Thursday, July 15, 2010


July 15, 2010
JPMorgan Chase Exceeds ForecastsBy ERIC DASH
JPMorgan Chase & Company kicked off earnings season for the nation’s big banks on Thursday with news of a strong gain in second-quarter profit.

After powering ahead for the last year on the strength of its Wall Street trading operations, JPMorgan said its net income rose 76 percent, to $4.8 billion, from $2.7 billion in the period a year earlier. Earnings rose to $1.09 a share, from 28 cents.

The results benefited from a one-time release of $1.5 billion in loan loss reserves.

JPMorgan shares, however, were down 1.4 percent, as concerns about weak manufacturing pushes the entire market lower.

Revenue declined 8 percent, to $25.6 billion, in the second quarter, from $27.7 billion in the period a year ago.

The results — which exceeded of analysts’ expectations of 70 cents a share — were the start of a rush of quarterly results from major banks. Citigroup and Bank of America are scheduled to report results on Friday, with Goldman Sachs, Morgan Stanley and Wells Fargo to follow next week.

JPMorgan emerged from the global financial crisis bigger, stronger and healthier than many rivals. But like other big banks, it still confronts fallout from the recession, with potential losses on its portfolio of home mortgages and consumer loans. The jittery markets, unnerved by the European debt crisis and May’s flash, tempered trading results for JPMorgan and its main rivals.

Even so, Jamie Dimon, JPMorgan’s chairman and chief executive, seemed cautiously optimistic that the worst for his bank — and the industry — was behind. For the first time since the crisis began, JPMorgan released money from the reserves it had set aside to cover future losses.

The $1.5 billion benefit, or an after-tax gain of 36 cents, came from a reduction in loan loss reserves amid a modest improvement in housing and job markets, as well as signs that corporate borrowers were in better shape.

“I have always called that income paper,” Mr. Dimon told investors on a conference call. “It means nothing. Put it this way, we will take down reserves only if we have to.”

Still, Mr. Dimon stopped short of saying the economy was turning around. “Although we are gratified to see consumer lending net charge-offs and delinquencies decline, they remain at extremely high levels,” he said. “It is too early to say how much improvement we will see from here.”

With the permission of its regulators, the bank bought back more than $500 million in shares in the second quarter. Tellingly, however, it did not did not raise its dividend. Mr. Dimon said late last month that he planned to await further improvement in the economy and more clarity about minimum capital requirements before contemplating an increase. He had previously hinted such a move could come in the second half of 2010.

As the Senate moves to pass passing the financial reform bill and send it to President Obama, Mr. Dimon said that many challenges and uncertainties remained that could result in unintended consequences for the bank’s businesses and the broader markets.

“With a need for global regulatory coordination and hundreds of rules to be written, increased focus is critical in order to implement these reforms in a way that protects consumers and the competitiveness of the U.S. financial system, while ensuring the flow of safe and sound credit,” he said in the statement.

Mr. Dimon did not present a full estimate of how much the new financial rules would cost his bank, although the credit and debit card business could face bigger hits than the bank previously anticipated. Analysts say the full set of reforms could wind up lowering earnings by as much as 11 percent.

It was a difficult second quarter in some ways. JPMorgan set aside about $550 million to cover the cost of a one-time tax on the 2009 bonuses of workers based in the Britain.

The investment bank posted a $1.3 billion profit, about 44 percent less that it earned in the first quarter. After making money every day in the first three months of the year, trading results in fixed-income, commodities and currency were much weaker as the market swung wildly. The bank benefited, however, from releasing about $325 million originally set aside to cover losses.

Chase’s consumer businesses, meanwhile, showed modest improvement in its results. The credit card division posted a $343 million profit, after several quarters of bleeding red ink. Bank executives raised their projections of the cost of new credit card legislation to $750 million, from about $500 million.

The retail bank earned about $1 billion, in part because the bank set aside less money to cover future mortgage and home equity losses. Revenue fell by about 2 percent, as the bank took in less fee income on deposit accounts.

Mr. Dimon said that the loan losses in these units remained extremely high. “Returns in our consumer lending businesses are still unacceptable,” he said.

Even so, JPMorgan has emerged from the crisis in better shape than most of its peers, and perhaps no bank chief executive fared better than Mr. Dimon.

Mr. Dimon earned that distinction by playing as much defense as offense during the housing boom, which insulated JPMorgan more than most when the boom went bust. When the bust became a full-blown financial crisis, Mr. Dimon bought up Bear Stearns and then Washington Mutual, the giant thrift, bolstering his position in investment and retail banking while others were shrinking.

During the second quarter, he continued his expansion plan. He scooped up a European commodities trading unit from the Royal Bank of Scotland and is currently in talks to buy a Brazilian money manager. Meanwhile, Mr. Dimon signaled his international ambitions with the appointment of a top lieutenant to a new post overseeing an aggressive push into Brazil, China and a dozen or so other emerging markets.


It’s all about the ILLEGALS’ ILLEGAL VOTES!

Disappointing can't begin to describe Attorney General Eric Holder's explanation for suing Arizona. He said that "diverting federal resources away from dangerous aliens such as terrorism suspects and aliens with criminal records will impact the entire country's safety."
We don't have the resources to go after criminals and enforce our labor laws at the same time? Try again, Holder.


Democrats Can Avoid Rout -- It's Up to Them
A Commentary By Froma Harrop
Thursday, July 15, 2010

When the pollster calls and asks whether I think the country is going in the right direction, I will say "no." When she asks if I approve of the job Congress is doing, I will say "no." And when she follows up with a question on President Obama's performance, I will answer: "Sometimes good, sometimes bad. The guy drives me nuts at times."
But when they ask whether I want Republicans to take back Washington, I'll respond: "Are you out of your mind? We're still recovering from their last round of debauchery -- their fiscal irresponsibility, servility toward Wall Street, disrespect for science, contempt for the environment."
"Thank you, Ms. Harrop. One more question. Are you registered as a Democrat, Republican or independent?"
To which, I will respond:
"I'm an independent who usually votes for Democrats. I used to help send the occasional Republican to Washington, back when the party seemed to care more for the country than the least-informed member of its so-called 'base.'
"Did you hear Mitch McConnell say the other day that 'there's no evidence whatsoever that the Bush tax cuts actually diminished revenue'? This is our Senate minority leader spewing absolute ignorance! He must be trying to yank more campaign money out of the fat cats. Or he's playing to the yahoos who believe they can have big tax cuts, Medicare, wars and balanced budgets all at the same time.
"Republicans doubled the national debt under Bush. Perhaps they'd like to triple it the next time.
"But now that Democrats are in power, they're suddenly worried about deficits, which they hope to cure by -- give me strength! -- permanently cutting taxes even more.
"Republicans ran ruinous deficits when the economy was doing well. Now that the economy is depressed, Washington must spend more than it takes in to get the heartbeat going. Even conservative economists agree -- certainly the honest ..."
"Gotta go," interrupts the poll-taker. CLICK.
Dear reader, I'm a reasonable woman. I don't care much about ideology. My bottom line is what's good for the country. While the country is on a bad path, Republican voodoo is what put us on it. Surely, many voters agree with me.
That's why these predictions of a Democratic rout in November seem so overwrought. Sure, Democrats will lose seats -- but do the voters want a return to the crazy years?
The threat of a Republican takeover seems gravest when the Obama administration does stupid things like attack Arizona's tough immigration law. The law may be misguided, but it does reflect real public frustration with a real problem. Does Obama think it wise right now to use this volatile issue for shoring up support among some Latino voters?

Disappointing can't begin to describe Attorney General Eric Holder's explanation for suing Arizona. He said that "diverting federal resources away from dangerous aliens such as terrorism suspects and aliens with criminal records will impact the entire country's safety."
We don't have the resources to go after criminals and enforce our labor laws at the same time? Try again, Holder.

Still, he's better than George W. Bush's first attorney general, John Ashcroft. Shortly after Sept. 11, Ashcroft found the time and resources to go after businesses selling marijuana pipes.
When it comes to confidence levels, Republicans always seem to be taking uppers, and Democrats downers. But the pill that Democrats really need is the one that cures the urge to play identity politics.
What's good for the country should be good for everyone in it. That includes Latinos, blacks, whites from Northern Europe, whites from Southern Europe, Asians, Indians, Polynesians.
One thing that would

U.S. home foreclosures reach record high in second quarter
Bank repossessions increased 38% in the second quarter from the same period a year earlier for a record total of 269,952, according to data to be released Thursday by RealtyTrac.
By Alejandro Lazo, Los Angeles Times

July 15, 2010


The number of U.S. homes taken back by banks through foreclosure hit a record high in the second quarter, even as lenders delayed more homes from entering the process through short sales and loan modification efforts, according to data to be released Thursday.

This growing supply of lender-owned properties could set back the nation's housing recovery but probably won't sink it completely if the nation's employment situation doesn't deteriorate further and the economy begins to pick up steam, experts said. Sales of homes have faltered nationally in recent months with the expiration of government tax incentives for buyers.

U.S. bank repossessions increased 38% in the second quarter from the same period a year earlier for a record total of 269,952, according to Irvine research firm RealtyTrac. That was also a jump of 5% from the previous quarter. If that pace continues through the year, the number of homes taken by banks is likely to top 1 million by the end of 2010, said Rick Sharga, RealtyTrac senior vice president.

"It is almost a certainty that we will see over a million over the course of the year, and that would definitely be a record," he said. "It's serious, but it doesn't appear to be that these levels will crater the housing market if the economy at least stabilizes and we do start to see some job creation."

A total of 895,521 foreclosure notices were filed on U.S. properties during the second quarter, an increase of less than 1% from the same quarter a year earlier and a 4% decrease from the first quarter, according to RealtyTrac. Notices of default — the first stage of the foreclosure process — were down 19% from the same quarter a year earlier and 11% from the first quarter.

"What is happening is that the number of loans that are going into delinquency is abating, but the number of loans that are moving through the foreclosure process is rising," said Mark Zandi, chief economist for Moody's "This is because many loans got piled up in the foreclosure process as mortgage servicers tried to figure out all the various loan modification plans and policy efforts to mitigate foreclosure activity. Now, at this point, servicers are figuring out these programs and are starting to push loans through the process."

Because housing has stabilized and banks have improved their financial positions since the start of the financial crisis, regulators are pressing them to get rid of their troubled loans.

"There is growing pressure on the banks to get problem residential loans worked out one way or another," said Bert Ely, an independent banking consultant. "And the sense is that, in most markets, we are through the worst of it to the extent the economy improves at all."

California homes received a total of 192,422 foreclosure filings in the second quarter, a 24% decrease from the same quarter a year earlier and an 11% drop from the first three months of the year. Notices of default were down 43% from the same quarter a year earlier and 15% from the first three months of the year.

California also appears to be bucking the trend in bank seizures, with that number up only 1% at the end of the second quarter from the year-earlier quarter and down 1.5% from the first quarter. That relatively moderate increase in home seizures in the Golden State is probably because banks are purposely postponing the auctions of homes to keep a flood of properties off the market, Sharga said, and will not last forever.

"California might be too saturated, in terms of what the banks are willing to put on their books right now," he said. "You will definitely see it coming later."

"Because of how out of control the prices and lending practices got during the boom, and now because of high levels of unemployment, California is probably going to be at the center of the foreclosure crisis until it's over," Sharga said.

COMPANIES PILE UP CASH BUT DON'T HIRE! Someone Thought Wall St Rape & Pillage Was Over?


“We could cut unemployment in half simply by reclaiming the jobs taken by illegal workers,” said Representative Lamar Smith of Texas, co-chairman of the Reclaim American Jobs Caucus. “President Obama is on the wrong side of the American people on immigration. The president should support policies that help citizens and legal immigrants find the jobs they need and deserve rather than fail to enforce immigration laws.”


“The principal beneficiaries of our current immigration policy are affluent Americans who hire immigrants at substandard wages for low-end work. Harvard economist George Borjas estimates that American workers lose $190 billion annually in depressed wages caused by the constant flooding of the labor market at the low-wage end.” Christian Science Monitor

Companies pile up cash but remain hesitant to add jobs

By Jia Lynn Yang
Washington Post Staff Writer
Thursday, July 15, 2010; A01

Corporate America is hoarding a massive pile of cash. It just doesn't want to spend it hiring anyone.

Nonfinancial companies are sitting on $1.8 trillion in cash, roughly one-quarter more than at the beginning of the recession. And as several major firms report impressive earnings this week, the money continues to flow into firms' coffers.

Yet all the good news from big business hasn't translated into much promise for jobless Americans, leading many to wonder: If corporations are sitting on so much money, why aren't they hiring more workers?

The answer to that question has become a political flash point between the White House and big business groups such as the U.S. Chamber of Commerce, which held a jobs summit Wednesday and accused the Obama administration of dumping onerous regulations on businesses. That has created an environment of "uncertainty," which is causing firms to hold back on hiring as the unemployment rate has hovered near 10 percent, the Chamber said.

The White House countered that companies are wary of hiring not because of new regulations but because they're still waiting for consumer demand to return. The administration also claimed credit for 3.5 million jobs created by the stimulus bill from last year.

The acrimony over jobs comes at a particularly tense moment in the relationship between business groups and the White House. With the midterm elections looming and polls showing Americans expressing a lack of confidence in President Obama's handling of the economy, White House officials are eager to demonstrate that their policies are helping, not hurting, the prospects for job growth and are making an extra effort to reach out to industry leaders.

For the Chamber's jobs event, the White House said it asked for a speaking slot for senior adviser Valerie Jarrett, who acts as a liaison to the business community, but the Chamber turned down the request. Chamber officials said Jarrett's office called Tuesday afternoon, the day before the conference, and demanded a speaking slot immediately after remarks from Chamber chief executive Tom Donohue. The White House said that it did not ask for a specific slot.

"There are going to be areas where we differ, but we do have different roles," Jarrett said in an interview. "Our job is to both protect the American people and foster a climate where companies invest and create jobs. Their role is to produce profits for their shareholders."

White House officials also choreographed a competing set of images for Obama on Wednesday, having him meet separately with famed investor Warren Buffett and, later, with Bill Clinton as well as the chief executives of Bank of America and Honeywell. Obama aides said the business meetings were a coincidence and had been scheduled before they knew of the Chamber event. They said the meeting with Buffett had been in the works for a long time. (Buffett is a director with The Washington Post Co.)

The question of how to encourage companies to hire has challenged policymakers.

A survey last month of more than 1,000 chief financial officers by Duke University and CFO magazine showed that nearly 60 percent of those executives don't expect to bring their employment back to pre-recession levels until 2012 or later -- even though they're projecting a 12 percent rise in earnings and a 9 percent boost in capital spending over the next year.

When asked why companies are holding back so much, many economists cite broader uncertainty that goes well beyond anything happening in Washington. Firms aren't sure whether the economy can sustain a strong recovery. And as long as consumer spending remains low, there's not much incentive for companies to ramp up.

The trend of companies holding more cash is not new. Between 1980 and 2006, the average cash-to-assets ratio for U.S. industrial firms more than doubled, according to research by finance professors.

One explanation, said finance professor René Stulz at Ohio State University, is that as competition has become more global, it's become harder for individual companies to survive, and so they hold on to more cash to be safe. He added that companies have also increased their cash holdings in the wake of the financial crisis, particularly since the bankruptcy of Lehman Brothers in September 2008, as the banking system has become more fragile and credit has become scarce.

Tech companies in particular tend to build large cash reserves. Intel, which reported on Tuesday its biggest quarterly profit in a decade, brought aboard 400 new employees worldwide in the last quarter, though it would not identify in which countries the hirings took place. Intel spokeswoman Lisa Malloy added that the firm expects to spend more money, from $4.5 billion last year to $5.2 billion this year, investing in capital projects around the world.

And yet the firm has $1.7 billion more in cash than it had a year ago. Intel said it is enjoying strong demand for its chips, so low demand doesn't help explain the firm's mountain of cash.

Alcoa, which reported strong earnings Monday, said it had $493 million more in cash this quarter compared with a year earlier. Spokesman Kevin Lowery said the company plans to keep its head count steady.

Some analysts said it may be hard to create policy that compels companies to use some of their cash to hire workers. "CEOs don't like taking risks. They kind of move in packs," said Zachary Karabell, president of River Twice Research.

"There's not a whole lot that you could do to entice companies to hire," he added. "You could cut taxes on them, but they're not going to hire just because they have the extra cash, because they already have the extra cash."