JPMorgan Chase

Did JPMorgan bring down Lehman Brothers?

Jim Kim — Tue, 07 Oct 2008 13:27:19 -0400

A filing in bankruptcy court in New York contains an explosive charge by Lehman's biggest creditors: JPMorgan froze $17 billion in cash and securities on the Friday night before its failure. The creditors also say that "as a result of JPMC's actions, [Lehman Brothers] suffered an immediate liquidity crisis, that could have been averted by any number of events, none of which transpired." According to The Times Online, JPMorgan was apparently holding on to the assets in case as a "potential offset" to future claims the bank might have against Lehman. We're likely going to hear a lot of things in the near future. What we desperately need is a 9-11 commission-like reconstruction of events. The fact is that it remains unclear how it all went down. Hopefully, the many investigations will shed light on these issues.

For more:
- here's the article

WaMu, saved in the nick of time?

Jim Kim — Tue, 23 Sep 2008 12:29:28 -0400

All seemed lost for Washington Mutual just as few days ago. AIG had just cratered, as had Lehman Brothers. Everyone knew WaMu was on its last legs. Goldman Sachs staged an auction that attracted no legitimate contenders. But then came news of the massive bailout plan, which seemed to give new life to the fading, old thrift. Potential buyers are back, driven in part by the prospect that the government will take on the worst of WaMu's loans. The New York Post reports "expressions of interest" from the likes of Citigroup, JPMorgan Chase, Wells Fargo, HSBC and Spain's Banco Santander. Moody's Investors Service downgraded WaMu's financial strength by one notch yesterday as well as its preferred stock rating. There has been no run on the bank, in part because most of the accounts are less than $100,000 and insured by the FDIC.

For more:
- here's the article

The big bailout gravy train

Jim Kim — Mon, 22 Sep 2008 09:35:00 -0400

The big bailout will likely mean big bucks to a few lucky asset managers, all of whom are jockeying for their piece of the pie. The $700 billion bailout is looking more and more like a gravy train. Institutions of all stripes want to offload their assets. Which has the likes of Pimco, BlackRock, Morgan Stanley, JPMorgan Chase, Bank of New York Mellon and others at least intrigued. The New York Times says that $1 billion in fees are at stake. There may well be multiple managers for multiple asset classes. All in all, there are lots of details that must still be worked out. But clearly there is an opportunity here. Some have already discerned some lobbying going on. For example, the industry wants more than just mortgage eligible for bailout funds.

For more:
- here's the New York Times article

No bidders for Washington Mutual

Jim Kim — Thu, 18 Sep 2008 21:43:08 -0400

Goldman Sachs is staging an auction, but guess what? It's doubtful anyone will show up. The competition for Washington Mutual has so far failed to attract any bidders, which is not really a surprise. Goldman had been hoping that Citigroup, JPMorgan Chase or Wells Fargo would show some interest. TPG has waived its rights to be paid for any dilution, but that does not seem to be helping. The big issue, of course, is Washington Mutual's portfolio of troubled mortgages. Fred Cannon, of Keefe, Bruyette & Woods, tells the Financial Times that WaMu's franchise and retail branch network on the West Coast would be attractive, but any buyer might have take hit up to $37 billion. So what are the options? If the bank could offload the bad debts--the RTC-like entity may come just in time--it would likely find a buyer for the good assets.

For more:
- here's the article

The biggest deal makers on Wall Street?

Jim Kim — Wed, 17 Sep 2008 13:42:43 -0400

Who are the biggest deal makers on Wall Street right now? Not Goldman Sachs. Not Morgan Stanley. Try federal regulators, like Treasury Secretary Henry Paulson and New York Fed Bank head Tim Geithner. Washington Mutual has been the target of lots of rumors. The grapevine holds that regulators have reached out to Wells Fargo & Co., JPMorgan Chase & Co., and HSBC Holdings PLC among other banks. So far, it's unclear if anyone wants the ailing thrift, whose stock is down 83 percent this year. The issues seems to be the minefields that potentially lurk in its portfolio of assets.

For more:
- here's an AP article

Related Articles:
Who's next to crater? WaMu?
What's up with WaMu?

Regulators change tune, bail out AIG

Jim Kim — Wed, 17 Sep 2008 09:10:12 -0400

Lehman Brothers wasn't worth any public money. But AIG? Well, that's another story. After the Bear Stearns, Fannie Mae and Freddie bailouts, people applauded when Treasury Secretary Henry Paulson said there was no more public money available. But he has already been forced to change his tune. AIG, which underwrote a lot of protection on mortgage-related securities, is much more of a systemic risk. A credit downgrade could have serious repercussions for the many firms that bought bond protection from it. So the Fed and Treasury are once again scrambling to put together a bailout in the form of a bridge loan of $85 billion, the Financial Times reports. The quid pro quo here is that the government will assume control of the enterprise. All this is nothing short of stunning. The New York Times called it "the most radical intervention in private business in the central bank's history." A private sector bailout plan put together by Goldman Sachs and JPMorgan Chase failed to materialize given the precarious nature of AIG's credit rating. That left taxpayers on the hook.

For more:
- here's a Financial Times article
- here's the New York Times article

As AIG teeters, banks to extend capital?

Jim Kim — Mon, 15 Sep 2008 21:10:30 -0400

It's clear that there is no more bailout money left in the public trough. Taxpayers have done enough. But there are still companies in need of a lifeline. Hence the Fed-directed $70 billion bailout facility that top banks have agreed to. Hence also the plans by Goldman Sachs and JPMorgan Chase to bail out AIG with another $75 billion in credit, as reported by the New York Times. AIG has been downgraded, and likely will face soaring collateral requirements that threaten the firm. Few details are known. But this is an extraordinary development. Out of public money but still averse to financial chaos, the Fed is nevertheless dictating a lot. Goldman Sachs and JPMorgan Chase have held up well, but $75 billion is a lot. What if they say no? Is that really an option? And if they go forward with the bailout plans, are they in a position to call in a chit later? Are there any quid pro quos that ought to be disclosed? These are important issues that are perhaps outweighed by events. Certainly, we're in some tricky regulatory waters.

For more on AIG:
- here's the New York Times article

More on the new private bailout facility

Jim Kim — Mon, 15 Sep 2008 09:47:00 -0400

Shades of Long-term Capital Management? To hold up other would-be failing banks, banks including JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup have committed $7 billion each for a bailout pool. A bank will be able to borrow in cash up to one-third the size of the pool. That number could go higher, the AP notes, as more banks join the program. This recalls the pool that banks put together when LTCM fell. The issue is whether this will be enough to reassure the markets? Is it big enough? And what happens if a big institution--say an AIG--needs to tap the facility more than once? Will the creditors allow that? Will they agree to a concentrated position? For now, it's a piece of the puzzle that certainly cannot hurt. But it's also not the answer to all woes.

For more:
- here's the AP article

Merrill Lynch wants to rebuild in mortgages

Jim Kim — Fri, 12 Sep 2008 11:09:34 -0400

Merrill Lynch, in some ways, was the poster child for banks that pushed foolishly into the subprime-backed securitization game. In hindsight, the deal to buy First Franklin--remember that?--was a disaster. But which would be worse: to exit the game all together, or retool in an appropriate way? Most would choose the latter. Merrill Lynch, as noted, has brought on Michael Nierenberg, from JPMorgan, to run its mortgage and securitization business, which signals its intention to remain relevant in the market. At this point, it's unclear exactly what shape that market will take. Mortgage-backed deals are hardly dead, though they might not drive growth the way they used to. The thought recently has been that if the GSEs stumble, the private sector will be handed an opportunity, IDD notes. So Merrill is looking prescient right now.

For more:
- here's the IDD article

Hedge fund manager hit by fraud

Jim Kim — Mon, 01 Sep 2008 07:23:51 -0400

Remember Guy Wyser-Pratte? He ran Bache's arbitrage unit for something like 20 years before striking out on his own. He's still a well-known activist investor, especially in Europe, where he has really ruffled feathers. But he's in the New York Times for a different reason: his JPMorgan Chase account has been hit by theft. Someone has stolen more than $300,000 from the account in a series of small transfers. He was told he had to start a new account--a hassle. And then the bank decided it would cover only $50,000 of his loss, which likely prompted a call to the media. Last month, a vice president in the private bank's Latin American unit was arrested and indicted for embezzling more than $5 million from private banking clients. But Wyser-Pratte's theft was unrelated.

For more:
- here's the article