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JP Morgan’s Analysts Agree with BoomBustBlog Research on the State of JPM (a Year Too Late) but Contradict CEO Jamie Dimon’s Conference Call Statements
As I sit in the car, surrounded by thick NYC traffic, on my way to the highly anticipated CNBC interview (the Squawk on the Street show)
on JP Morgan, banks, real estate and related issues, guess what I
happen to drive by… MORE construction – causing me to ponder what
additional damage will be done to banks that backed these deals. Then,
less than an hour later I read from CNBC and Bloomberg
that JP Morgan’s analysts predict that forced repurchases of soured
U.S. mortgages may be the “biggest issue facing banks”. Bloomberg goes
on to state:
Future losses from repurchases of
home loans whose quality failed to meet sellers’ promises will likely
total $55 billion to $120 billion, or potentially $10 billion to $25
billion for the next five years, the New York-based mortgage-bond
analysts led by John Sim and Ed Reardon wrote in a Oct. 15 report.
I immediately blurt out, “Now hold the hell on a minuted!!!” That
report of the 15th sounds an awful lot like the article I published on
the 12th, “The
Robo-Signing Mess Is Just the Tip of the Iceberg, Mortgage Putbacks
Will Be the Harbinger of the Collapse of Big Banks that Will Dwarf 2008!” (Hey, no peeking, no copying, fellas!) which, among many other things, reiterated what I said in the 4th quarter of LAST YEAR!!!.
To be fair, the JP Morgan report is very similar to mine in content, scope and gist – JUST A YEAR OR SO TOO LATE! I quote (again) “Reggie Middleton on JP Morgan’s “Blowout” Q4-09 Results”:
Warranties of representation, and forced repurchase of loans
JP Morgan has increased its reserves
with regards to repurchase of sold securities but the information
surround these actions are very limited as the company does not
separately report the repurchase reserves created to meet
contingencies. However, the Company’s income from mortgage servicing
was severely impacted by increase in repurchase reserves. Mortgage
production revenue was negative $192 million against negative $70
million in 3Q09 and positive $62 million in 4Q08.
Counterparties who are accruing losses from bad loans, (ex. monoline insurers such as Ambac and MBIA, see A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton circa November 2007,) are stepping up their aggression in pushing loans that appear to breach certain warranties or smack of fraud.
I expect this activity to pick up significantly, and those banks that
made significant use of brokers and third parties to place mortgages
will be at material risk – much more so than the primarily direct
writers. I’ll give you two guesses at which two banks are suspect. If
you need a hint, take a look at who is increasing reserves for
repurchases! JP Morgan and their not so profitable acquisition, WaMu!
It is not like I think I’m better than these guys (okay, I might be lying just a wee bit – Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?), but if you really felt the way you expressed yourselves in the Bloomberg article, why didn’t you say something last year when I brought the topic up, or the THREE WHOLE quarters since then??? Here’s an even better question that should make this entire article go viral around the web…
If you really felt “Forced repurchases of soured U.S. mortgages may
be the “biggest issue facing banks”” (which I certainly agree with) then
why didn’t you bother to tell your own damn CEO during his conference
call????
Jamie Dimon (Q3 2010 conference call)
You know our society, right? You know
how many lawsuits go on, and class action suits, and stock drop suits,
and [unintelligible] suits and WaMu suits and Morgan suits and it
ain’t going away. It’s becoming a cost of doing business.
…In repurchase reserves and litigation, it’s unclear exactly how or where it’s going to show up, but we do think there will be some of that.
Jim Mitchell
Right, but you’re already contemplating some of those issues in your current reserving?
Jamie Dimon
To the extent we can, you know? Reserves are – you can’t guess and put up numbers, but to the extent we can.
I think the question is, between the reserves we have is how long
losses relating to repurchase, whether it’s GSE or private label, and
whether it shows up on the litigation or repurchase, how long they go on
for. We don’t expect it to be a blowup kind of number [Ya' know, like $120 billion or so!!!]. We expect it will be they’ll just drag out these losses as these things play themselves out. [Definitely nuthin' like "biggest issue facing banks"]
Nancy Bush – NAB Research
Two questions. The first related to
the foreclosure issues, and whether there are going to be any
extraordinary expenses associated with that. And is the level of expense
in that whole activity now going to be higher going forward?
Jamie Dimon
I think I already mentioned that the way I look at it we’re bearing $5 billion of charge-offs a year, $1 billion in repurchase reserves a year [out of a potential pool of $120 billion],
a lot of re-owned foreclosure, which I forget off hand, but it’s big
numbers. Those numbers may bounce up and down and probably will go up a
little bit because of this, but I’m not sure they’re going to materially change because of this. And there will be litigation, I put to the side, I don’t know how it’s all going to be sorted out.
… I think the way you should look at
this topic is that we’re bearing today $7 billion of charge-offs,
foreclosure, repurchase costs – this affects reserves. That $7 billion
will go up or down based upon the economy and stuff like this. I’m not sure stuff like this is going to dramatically change that number.
It may extend it a little bit longer and stuff like that but – and
remember we have in total, between repurchase reserves and the $11
billion, we have $14 billion of reserves for repurchases or loan
losses.
There would have been some shit if I read this story in its entirety BEFORE my CNBC interview instead of after. And to think, some people actually ask me why I’m short JPM. If you want to see more of me on CNBC, click here and tell them. Be sure to explain why.
Everyone should be able to see there is something fundamentally
wrong with the mortgage landscape (still) in many parts of the US.
The punch line in the video below, “But how do all of these people [developers] get all of this money to put up all of these [empty] buildings? [as they are still building new buildings around the empty buildings that they cannot sell or rent!]“ I reply, “Those people over there! The banks!” As I point to the local JP Morgan Chase branch in downtown Brooklyn.
For all of you CRE bulls, that clip is the same area photo-toured
more than one year ago – tell me if the situation has changed in
accordance with the 100%+ spike in REIT and bank share prices – “Who are ya gonna believe, the pundits or your lying eyes?”. Download my free research on the topic – 
CRE 2010 Overview 2009-12-15 02:39:04 2.72 Mb. Tuesday, December 15th, 2009, then subscribe to get the juicy stuff.
The clip above is from the October 4, 2010 VPRO Backlight (Dutch
public television) featuring the issues facing JP Morgan, as well as
the European banking sector. This special was very well done and I
look forward to the US public television stations doing similar
investigative work. See the entire video (43 minutes) on the VPRO site (in Italian, Dutch and some English with Dutch Subtitles).
Required JP Morgan reading…
Reggie Middleton CNBC interview (the Squawk on the Street show)
Banks Will Be Forced to Forgo Certain Foreclosures, Even If the Borrower Has Admittedly Defaulted!
I will be releasing an updated JPM forensic valuation in about 24
hours for subscribers. In the meantime, current subscribers should
review our forensic valuation reports, which have (thus far)
proven to be right on the money in terms of JP Morgan:
The JP Morgan Professional Level Forensic Report (subscription only)
The JP Morgan Retail Level Forensic Report (subscription only)
Those that don’t subscribe
still have a lot of BoomBustBlog JPM opinion and analysis to chew
on, including a free, condensed (but still about 15 pages) version
of the forensic analysis above. You can find it below this pretty
graphic from “An Unbiased Review of JP Morgan’s Q1 2010 Results Yields Less Roses Than the Maintream Media Presents“…
An Independent Look into JP Morgan (subscription content free preview!)
More Reggie Middleton on JP Morgan
The full JPM Q2 review can be downloaded by subscribers (click here to subscribe) here: JPM 2Q10 review
- If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 – JP Morgan
- Is JP Morgan Taking Realistic Marks On Its WaMu Portfolio Purchase? Doubtful!
- Anecdotal observations from the JP Morgan Q2-09 conference call
- Reggie Middleton on JP Morgan’s Q309 results
- Reggie Middleton on JP Morgan’s “Blowout” Q4-09 Results
- advertisements -
I was pleased to see you this morning, Reg. Herb Greenberg did a nice job on the intro.
Herb Greenberg is quite the stand up guy. Media would look different if there were more reporters like him around. Truly investigative, knows his stuff, and not afraid to admit when he is wrong - which is oftern more important than being right.
good work Reggie...
Reggie, thanks for speaking & demonstrating the truth in your video & reports. I hope you choose to do more videos so folks can associate your name with your face & the facts. A simple showing of the discrepancies between reality & fantasy accounting will serve you well. Thank God you can sort thru all the mumbo-jumbo of the accounting to get to the underlying truth. Press on with the facts & attack on the discrepancies!
Thanks for sharing your views Reggie and the interview.
I had a feeling you rushed it a tad and that you were not too comfortable with the time pressure.
You should relax a bit more Reg ;=) .....Well if that is even remotely possible on CNBS.
LMAO
Reggieeeeeeeeeeee...young gifted and black! Yes I am more like the interviewer on CNBC!
If the MSM had half a brain it would commission you (for around $500,000 to $1m) to put together a one hour documentary on the big calls. Good luck with that!
I was thinking you would be as "graphic" as your blogs, so I was a little disappointed that you had to answer the questions on such big issues that are hard to fit into "bites".
You have so much more to give, but I guess you did not want to frighten people with Kramer moments!
Good 4 minute intro to you for the MSM viewers, hope this gets you more subscribers and, because I can, I suggest (respectfully) that you get a spell check going immediately! heh
Hurray for Reggie Middleton. Here’s to flinty-eyed realists, may we live long and prosper.
Talk is cheap Jamie
Wow Reggie, great stuff! Reality "always" beats fantasy in the end. My wifes 401k is invested with JPM through her employer, how can we rescue what's there without her quiting or getting fired. The money's in mm funds so we're getting raped anyway.