollar, Economy, FDIC, Financial Crisis, Ford, General Motors, GM, Government, Henry Paulson, Lehman Brothers, Politics, Stock Market, Taxpayers, Treasury, U.S., Wachovia, Wall Street, Washington Mutual

This Is Not A Normal Recession

Moving on to Plan B

“The Winter of 2008-2009 will prove to be the winter of global economic discontent that marks the rejection of the flawed ideology that unregulated global financial markets promote financial innovation, market efficiency, unhampered growth and endless prosperity while mitigating risk by spreading it system wide.” Economists Paul Davidson and Henry C.K. Liu “Open Letter to World Leaders attending the November 15 White House Summit on Financial Markets and the World Economy”

The global economy is being sucked into a black hole and most Americans have no idea why. The whole problem can be narrowed down to two words; “structured finance”.

Continue reading »

Tags: AIG, Banks, Bear Stearns, Ben Bernanke, Bubble, Credit Crisis, Credit Crunch, Derivatives, Derivatives market, Economy, Fannie Mae, Fed, Federal Reserve, Freddie Mac, Great Depression, Henry Paulson, Lehman Brothers, mortgage crisis, Mortgages, Politics, Recession, Stock Market, Taxpayers, Treasury, Wall Street, Washington Mutual

Oct. 25 (Bloomberg) — Alpha Bank & Trust in Alpharetta, Georgia, with $346 million in deposits, was seized by regulators and closed as the collapse of the housing market and loan defaults claimed a 16th U.S. bank this year.

Alpha, with $354 million in assets, was shut by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. sold the deposits to Stearns Bank N.A., of St. Cloud, Minnesota. Alpha’s two offices north of Atlanta will open on Oct. 27 as branches of Stearns Bank, the FDIC said yesterday.

Regulators have closed the most banks in 15 years, and the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. were among the biggest in history. About 4.4 percent of Alpha’s assets were defaulted real-estate loans it took back on its balance sheet, quadruple the total for most U.S. banks, based on data compiled by Charlottesville, Virginia-based SNL Financial.

Continue reading »

Tags: Bank of America, Banks, Bear Stearns, Citigroup, Economy, FDIC, Goldman Sachs, JPMorgan, Merrill Lynch, Morgan Stanley, Treasury, Washington Mutual, Wells Fargo & Co.

Oct. 22 (Bloomberg) — Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system.

The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves against losses after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.

“We’ll see the same problems we’ve seen in subprime,” said Alistair Milne, a professor in banking and finance at Cass Business School in London and a former U.K. Treasury economist. “Banks will take substantial markdowns.”

The collapse of Lehman Brothers, Washington Mutual Inc. and the three banks in Iceland prompted Susquehanna Bancshares Inc., a Lititz, Pennsylvania-based lender, to lower the value of $20 million in so-called synthetic CDOs by almost 88 percent last week.

Continue reading »

Tags: Banks, Barclays, Derivatives, Derivatives market, Economy, Financial Crisis, Iceland, Lehman Brothers, mortgage crisis, Mortgages, Recession, Standard & Poor's, Washington Mutual

A sign at a Washington Mutual Bank (WaMu) branch is shown in San Francisco, California September 26, 2008. REUTERS/Robert Galbraith

NEW YORK (Reuters) - Federal investigators have opened an investigation into the collapse of Washington Mutual Inc, the largest U.S. banking failure.

Jeffrey Sullivan, U.S. attorney for the western district of Washington, said in a statement on Wednesday that he has set up a task force that includes investigators from the FBI, the U.S. Securities and Exchange Commission, the Federal Deposit Insurance Corp and the Internal Revenue Service’s criminal investigations unit.

“Given the significant losses to investors, employees and our community, it is fully appropriate that we scrutinize the activities of the bank, its leaders and others to determine if any federal laws were violated,” Sullivan said in a statement. He said the probe comes on the heels of “intense public interest in the failure of Washington Mutual.”

Continue reading »

Tags: Bank Failure, Bankruptcy, Banks, Credit Crisis, Credit Crunch, Economy, FBI, FDIC, Government, investigation, JPMorgan, mortgage crisis, Mortgages, U.S., Washington Mutual

Oct. 15 (Bloomberg) — JPMorgan Chase & Co., the largest U.S. bank by market value, said third-quarter profit fell 84 percent on about $5.8 billion of writedowns, losses and credit provisions.

Net income dropped to $527 million, or 11 cents a share, from $3.4 billion, or 97 cents, a year earlier, the New York- based bank said today in a statement. Shares of the company rose as earnings beat the 18-cent loss analysts predicted on average in a survey by Bloomberg.

JPMorgan took $18.8 billion of writedowns and credit costs before today, less than a third of what Wachovia Corp. and Citigroup Inc. reported. Chief Executive Officer Jamie Dimon has capitalized on the market crisis by taking over Bear Stearns Cos. and Washington Mutual Inc. as they collapsed earlier this year. JPMorgan will get $25 billion from the U.S. government under a bank rescue plan announced yesterday.

Continue reading »

Tags: Bank of America, Banks, Citigroup, Credit Crisis, Credit Crunch, Economy, JPMorgan, Morgan Stanley, mortgage crisis, Mortgages, Stock Market, Wall Street, Washington Mutual, Wells Fargo & Co.

Fearing a loss of funding over the weekend, the FDIC forced the sale.

10/02/08 Downtown Charlotte skyline showing the Wachovia First Street Campus headquarters project under construction. DAVIE HINSHAW of the Observer from WCNC’s AirStar36

On Friday, with its stock plunging 27 percent, Wachovia experienced a “silent run” on deposits, but the bigger worry for regulators was that other banks wouldn’t provide the Charlotte bank with necessary short-term funding when it opened for business Monday, sources familiar with the situation told the Observer.

With Wachovia already looking for a merger partner, the Federal Deposit Insurance Corp., in consultation with other regulators, required the bank to reach a sale to Citigroup on Monday morning.

The FDIC, for the first time, used legislative authority created in 1991 to help it deal with a “very large complex bank failure” on short notice. It requires approval from heavy hitters - two-thirds of FDIC board members, two-thirds of Federal Reserve board members as well as the Treasury secretary, who must consult with the president.

“When Wachovia opened Monday it would not have had a source of liquidity,” a source familiar with the situation said. “It really could not have opened under those circumstances. That’s why (the FDIC) put together the assistance package.”

Continue reading »

Tags: Bank Failure, Banks, Citigroup, Economy, FDIC, Fed, Federal Reserve, George Bush, Henry Paulson, Politics, Treasury, U.S., Washington Mutual

Studies show that people often fear the wrong things. We are terrified of things which probably won’t hurt us, but blissfully unconcerned with things that might really kill us (see this, this and this). So we put a tremendous amount of energy into solving non-problems, and get blindsided by things that we don’t know about or which we are too afraid to even think about.

The same applies to the economic crisis.

For example, the market for credit default swaps is larger than the entire world economy.

Credit default swaps - which were largely responsible for bringing down Bear Stearns, AIG, WaMu and other mammoth corporations - are now being taken out against the U.S. government.

So you’d think that politicians trying to prop up the teetering U.S. economy would want to cancel credit default swaps, or at least declare their value is somewhere near zero.

Nope . . . not even on their discussion list, even though it is the real economic crisis.

Instead, they are proposing things which most experts say will actually harm the economy.

Call congress and tell them to stop their political posturing, stop ignoring the derivatives elephant in the room, and either do something useful or nothing at all.

Posted by George Washington at 1:08 PM
Wednesday, October 1, 2008

Source: George Washington’s Blog

Tags: AIG, Bailout, Bear Stearns, Credit Crisis, Credit Crunch, Derivatives, Derivatives market, Economy, Government, Henry Paulson, mortgage crisis, Mortgages, Politics, Treasury, U.S., Washington Mutual

JPMorgan Buys WaMu Bank Business as Thrift Seized

Sept. 25 (Bloomberg) — JPMorgan Chase & Co., the third- biggest U.S. bank by assets, agreed to acquire Washington Mutual Inc.’s deposits and branches for $1.9 billion after regulators seized the thrift in the biggest bank failure in U.S. history.

Customers withdrew $16.7 billion from WaMu accounts since Sept. 16, leaving the Seattle-based bank “unsound,” the Office of Thrift Supervision said today. WaMu’s branches will open tomorrow and customers will have full access to all their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said on a conference call.

WaMu’s fate played out as Congress debated an accord to end the global credit crunch that drove Lehman Brothers Holdings Inc. and IndyMac Bancorp out of business and led to the hastily arranged rescues of Merrill Lynch & Co. and Bear Stearns Cos., which was itself absorbed by JPMorgan. WaMu in March rebuffed a takeover offer from JPMorgan Chief Executive Officer Jamie Dimon that WaMu valued at $4 a share.

Continue reading »

Tags: Bank Failure, Banks, Congress, Credit Crisis, Credit Crunch, Economy, FDIC, JPMorgan, Lehman Brothers, Merrill Lynch, mortgage crisis, Mortgages, Politics, Washington Mutual