Curious how much the various banks who stood to be impacted by or, otherwise, benefit from either a concentration or dilution of the Volcker rule? According to OpenSecrets, which crunched the numbers, here is how much being able to continue prop trading meant to some of the largest US banks and lobby groups:
- American Bankers Association: $6.495 million
- JPMorgan: $4 million
- Wells Fargo: $4.440 million
- Citigroup: $4.240 million
- Independent Community Bankers of America: $3.581 million
- Bank of America: $2 million
Not bad considering the loophole-ridden Volcker Rule will effectively permit "hedge" books (where an army of lawyers paid $1000/hour defines just what a hedge is) to continue piling on billions of dollars in wildly profitable, Fed reserve funded trades.
If you can't beat 'em, join 'em, copy 'em, and then beat 'em. While everyone's attention has been glued to Bitcoin (and its various smaller and less viable for now alternative digital currencies), JPMorgan has submitted a patent which appears to set the scene for a competing centralized network to Bitcoin. As LetsTalkBitcoin noted first, the "Method and system for processing internet payments using the electronic funds transfer network," states that Chase's technology is a "new paradigm." Moreover that it permits the creation of "virtual cash" (also referred to as "web cash") with a "real-time digital exchange of value." Without naming the virtual currency or any competing payments system by name, the bank takes a swipe at the crytocurrency model, adding that sees “a new marketplace” emerging for “low dollar, high volume, real-time payments with payment surety for both consumers and producers.”
And so it is done (as we detailed here)... and due to be put in place as of April1st 2014 (rather ironically). The 100-plus-pages of rules and regulations prohibit two activities of banking entities: (i) engaging in proprietary trading; and (ii) owning, sponsoring, or having certain relationships with a hedge fund or private equity fund. But the kicker...
"requires banking entities to establish an internal compliance program designed to help ensure and monitor compliance with the prohibitions and restrictions of the statute and the final rule."
Great! Because self-regulation worked so well in the past for the financial services industry.
- Glass-Steagall Fans Plan New Assault If Volcker Rule Deemed Weak (BBG) ... "if"? The banks control the legislators and regulators...
- Cellphone data spying: It's not just the NSA (USA Today)
- Major tech companies push for limits on government surveillance (Reuters)
- Shanghai Warns Kids to Stay Indoors for Seventh Day on Smog (BBG)
- Protesters fell Lenin statue, tell Ukraine's president 'you're next' (Reuters)
- Everyone must be flying private these days: EADS to cut 5000-6000 jobs, close Paris HQ in restructuring (FT)
- Big Players Trade 'Upstairs' (WSJ)
- There’s no way to tell how many people who think they’ve signed up for health insurance through the U.S. exchange actually have (BBG)
- Slower China inflation reduces worries of tighter policy (Reuters)
The too big to fail banks have a larger share of the U.S. banking industry than they have ever had before. So if having banks that were too big to fail was a "problem" back in 2008, what is it today? The total number of banks in the United States has fallen to a brand new all-time record low and that means that the health of the too big to fail banks is now more critical to our economy than ever. In 1985, there were more than 18,000 banks in the United States. Today, there are only 6,891 left, and that number continues to drop every single year. That means that more than 10,000 U.S. banks have gone out of existence since 1985. Meanwhile, the too big to fail banks just keep on getting even bigger.
- With website improved, Obama to pitch health plan (Reuters)
- Joe Biden condemns China over air defence zone (FT)
- Tally of U.S. Banks Sinks to Record Low (WSJ)
- Black Friday Weekend Spending Drop Pressures U.S. Stores (BBG)
- Cyber Monday Sales Hit Record as Amazon to EBay Win Shoppers (BBG)
- Ukraine's Pivot to Moscow Leaves West Out in the Cold (WSJ)
- Investment banks set to cut pay again despite rise in profits (FT)
- Worst Raw-Material Slump Since ’08 Seen Deepening (BBG)
- Democrats Face Battles in South to Hold the Senate (WSJ)
- Hong Kong reports 1st case of H7N9 bird flu (AP)
- In Fracking, Sand Is the New Gold (WSJ)
It’s interesting, disturbing and pathetic that this article emerged so shortly after we highlighted the fact that there is about to be a huge, and potentially disruptive reset in home equity loans over the next several years. So while we are still dealing with the ramifications of the prior housing bubble and the HELOCs associated with that debacle, we are right back at it. Extracting additional equity from another phony housing bubble to remodel homes that likely aren’t worth anywhere near what people think once private equity and money laundering oligarchs are done with their binge buying. As we have said many times before, QE makes a society lose its mind.
- Washington turns bond market upside (FT)
- China Air-Zone Move Expands Field of Islands Spat With Japan (BBG); Japan rejects China claim on airspace over disputed islands (FT)
- 'Great Satan' meets 'Axis of Evil' and strikes a deal (Reuters)
- Iran Pact Faces Stiff Opposition (WSJ)
- Allies Fear a US Pullback in Mideast (WSJ)
- India to resume paying Iran in Euros (Economic Times)
- At 'Business Insider,' it's time to sell (USA Today)
- More ECB currency war jawboning: ECB’s Hansson Says Rate Cut Options Not Fully Exhausted (BBG)
- Spy World Links Plus Obama Ties Stoke Concern About NSA Review (BBG)
- A disunited Europe will struggle even to disintegrate (FT)
In the aftermath of the devastating, vicious, tax-deductible DOJ settlement with JPMorgan, its stock may have responded by soaring to new all time highs (unclear if it was JPM's prop desk - in violation of the Volcker and every other rule - doing most of the buying) but that doesn't mean the benefits go out equally to all. According to Reuters, while JPM's shareholders will reap the benefits of yet another year in which Jamie Dimon uses nearly $600 billion in excess reserves, aka excess deposits, to ramp product risk around the globe and corner assorted markets (until various unknown teapot tempests blow up in his face), JPM's employees - unable to manipulate every market as much as they want to, and as much as they have in the past now that every action by JPM is scrutizined - will be stuck with total all in compensation that is unchanged from last year. Oh the humanity.
- JPMorgan $13 Billion Mortgage Deal Seen as Lawsuit Shield (BBG)
- J.P. Morgan Is Haunted by a 2006 Decision on Mortgages (WSJ)
- World powers, Iran in new attempt to reach nuclear deal (Reuters)
- Keystone Foes Seek to Thwart Oil Sands Exports by Rail (BBG) - mostly Warren Buffet?
- How Would Fed Deal With Debt Ceiling Crisis? Look to Minutes for Clues (Hilsenrath)
- Anything to prevent the loss of prop trading: 'Volcker Rule' Faces New Hurdles (WSJ)
- BOE Sees Case for Keeping Record-Low Rate Beyond 7% Jobless (BBG)
- Obama Backs Piecemeal Immigration Overhaul (WSJ)
- Abenomics Seen Cutting Japan Bad-Loan Costs to 2006 Low (BBG)
- J.P. Morgan, U.S. Reach Historic Settlement (WSJ)
- OECD cuts global growth forecast (AP)
- Guess the profit margin: Wal-Mart Touts $98 TV as Holiday Seen Weakest Since 2009 (BBG)
- Republicans defy threat, block another Obama judicial pick (Reuters)
- Fed Ponders How to Temper Tapering Without Rate Increase (BBG)
- Wall Street uses 'merchant' workaround to cling to commodity assets (Reuters)
- PBOC to ‘Basically’ End Normal Yuan Intervention, Zhou Says (BBG)
- Italy’s leader warns Germany of rise of anti-European sentiment (FT)
- Yellen Nomination for Fed Chairman to Get Vote This Week (BBG)
- As U.S. default threatened, banks took extraordinary steps (Reuters)
- NSA vowed repeatedly to fix its collection errors (AP)
The overnight global scramble to buy stocks, any stocks, anywhere, continued, with the Nikkei soaring higher by 2% as the USDJPY rose firmly over 100, to levels not seen since May as the previously reported speculation that more QE from the BOJ is just around the corner takes a firm hold. Sentiment that the liquidity bonanza would accelerate around the world (with possibly more QE from the ECB) was undented by news of a surge in Chinese short-term money market rates or the Moody's one-notch downgrade of four TBTF banks on Federal support review. The release of more market-friendly promises from China only added fuel to the fire and as a result S&P futures are now just shy of 1800, a level which will almost certainly be taken out today as the multiple expansion ramp continues unabated. At this point absolutely nobody is even remotely considering standing in front of the centrally-planned liquidity juggernaut that has made "market" down days a thing of the past.
Allegations of JP Morgan’s use of clever tactics to bribe Chinese officials recently received mainstream attention when Salon journalist Alex Pareene mentioned it in a comical and classic interview on CNBC (you need to watch the video before reading this) with presstitute Maria Bartiromo. When Mr. Pareene mentioned these claims against the TBTF bank, CNBC mocked him. Howeverer, this article from the New York Times details how JP Morgan paid $75,000 a month to an obscure consulting firm called Fullmark Consultants, which had only two employees. The firm was run by a woman named Lily Chang, which in reality was the alias used by Wen Jiabao’s only daughter Wen Ruchun. Wen Jiabao was the Prime Minister of China at the time.
- Yellen to defend Fed's ultra-easy monetary policy (Reuters)
- Japan growth slows on global weakness (WSJ)
- Eurozone third-quarter growth falters (FT)
- Fed Debates Its Low-Rate Peg (Hilsenrath)
- Yellen: Economy Still Needs Fed Aid (WSJ)
- ‘Obamacare’ launch fiasco rouses sceptics (FT)
- DoubleLine's Gundlach says U.S. equities 'only game in town' (Reuters)
- Indian Inflation Exceeding Estimates Adds Rate-Rise Pressure (BBG)
- HUD Said to Fail in Bid to Sell $450 Million of Mortgages (BBG)
- Boeing machinists reject labor deal on 777X by 67 percent (Reuters)
Q3 earnings for financials show that the interest rate risk created by the Fed after years of zero rates is very real indeed