Washington Mutual

JPM's Dimon Builds Fiscal Cliff Bunker As CFO Exits "Balance Sheet Fortress"

UPDATE:*JPMORGAN CFO EXPECTED TO STEP DOWN: WSJ

Jamie "The Europeans have the will, but no way; The US has the way, but no will." Dimon had a very open and wide-ranging discussion with the Council on Foreign Relations today. The conversation ranged from the unfairness of the Bear Stearns' deal (poor chap - all that very limited downside from $2/BSC share, at least initially) to the immediate threat of the pending Fiscal Cliff - and his $100mm-debt-ceiling-preparedness war-room bunker, and America's longer-term fiscal profligacy (vigilantes moving against the US bond market is virtually assured - question is when and how). He also discussed the London Whale 'error' and went on to discuss the Greeks and the Eurozone's political and economic debacle in general. Some significant anti-administration rhetoric (ironic really), summed up with the veiled threat "Hey folks, if you think Washington and American Business can go to war with each other and it ends good - terrible error!"

Shhh... Don't Tell Anyone; Central Banks Manipulate Rates

It should come as no surprise to anyone that major commercial banks manipulate Libor submissions for their own benefit. As Jefferies David Zervos writes this weekend, money-center commercial banks did not want the “truth” of market prices to determine their loan rates. Rather, they wanted an oligopolistically controlled subjective survey rate to be the basis for their lending businesses. When there are only 16 players – a “gentlemen’s agreement” is relatively easy to formulate. That is the way business has been transacted in the broader OTC lending markets for nearly 30 years. The most bizarre thing to come out of the Barclays scandal, Zervos goes on to say, is the attack on the Bank of England and Paul Tucker. Is it really a scandal that central bank officials tried to affect interest rates? Absolutely NOT! That’s what they do for a living. Central bankers try to influence rates directly and indirectly EVERY day. That is their job. Congresses and Parliaments have given central banks monopoly power in the printing of money and the management of interest rate policy. These same law makers did not endow 16 commercial banks with oligopoly power to collude on the rate setting process in their privately created, over the counter, publicly backstopped marketplaces.

Guest Post: Who Destroyed The Middle Class - Part 2

The middle class has a gut feeling they are being screwed by somebody, they just can’t figure out who to blame. The ultra-wealthy elite keep up an endless cacophony of propaganda and misinformation designed to confuse an increasingly uneducated and willfully ignorant public while blurring the facts for those educated few capable of understanding the truth. They have been able to keep the masses dumbed down through government run education; distracted by sports, reality TV, Facebook, internet porn, and igadgets; lured by mass media messages of materialism; and shackled with the chains of debt used to acquire the goods sold by mega-corporations. We’ve become a society oppressed by a small faction of ultra-wealthy masters served by millions of impoverished, uneducated, sedated slaves. But the slaves are getting restless and angry. The illegally generated wealth disparity chasm is growing so large that even the ideologue talking head representatives of the elite are having difficulty spinning it. Even uneducated rubes understand when they are getting pissed on.

Guest Post: An Open Letter to Jamie Dimon

Dear Mr. Dimon,

Why do you impugn your character and reputation by allowing your firm to engage in these immoral activities? Sure, the regulators have failed to assess you any meaningful punishments that would deter you from this conduct on a strict, short-term dollars and cents analysis. Every penny of earnings counts, I get it. But, sir, you do not strike me as someone who is trying to pump your company’s stock price for a quarter or two. You are the face of JPMorgan Chase and, I would assume, you plan on being there for a while. Why intentionally destroy any and all goodwill your firm has to make additional revenue that is mostly insignificant in the short-term and, quite possibly, deleterious in the long-term? The only reason I can think of is: because you can. And, that, sir is where hubris starts.

"Lehman 2.0" Imminent Warns John Taylor

Hubris is at the heart of this. Everyone says this cannot happen – we won’t allow it. Says who? The EU says: if it is written in an agreement, it must be totally correct, unchangeable, and followed at all costs. New realities can’t intervene and no slippage is allowed. Why the Germans are so sure that they know the future is beyond me. They are fallible too, but they won’t admit it, and the Greeks can’t make them budge. Haven’t they looked around? Santorini has a different economic and social cost structure than Wiesbaden. Humanity (and common sense) seems totally lacking in the negotiations with the Greeks and a violent backlash would be totally understandable. Why the countries that have been fattening up their current account surpluses selling products to Greeks, whom they should have known were basically broke – just as they always have been – should be paid 100% on the euro is beyond me. Major losses should apply not only to sovereign borrowings but also to accounts receivable for cars, electronics, and other consumer goods. The market has not opened its eyes to the impact this Greek unraveling will have. The Eurozone will be mortally wounded and the world will suffer a significant recession – maybe as deep as 2008. European banks will lose much of their capital base and many should be bankrupt, but just as in the Lehman aftermath, the governments will try to save the banks and the banks’ bondholders, solvent or not. As the bank appetite for Eurozone sovereign paper will be decimated, austerity will probably follow shortly, followed by deflation and uncontrollable money creation. The European recession should be one for the record books.

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For a new investor in gold and silver, here is the most lucid piece of advice I can offer. Identifying severe undervaluation points in gold and silver, buying gold and silver assets during these times, and not worrying about interim short-term volatility, even if the immediate volatility is downward, is much more likely to impact your accumulation of wealth in a positive manner than trying to perfectly time market tops and bottoms in the highly manipulated gold and silver game.

Washington Mutual Sues JPMorgan To Recover $4 Billion In Deposits

WaMu has had enough and has filed a suit against JPM, trying to recover its $4 billion in deposits. WaMu, claims the money is being held by its former subsidiary, Washington Mutual Bank, which JPMorgan bought for $1.9 billion last year (not a bad deal if we may say so ourselves: you buy $1 for less than 50 cents on the dollar, with the FDIC guaranteeing any potential losses on the transaction). Seattle-based Washington Mutual has been trying to recover the money since filing for bankruptcy in September.