International Forecaster Weekly

The Fallout for 2bn Losses at JP Morgan

Little success for Brown in California fiscal crisis, teachers have a lesson for Wal Mart, JP Morgan under investigation again for its recent 2 billion in losses, China can now bypass Wall Street and go to US Treasury to buy US debt, a need for measured efforts to bolster the economy.

Bob Chapman | May 23, 2012

California Governor Jerry Brown took office last year on a promise to deploy political skills honed over three decades to break the most populous U.S. state out of its annual fiscal crisis. 

After 16 months, the 74-year-old Democrat is having as little success as his Republican predecessor, Arnold Schwarzenegger, in governing the state with the world’s ninth- biggest economy as it slips into a $15.7 billion deficit, up 70% since January.

The California State Teachers’ Retirement System will vote its 5.3 million Wal-Mart Stores Inc. (WMT) shares against the entire board’s re-election amid a probe into alleged bribery in Mexican operations.

The board failed to respond to indications of unethical conduct, and Wal-Mart’s leadership may have “actively suppressed” an internal investigation, Calstrs Chief Executive Officer Jack Ehnes said today in a statement disclosing how the shares will be voted.

“Calstrs does not have confidence that the current board has the independence and leadership needed to address these difficult issues,” Ehnes said in the statement.

The move shows mounting pressure against Wal-Mart, the world’s largest retailer, over its corporate-governance practices in advance of the company’s annual meeting on June 1 in Fayetteville, Arkansas. The New York City Pension Fund and a major adviser to investors have also urged investors to vote against some directors in the wake of bribery allegations.

Wal-Mart, based in Bentonville, Arkansas, has said it is probing allegations reported by the New York Times last month that executives paid more than $24 million in bribes to clear the way for expansion in Mexico. A company spokesman, David Tovar, didn’t return a phone call seeking comment today.

 

New Jersey’s revenue may lag behind Governor Chris Christie’s projections by as much as $1.3 billion over this fiscal year and the next, the Legislature’s chief budget analyst said in a memorandum to lawmakers.

David Rosen of the nonpartisan Office of Legislative Services told budget committee members that he’ll provide details of his forecast at meetings tomorrow, according to a copy of the memo obtained by Bloomberg News. Rosen is to testify before the Assembly Budget Committee at 10 a.m.

The shortfall estimated by Rosen is more than double the $537 million over the two-year period that he projected in March before the budget panels. He declined to comment today when reached by telephone.

“It’s time to see the reality that things are not going as well as we had hoped they would,” said Assemblyman Vincent Prieto, a Secaucus Democrat who leads the budget committee. “This is something that is real and we’re going to have to deal with it.”

Christie’s $32.1 billion spending plan for fiscal 2013, which begins July 1, counts on a 7.3 percent revenue gain, the most since before the recession that began in December 2007. The 49-year-old Republican traveled the state to promote his “Jersey Comeback,” a turnaround he has said will let the state increase spending while cutting income taxes by 10 percent.

JPMorgan Chase & Co. the biggest U.S. bank, has hired former U.S. Securities and Exchange Commission enforcement chief William McLucas to help respond to regulatory probes of the firm’s $2 billion trading loss.

The lender retained law firm Wilmer Cutler Pickering Hale & Dorr LLP, where McLucas is a partner, shortly after the bank disclosed the loss on May 10, said Kristin Lemkau, a spokeswoman for New York-based JPMorgan.

The probes began after JPMorgan traders in London built up positions in illiquid credit derivatives that were so large they distorted market prices and eventually led to what Chief Executive Officer Jamie Dimon called “self-inflicted” losses that may grow. That spurred reviews by the SEC, Commodity Futures Trading Commission, Office of the Comptroller of the Currency and Federal Bureau of Investigation.

“Our focus right now is on whether the company’s public disclosure and financial reporting is accurate,” SEC Chairman Mary Schapiro said today in congressional testimony. “The agencies collectively, including the criminal authorities, are working very hard to untangle what happened at the firm.”

The SEC is reviewing the accuracy and timing of JPMorgan’s disclosure of changes in how it calculates value-at-risk, or VaR, which shows how much it could lose from trading most days, Schapiro said. The bank changed its VaR model for the chief investment office during the first quarter without telling investors. The new model, which has since been scrapped, had cut the risk estimation almost in half, Dimon told investors May 10.

JPMorgan Chase & Co has been hit with a lawsuit brought on behalf of employees whose retirement holdings fell in value after the largest U.S. bank revealed a surprise $2 billion trading loss earlier this month.

The complaint, filed late Monday in U.S. District Court in Manhattan, also names individual defendants, including Chief Executive Jamie Dimon and Ina Drew, who stepped down last week as head of JPMorgan's chief investment office, where the loss occurred.

The defendants were accused of violating their duties to 401(k) and other retirement plan participants by including company stock as an investment option, hiding the stock's risk, and failing to move participants to safer choices.

"The plans suffered hundreds of millions of dollars of losses," the complaint said. "If defendants had discharged their fiduciary duties to prudently manage and invest the plans' assets, the losses suffered by the plans would have been minimized or avoided."

Shares of JPMorgan have fallen as much as 20.8 percent since the New York-based bank revealed a $2 billion trading loss synthetic credit products, a type of derivative, on May 10, when its stock traded at $40.74.

In Tuesday morning trading, JPMorgan shares were up $1.49, or 4.6 percent, at $34 on the New York Stock Exchange.

JPMorgan did not immediately respond to requests for comment. Lawyers who filed the lawsuit were not immediately available for comment.

The 401(k) plan covers substantially all U.S. employees.

As of December 31, 2010, the last date for which data was immediately available, the plan held $14.64 billion of investments, including $2.79 billion of JPMorgan stock.

Watch out Romney; here comes Ron Paul or Ron Paul takes Minnesota delegates; Texas next?

 

JP Morgan 'faces £4bn loss' from trading blunders in one of Square Mile's worst catastrophes

http://www.dailymail.co.uk/money/news/article-2148008/JP-Morgan-faces-4bn-loss-Square-Miles-worst-catastrophes.html

JP Morgan's Regulatory Arbitrage of turning Financial Loss into Political Profit

http://www.youtube.com/watch?v=WYw0Ibz-hi8

https://www.youtube.com/watch?v=-fjTxG4CCjo&feature=g-all-u

The Case of the Missing Terrorists

http://www.lewrockwell.com/roberts/roberts348.html

Banks Notified By DHS Of Unannounced Warrantless Looting Of Personal Accounts Or Safe Deposit Boxes

http://beforeitsnews.com/story/1962/814/Banks_Notified_By_DHS_Of_Unannounced_Warrantless_Looting_Of_Personal_Accounts_Or_Safe_Deposit_Boxes.html

Chicago under Siege By Stephen Lendman

http://sjlendman.blogspot.mx/2012/05/chicago-under-siege.html

Siege of Chicago: Anti-NATO March Met with Batons; Vets Return Medals

https://www.youtube.com/watch?v=YacN_8sqahg&feature=g-all-u

Life in Occupied Chicago By Stephen Lendman

http://sjlendman.blogspot.mx/2012/05/life-in-occupied-chicago.html

 4-year-old Texas girl taken from parents and heavily drugged by Child Protective Service

http://revolutionarypolitics.tv/video/viewVideo.php?video_id=18885

Chaos in Chicago during NATO summit

http://www.youtube.com/watch?v=2NRxWPzmqOo

 

Barclays Plc, the U.K.’s second- largest bank by assets, said it will receive net proceeds of $5.5 billion from the sale of its entire stake in BlackRock Inc. 

The lender sold about 26.2 million shares to money managers for $160 each, London-based Barclays said in a statement yesterday. Underwriters have the option to purchase an additional 2.6 million. New York-based BlackRock will buy back a further 6.38 million shares at $156.80 per share, about 8.8 percent less than the stock’s $171.91 close on May 18, the last trading day before the deal was announced.

The British bank took the 19.6 percent holding when it sold Barclays Global Investors to BlackRock in December 2009 for about $15.2 billion. The sale turned BlackRock into the world’s biggest asset manager and added passive products such as the iShares exchange-traded funds to its offerings.

Barclays is selling as the latest rules from the Basel Committee on Banking Supervision will force the lender to set aside capital against the stake to cushion itself against any decline in the value of the holding.

The Barclay’s offering was priced 2.1 percent below BlackRock’s shares which fell 2.6 percent to $163.37 yesterday in New York.

China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury’s first-ever direct relationship with a foreign government, according to documents viewed by Reuters.

The relationship means the People’s Bank of China buys U.S. debt using a different method than any other central bank in the world.

The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions.

China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn’t been necessary.

The documents viewed by Reuters show the U.S. Treasury Department has given the People’s Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011.

Inflation slowed to 3 per cent last month due to the timing of Easter and a drop in transport prices, but is likely to stay above its 2 per cent target, fuelling controversy over the Bank of England’s quantitative easing policy.

The Consumer Prices Index, or CPI, measure of inflation fell from 3.5 per cent in March to 3 per cent in April, its lowest level since February 2010.

The drop means Sir Mervyn King, the governor of the Bank of England, is spared the embarrassment of having to write a letter to the Chancellor explaining why inflation is off target for the first time in the life of this Parliament.

However, King has admitted that CPI inflation is likely to remain above his goal of 2 per cent for the next year or so.

The Bank has previously suggested that QE, which has been widely criticised for penalising savers and pensioners, is needed in order to prevent inflation soaring above the benchmark.

California as broke as Greece?

http://www.youtube.com/watch?v=RKMF21VFMyg

Fake Chinese Parts 'Found In US Planes'

http://uk.news.yahoo.com/fake-chinese-parts-found-us-planes-103012001.html

CrossTalk: Banking Mafia

https://www.youtube.com/watch?v=RQBNq4vIo74

Journalists Arrested, Beaten, Raided, Held At Gunpoint By Police At NATO Protests

http://blog.alexanderhiggins.com/2012/05/21/cnn-does-deserve-this-journalists-arrested-beaten-police-nato-protests-136401/

Tony Blair and George Bush's phone conversation a week before Iraq invasion 'must be released'

http://www.independent.co.uk/news/uk/politics/tony-blair-and-george-bushs-phone-conversation-a-week-before-iraq-invasion-must-be-released-7771236.html

Police 'sold information to private detectives'

http://www.independent.co.uk/news/uk/crime/police-sold-information-to-private-detectives-7778956.html

Youth joblessness is almost back at its peak following the outbreak of the global economic crisis and is unlikely to ease until at least 2016, the International Labour Organization warned Tuesday.

The ILO said nearly 75 million youths or 12.7 percent of people aged 15 to 24 will be out of work this year, up from 12.6 percent in 2011.

The jobless total is creeping towards the 75.4 million unemployed in 2009 when the financial crisis caused the number to soar.

The picture is more gloomy if the millions who have put off or given up looking for a job are included: this would put the 2011 figure at 13.6 percent.

Youths opting to prolong their education will meanwhile enter the labour market in the coming years, putting continued pressure on the jobless rate.

“By 2016, the youth unemployment rate is projected to remain at the same high level,” said the ILO.

In its Global Employment Trends for Youth report, the body suggests offering tax and other incentives to businesses hiring young people and more entrepreneurship programmes to help youths kick-start a career.

Manufacturers probably received more orders in April and home sales rose, a sign the U.S. expansion is still on track, economists said before reports this week.

Factory bookings for long-lasting goods rose 0.3 percent last month after falling 3.9 percent in March, according to the median forecasts of 61 economists surveyed by Bloomberg News before a May 24 Commerce Department report. Other figures may show purchases of existing and new houses also climbed.

Manufacturers may keep forging ahead as automakers crank out more cars and trucks, while housing will probably benefit from record-low mortgage rates that are making properties more affordable. Nonetheless, those industries alone will fail to spur a pickup in growth without bigger increases in employment throughout the economy that will propel consumer spending.

“The economy is growing, but it’s just not growing at an inspiring pace,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “The production numbers look OK, the housing market looks OK, the thing we’re more concerned about is the labor market.”

A Federal Reserve report last week showed factory production rose 0.6 percent in April. About half the gain came from auto making, which jumped 3.9 percent following a 1.2 percent increase in the prior month.

The U.S. economy needs "measured" efforts to bolster growth, but the central bank should focus on improving its communications because circumstances do not warrant further bond buying at this time, a top Federal Reserve official said on Monday.

Atlanta Federal Reserve Bank President Dennis Lockhart said the central bank's policy panel should push forward with efforts to give the public and financial markets a better understanding of how it would react to incoming information on the economy.

"Circumstances today in the United States call for continued measured efforts to quicken the pace of recovery and shrink unemployment, while keeping inflation controlled," Lockhart said in a speech prepared for delivery to the Institute of Regulation and Risk, North Asia, in Tokyo.

The Federal Reserve, specifically, should continue to clarify strategy so the public can discern how the committee arrives at decisions, he said.

"Working toward this end is the right undertaking ... at this moment," Lockhart said. "I think use of the tool of refined communication is an appropriate incremental policy action."

However, Lockhart, a voting member of the policy panel this year, said the central bank should not take the option of a third round of so-called "quantitative easing" off the table, saying he foresees only modest growth over coming years and that the economy still faced risks, notably from Europe.

The Fed cut overnight interest rates to near zero in December 2008 and has bought $2.3 trillion in government and mortgage-related debt to push other borrowing costs lower and spur a stronger recovery.

U.S. economic growth, however, has been tepid and the unemployment rate remains at a high 8.1 percent.

Jobless rates in all but two U.S. states dropped in April from a year before, and were sharply lower in battleground states that could decide November's presidential contest.

Sharp drops in unemployment rates were registered in Florida, Nevada and Ohio, while joblessness in Michigan, a key state in the election four years ago, hit its lowest since 2008.

According to Labor Department data released on Friday, New York's rate rose to 8.5 percent, marking the third month in a row in which New York was the sole state with an unemployment rate higher than the year before. Rhode Island's was the same as in April 2011, 11.2 percent.

Compared with March, jobless rates fell in 37 states and the District of Columbia, rose in five, and were unchanged in eight states. North Dakota again notched the lowest rate, 3 percent.