Bank of America

The "Big Three" Banks Are Gambling With $860 Billion In Deposits

A week ago, when Wells Fargo unleashed the so far quite disappointing earnings season for commercial banks (connected hedge funds like Goldman Sachs excluded) we reported that the bank's deposits had risen to a record $176 billion over loans on its books. Today we conduct the same analysis for the other big two commercial banks: Wells Fargo and JPMorgan (we ignore Citi as it is still a partially nationalized disaster). The results are presented below, together with a rather stunning observation.

The Frightening Truth Behind Bank Of America's "Earnings"

Over a year ago we noted that when it comes to Bank of America "earnings", items which traditionally are classified as non-recurring, one-time: primarily litigation and mortgage related charges, have now become recurring, and all the time, courtesy of the worst M&A transaction of all time - the purchase of Countrywide and its horrifying mortgage book. Today, this is finally being appreciated by the market where even the pompom carriers have said that it is time to start ignoring the endless addbacks and focus on actual earnings. The same cheerleaders have also, finally, understood that the primary source of "profitability" at this lawsuit magnet of a company, is nothing other than the accounting trick known as loan loss reserve releases - not actual profits but merely bottom line adjustments whose purpose is to mitigate the impact of quarterly charge offs on loans gone horrible bad. Remember that Bank of America has some $908 billion in total consumer loans and leases, and every day hundreds of millions of these go 'bad' and ultimately have to be discharged, offset by "hopes" that the future will improve. This hits both the balance sheet and the P&L. So, if one steps back and ignores the non-recurring, one-time noise, what emerges? A truly frightening picture.

Bank Of America Earnings Plagued By Legacy Countrywide Woes Offset By $900 Million In Loan Loss Reserve Releases

Bank of America just reported yet another quarter marked by a bevy of "one-time" charges, which have now become normal course of business, even as NIM declined Y/Y, and sales and trading revenues declined sequentially. Loan loss reserve releases of $900 million more than offset the declining Noninterest income, and contributed to a positive pre-tax net income number. The biggest threat continue to be private Rep and Warrant outstanding claims which increased by almost 42 billion in the quarter to a total of $12.3 billion.

Two 787 Fleets Grounded, As Well As Overnight Optimism

Those who went long Boeing in the last few days on hopes the "smoking battery" issue had been resolved, especially following Ray LaHood comment's he would fly the Dreamliner, which is rapidly becoming the Nightmareliner for Boeing, anytime anywhere, are about to be grounded, as is the entire 787 fleet of All Nippon Airlines and Japan Airlines following yet another incident forcing an emergency Dreamliner landing. This happened after ANA "alarms indicated smoke in the forward area of the plane, which houses batteries and other equipment, the airline said, and there was a "burning-like smell" in the cockpit and parts of the cabin. The plane landed at Takamatsu airport in western Japan, where the 129 passengers were evacuated using the plane's emergency chutes. The plane also carried eight crew members. ANA said that the exact cause was still undetermined. The event was designated as a "serious incident" by Japan's transport ministry, setting off an immediate investigation by the Japan Transport Safety Board, which dispatched a team to the scene." The result - a 4% drop in the stock so far premarket, and if any more airlines are to ground their fleet the implications for the backlog could be devastating, it will only get far worse for both the company and the Dow Jones average, of which it is part.

As NSA Pairs With Banks To "Fight Hackers", Will It Also Gain Access To Every American's Financial Secrets?

Just because there was not enough encroachment by the government into virtually every corner of private life, here is another "collaboration" that will further enmesh big brother into every aspect of private life, in this case private financial life, because as the WaPo reports, "major U.S. banks have turned to the National Security Agency for help protecting their computer systems after a barrage of assaults that have disrupted their Web sites, according to industry officials... The NSA, the world’s largest electronic spying agency, has been asked to provide technical assistance to help banks further assess their systems and to better understand the attackers’ tactics." And while we salute the great diversionary pretext that "Iranian hackers" pose a greater risk to the stability of the US financial system than, say, the ongoing monetization of US debt at a pace of $85 billion per month, which has made the Fed's DV01 rise to a mindboggling $2.75 billion, or idiot pundits who claim all American problems can be resolved with one coin, we can't help but wonder what happens when the most intrusive of US spy agencies, one which as reported last year is free "to intercept, decipher, analyze, and store" virtually every electronic communication in the entire world, now has full explicit access to all bank data, and, incidentally, every American's financial snapshot at any given moment?

FleeceBook: Meet JP Morgan's Matt Zames

Previously, in our first two editions of FleeceBook, we focused on "public servants" working for either the Bank of International Settlements, or the Bank of England (doing all they can to generate returns for private shareholders, especially those of financial firms). Today, for a change, we shift to the private sector, and specifically a bank situated at the nexus of public and private finance: JP Morgan, which courtesy of its monopolist position at the apex of the Shadow Banking's critical Tri-Party Repo system (consisting of The New York Fed, The Bank of New York, and JP Morgan, of course) has an unparalleled reach (and domination - much to Lehman Brother's humiliation) into not only traditional bank funding conduits, but "shadow" as well. And of all this bank's employees, by far the most interesting, unassuming and "underappreciated" is neither its CEO Jamie Dimon, nor the head of JPM's global commodities group (and individual responsible for conceiving of the Credit Default Swap product) Blythe Masters, but one Matt Zames.

Frontrunning: January 11

  • WSJ picks up on excess "deposits over loans" theme, reaches wrong conclusion: Wads of Cash Squeeze Bank Margins (WSJ)
  • SAC Is Bracing for Big Exodus of Funds (WSJ)
  • Japan unveils Y10.3tn stimulus package (FT)
  • China’s Inflation Accelerates as Chill Boosts Food Prices (BBG)
  • Berlusconi Denies Responsibility for Italy Crisis (BBG)
  • Fed hawks worry about threat of inflation (Reuters)
  • And then the lunatics: Fed easing may not be aggressive enough: Kocherlakota (Reuters)
  • BOJ Likely to Take Easing Steps (WSJ)
  • Draghi Shifts Crisis Gear as ECB Focuses on Economy Inbox (BBG)
  • Argentina Bondholders Lose Bid to Get State-Court Review (BBG)
  • Regulators Find Major Euribor Shortcomings (WSJ)
  • Basel III Punishes Dutch Over Risk That Isn’t (BBG)
  • Bondholders in Crosshairs as Merkel Travels to Cyprus (BBG)

Frontrunning: January 9

  • A Bold Dissenter at the Fed, Hoping His Doubts Are Wrong (NYT)
  • China and Japan step up drone race as tension builds over disputed islands (Guardian)
  • How Mario Draghi is reshaping Europe's central bank (Reuters)
  • Merkel Economy Shows Neglect as Sick Man Concern Returns (BBG)
  • US oil imports to fall to 25-year low (FT)
  • China Loan Share at Record Low Shows Financing Risks (BBG)
  • Dimon Says Some JPMorgan Execs ‘Acted Like Children’ on Loss (BBG) - children that reveleased who 'excess reserves' are truly used
  • Fed injects new sell-off risk into Treasuries (FT) - really? So the Fed will stop monetizing the US deficit some time soon?
  • Obama aide presses Republicans to accept more tax revenues (Reuters)
  • Ex-SAC analyst named 20 alleged insider traders (FT)
  • BOJ easing bets help dollar regain ground vs yen (Reuters)
  • Goldman Sachs Said to Be Part of Fed-Led Foreclosure Settlement (BBG)
  • Venezuela postpones inauguration for cancer-stricken Chavez (Reuters)

Bank Of America On The "Trillion Dollar Tooth Fairy" Straight "From The Land Of Fiscal Make Believe"

A year ago, out of nowhere, the grotesque suggestion to "resolve" the US debt ceiling with a platinum dollar coin came, and like a bad dream, mercifully disappeared even as the debt ceiling negotiations dragged until the last minute, without this idea being remotely considered for implementation, for one simple reason: it is sheer political, monetary and financial lunacy. And yet there are those, supposedly intelligent people, who one year later, continue dragging this ridiculous farce, as a cheap parlor trick which is nothing but a transparent attempt for media trolling and exposure, which only distracts from America's unsustainable spending problem and does nothing to address the real crisis the US welfare state finds itself in. And while numerous respected people have taken the time to explain the stupidity of the trillion dollar coin, few have done so as an integral part of the statist mainstream for one simple reason - it might provide a loophole opportunity, however tiny, to perpetuate the broken American model even for a day or two, if "everyone is in on it." Luckily, that is no longer the case and as even Ethan Harris from Bank of America (a firm that would be significantly impaired if America was forced to suddenly live within its means), the whole idea is nothing more than "the latest bad idea" straight "from the land of fiscal make believe." We can only hope that this finally puts this whole farce to bed.

Frontrunning: January 8

  • London Quantitative Hedge Funds Report Second Year of Losses (BBG)
  • Berlusconi Forms Alliance in Comeback Bid (WSJ)
  • Japan to Buy ESM Bonds Using FX Reserves to Help Weaken Yen (BBG)
  • Japan Mulling BOJ Accord Linked to Employment, Mainichi Says (BBG)
  • Samsung Expects Record Operating Profit (WSJ)
  • Boeing 787 Dreamliner Fire Probed, Blaze Adds to Setbacks (BBG)
  • BOJ's Shirai: Open to Firmer Inflation Target (WSJ)
  • HSBC N.J. Client Admits Conspiracy in Offshore Tax Case (BBG)
  • Lampert to Assume CEO Role at Sears (WSJ)
  • Abe prepares fresh stimulus measures (FT)
  • U.S. Set for Biggest State-Local Jobs Boost Since 2007 (BBG)
  • Pakistan Seen Needing IMF Bailout as Rupee Drops Before Vote (BBG)

Banks Put Linda Green Behind Them With $10 Billion Robosigning Settlement

The chapter on robosigning, i.e., Fraudclosure, is now closed with a $10 billion wristslap on US banks, of which a whopping $3.3 billion in the form of direct cash and $5.2 billion in "other assistance." The banks who are now absolved from any and all Linda Green transgressions in the past include: Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo. And so, banks can resume to resell properties with mortgages on which the original lien may or may not have been lost in the sands of time.

Fannie Says Household Financial Situtation Outlook Slumps To Worst Since August 2011

Fannie was already in the news this morning courtesy of the $10 billion settlement announced between the GSE and Bank of America. Let's make it two in a row courtesy of the firm's monthly housing survey in which one aspect, the ongoing expectation that home prices will continue to rise driven by the recent momentum, should come as no surprise: there is always hope that this dead cat bounce is different and unlike the previous three, and will result in something substantial. It won't, once all those millions of properties held on bank books and generating zero cash flow (remember: BAC's 6+ month delinquent mortgages now amount to a whopping $64 billion) are unleashed on the market once the subsidized housing price is perceived as sufficient by most as a new, and satisfactory, clearing price. What was surprising was the consumer outlook on the economy and personal finances, which was diametrically opposite, and in fact those who expect that their personal financial situation will get worse in the next 12 months rose to the highest since August 2011.