Fortress Balance Sheet

US Bank Stocks Slide After New Fed Tests Suggest Need For "Significant Increase In Capital"

Two weeks after European and Japanese banks threatened mutiny against new banking capital requirements set forth by the Basel Committee, Bloomberg reports that Wall Street would have to come up with billions of dollars in additional capital in a proposed revamp of the Fed’s stress tests. US bank stocks are sliding on the news, falling back to the reality of lower and flatter yield curves as well as systemic threats from Deutsche Bank.

Buffett Exits Entire Credit Default Swap Exposure, As Citi's Appetite For Derivative Destruction Surges

It was considered one of the bigger paradoxes for years. Back in 2003, Warren Buffett famously dubbed derivatives “financial weapons of mass destruction” and yet over the next several years went ahead and entered a number of the contracts, including both equities and credit, ostensibly by selling CDS to collect up monthly premiums. However, at least when it comes to CDS, after several years of Berkshire trimming its credit derivative exposure, it is now completely out. Meanwhile, Citi is loading up on any CDS it can find...

The New New 'Deal' - "Markets Are Too Important To Be Left To Investors"

In the same way that FDR had an existential political interest in generating inflation and preventing volatility in the US labor market, so does the US Executive branch today (regardless of what party holds the office) have an existential political interest in generating inflation and preventing volatility in the US capital markets. Transforming Wall Street into a political utility was an afterthought for FDR; today the relative importance of the labor markets and capital markets have completely switched positions. Today, the quote would be "markets are too important to be left to investors."

The Silver Age Of The Central Banker (Ends Badly)

The Golden Age, per the original Greek myth, was an era of unblemished cooperation and great deeds. The Silver Age, on the other hand, was a pretty miserable time to be alive. Not as warlike as the Bronze Age, and not the war of all against all as in the Iron Age, but the spirit of the age was one of strife and competition. It ends badly. What’s required is seeing the world for what it is, not what we might wish it to be. That’s not easy, whether you’re a central banker or a small investor, but it’s never been more important.

Did A Central Banker Just Margin Call All Other Central Banks' Credibility?

Did the BOJ’s out-of-the-blue reversal on its monetary stance which was refuted just weeks prior by Mr. Kuroda himself take place because after listening to the arguments, suggestions, as well as concerns, from the participants at Davos he concluded much like what the movie “Margin Call” depicted: It was all about to unravel? And if so: is this him deciding to be “first” and considered it his only choice?

This Time 'Is' Different - For The First Time In 25-Years The Wall Street Gamblers Are Home Alone

The last time the stock market reached a fevered peak and began to wobble unexpectedly was August 2007. Markets were most definitely not in the classic “price discovery” business. Instead, the stock market had discovered the “goldilocks economy." But what is profoundly different this time is that the Fed is out of dry powder. Its can’t slash the discount rate as Bernanke did in August 2007 or continuously reduce it federal funds target on a trip from 6% all the way down to zero. Nor can it resort to massive balance sheet expansion. That card has been played and a replay would only spook the market even more. So this time is different.  The gamblers are scampering around the casino fixing to buy the dip as soon as white smoke wafts from the Eccles Building.  But none is coming. For the first time in 25- years, the Wall Street gamblers are home alone.

JPMorgan Lied To Fed, Did Not Report Losing Trades Whistleblower Charges

Long before Virtu was forced to pull its IPO due to the backlash against HFT frontrunners in party due to being stupid enough to post its perfect trading record of 1 trading day loss in 5 years which could only be the result of a grossly rigged market, we pointed out that another entity, one having little in common with your garden variety HFT parasite, namely JPMorgan, had a 2013 trading record which could be summed up on one word only: perfection. Yet while one could simply attribute the same kind of market rigging to JPM as one can (and should) to the average hi-freak, it seems there may be more here than meets the eye so used to seeing manipulation everywhere it looks. According to Australia's Sydney Morning Herald, "a technical support person who worked for JP Morgan in Australia claims the bank regularly misled its New York parent and the US Federal Reserve by failing to report losing trades."

JPMorgan To Fire Thousands

Following last year's realization that mortgage origination as a product line is effectively dead (which has forced such origination dependent banks as Wells Fargo to return to subprime lending in hopes of keeping the revenue stream alive, knowing full well how it all ends), and that only investors and "all cash" buyers are keeping the myth of the housing recovery alive on their shoulders, banks fired tens of thousands of workers in the mortgage business hoping to stem the bottom line bleeding from the collapse in revenues. It turns out that they didn't fire enough and/or that the housing market contraction was far worse than even the banks, in their most, pessimistic forecasts, had expected. Case in point: JPMorgan, which after firing 15,000 in its mortgage business, has just revealed it will fire thousands more.

JPM Hammered By Massive $9.2 Billion In Legal Expenses, Posts First Loss Under Dimon; Takes $1.6 Billion Reserve Release

So much for the JPM "fortress balance sheet." Moments ago the bank which 18 months ago stunned the world with the biggest prop trading loss in history, just reported its first quarterly loss under Jamie Dimon, missing expected revenue of $24 billion with a print of $23.88 billion, but it was net income where the stunner was in the form of a $0.4 billion net income. The reason: the fact that from the government's best friend, Jamie Dimon has become the punching bag du jour, and having to pay $9.15 billion in pretax legal expenses, the biggest in company history. Considering that the other key component of Q3 net income was a whopping $1.6 billion in loan loss reserve releases, one wonders just how truly strong Q3 earnings really were. But of course, this being Wall Street, all negative news is "one-time" and to be added back. Which is why JPM promptly took benefit for all charges, which means adding back the $7.2 billion legal expense and $992 MM reserve release after tax benefit. In short: of the firm's $1.42 in pro forma EPS, a whopping $1.59 was purely from the addback of these two items.

Fraud Fortress: JPM Settles London Whale, Admits To Violating Securities Laws

"By late April 2012, JPMorgan senior management knew that the firm's Investment Banking unit used far more conservative prices when valuing the same kind of derivatives held in the CIO portfolio, and that applying the Investment Bank valuations would have led to approximately $750 million in additional losses for the CIO in the first quarter of 2012." Translated: Jamie Dimon lied to Congress.

JPMorgan Warns: Increasing Rates Have "Reduced The Remaining Refinance Opportunity By More Than 50%"

About an hour ago, Bank of America served the latest indication that the US housing "recovery" (also known as the fourth consecutive dead cat bounce of the cheap credit policy-driven housing market in the past five years) may be on its last breath. Namely, the bank announced that it will eliminate about 2,100 jobs and shutter 16 mortgage offices as rising interest rates weaken loan demand, said two people with direct knowledge of the plans and reported by Bloomberg. In some ways this may be non-news: previously we reported, using a Goldman analysis, that up to 60% of all home purchases in recent months have been, which of course shows just how hollow the "recovery" has been for the common American for whom the average home has once again become unaffordable. However, judging by an update presentation given earlier today by the CFO of none other than JP "fortress balance sheet" Morgan, things are rapidly going from bad to worse for the banking industry as a result of the souring mortgage market for which, absent prop trading, loan origination is the primary bread and butter.