Deutsche Bank executive woes continue

Deutsche Bank announced over the weekend that its top C-Suite executives would not be getting a bonus again this year.

CEO John Cryan strangely made the announcement Friday night at Austin’s South By Southwest conference, stating that for the third consecutive year top execs would forego year end payouts as the bank struggles to pull itself out of the mire of questionable trading practices.

As many of you may know I wrote extensively three years ago about the rash of suicides within the bank just as the Libor scandal was breaking.

The German uber bank did note that bonuses for other employees would total just over $2B for 2017.

The news comes as the 10-year anniversary of Bear Stearns’ demise hits Thursday, which led to the Great Recession. On March 14th 2008, the Federal Reserve agreed to provide a $25B loan to keep the bank solvent for 28 days as they unwound Jimmy Cayne’s troubled bank.

As the Fed dug deeper into Bear’s books that offer was pulled a day later and on the 16th of March, JPM CEO found the pot gold scooping up Bear for seven cents on the dollar with a $2 a share offer.

Dimon also made sure that nothing on the troubled bank’s books could come back and bite him with Fed chief Ben Bernanke assuring Dimon the Fed would take the hit as it put up $29B and JPM invested $1B for the sale.

In the following week a Bear shareholder lawsuit was filed and JPMorgan raised its offer price from $2 a share to $10 a share to quell the suit. As a point of contrast Bear Stearns stock was trading at $93 a share in late February 2008.


JPMorgan’s Dimon may have a whale of a problem, again

JPMorgan’s CEO Jamie Dimon is out on his annual bus tour to meet with employees and business and political leaders that have relationships with the bank. The poster boy for banking since 2008 crises is talking about making America great again.

Dimon says he is a patriot first and a banker second. His point is if we do right by America, then his bank and the stock price will do just fine, thank you. Yet there seems to be a dark cloud following Dimon and it looks like a whale.

While Dimon moves across the country, a ghost of banking’s past is rearing its head again. The London Whale trade, which hit JPMorgan in 2012 and cost the bank more than $6B ultimately in trading losses. Congress used it as prima facie evidence for the Volcker Rule’s banning of banks with deposits running their own trading operations called proprietary trading desks.

Bruno Iskil, the JPMorgan European trader who was working with authorities on the case has come out publicly to state he was doing Dimon’s work. While the feds have their charges against two other European traders for lack of evidence of wrongdoing and allege difficulty in expediting them.

At first Iskil and the team were deemed “rogue traders” going out on their own to capture huge profits using the bank’s money. As time went by and the bank’s CIO Ina Drew stepped down, word began leaking out that this was a C-Suite authorized trading program, which before it blew up, brought in huge profits for the bank.

Drew was essentially running a hedge fund within the bank, using other trading desks data to take winning positions in outsized bets, according to Iskil’s newest writings. When news of these losses began to emerge, Dimon called them a”tempest in a teapot”.

Well that leak has now become a chorus as others JPMorgan traders have backed up Iskil’s assertions that Dimon & Co. created the teapot and put it on the boil.

So as Dimon’s latest tour is said to include visits with Congressional leaders over these next weeks, it’s unclear whether his push to scale back the Volcker Rule will have any merit.

EDITOR’S NOTE: The subreddit r/google has barred me from posting after I put this story on the Reddit. While getting over a 1,000 hits from Reddit, the moderator labeled this post spam.

This only confirms what Damore says about the echo chamber. Certainly it’s not spam, but it is not in keeping with the “truth” as Silicon Valley sees it.

Wall St. banks $1 trillion market cap feast on backs of college students

Since the Great Recession of 2008-09 the total amount of consumer borrowing overall has dropped 1%, according to figures from the New York Federal Reserve Bank.

Mortgages and home equity lines of credit, the two debt instruments that allowed Americans to use their homes as an ATM after the Internet bubble popped in 2000, have seen 8% and 33% drop respectively, mostly due to regulation, not the banks regulating themselves.

So where did the banks go to make up for these losses. The went to the unregulated arena of student loans and “Ninja” auto borrowing.

Banks have seen a 105% rise in student loans totals since 2008, as the narrative of the time was to stay in school since no one was hiring anyway. This data means that the banks piled into education loans with more than doubling the amount lent prior to the Great Recession.

Now, we see record numbers of defaults and loans more than 60 days late from this cohort of master-degree touting 20-somethings who still can’t find meaningful work. More than 25% of these loans are currently in default, according to the latest Fed data.

Unlike the subprime mortgages of the 2000s, these loans have no assets backing them, except the blood, sweat and tears of the students and their families perhaps. These “noteholders” cannot receive forgiveness on the loan even in a bankruptcy, since Wall Street took that option away years ago.

So, existing student loans are now total $1.4 trillion according to the Federal Reserve in DC or $1.3 trillion for the New York Fed and growing as a new batch of incoming freshman find out where they will be attending school in September. These first-year students will be paying 2-4 percent more than last year’s incoming class, because there is plenty of liquidity in the market for new loans.

When these first-year accepted students open their financial aid package, their families will notice that part of the aid package includes loans. This is how universities and colleges grease the wheels for Wall Street banks.

In my book a loan is not financial aid, it’s a debt that has to be repaid, but the schools use them in their aid packages to reduce the initial sticker shock.

Now on the back of this news, I see where the market cap of Wall Street’s largest commercial banks recently exceeded $1 trillion for the fist time ever.

JPMorgan up 29% since the election, Wells Fargo +27%, Bank of America 44%, and Citigroup +19%, have all enjoyed the Trump bump and its expectation of business growth or at the very least a reduction in regulations governing their actions.

Investors believe Dodd/Frank and the Consumer Financial Protection Bureau may be going away or being at the very least deeply defanged through funding cutbacks. So what could go wrong here?

Tomorrow, I’ll look at the subprime auto loans and how repo men with tow trucks are creating the next bubble to pop.

The Wall St. bulls are on the run, look out.

Apologies for late post as I have computer problems.

Wall Street appears to be flexing its muscle again on the back of Donald Trump’s Presidential inauguration.

JPMorgan reported 4th quarter earnings this morning and knocked the cover off the ball.

Jamie Dimon’s management team just seems to fire on all cylinders, while Bank Of America and Wells Fargo missed analysts’ estimates on some very important metrics.

Morgan Stanley on Friday also announced 140 new managing directors.

The idea that dealmaking and less regulations will allow Wall Street to grow revenues and profits in 2017 has been goosing the stock prices of most bulge-bracket banks.

The bulls are running so either join them or get out of the way.

Dimon's "consumer is a winner" misses the point

So America’s banker Jamie Dimon of JPMorgan Chase believes the consumer is enjoying the best time in the last decade due to the savings from cheaper gas.

“The U.S. consumer is a huge winner,” Dimon, 59, said Tuesday at the bank’s annual investor day in New York. “The consumer balance sheet has almost never been in better shape.”

So let’s say for the moment Dimon is correct — although if he is using credit card usage as a barometer of spending he could be dead wrong, but more on that later.

The US consumer may realize a $700 a year savings in gas spending. That $700 will not drive — pun intended — an economy or grow the GDP by any great amount.

I would venture that instead of buying $10 in gas, many are just using the savings to buy more fuel. And that the savings is never really spent on other items.

Remember the US has a huge pool of workers who are employed in more than one part-time job, so miles traveled is larger than it was even five years ago.

That said, if you have lost 8% to 10% in your 401(k), then you’re not feeling so flush to spend on “wants.” Especially when you can barely afford your “needs.”

No this is not a great time for the consumer, it’s better, but when you have everyone on the monetary side of the US government pushing for a higher inflation rate — Dimon included — well the powers behind the scene are working against the US consumer.