Big Bank Bailout Payback Bamboozle

JPMorgan Chase's Profit Jumps 23 Percent in 3Q

JP Morgan Chase received $25 billion from TARP; Morgan Stanley (a spinoff of JP Morgan) received $10 billion.

The Wall Street Journal reported in March 2009 that about $50 billion of the more than $173 billion that U.S. taxpayers poured into AIG since October 2008 has been paid to at least two dozen U.S. and foreign financial institutions, which included Goldman Sachs, Morgan Stanley, Wachovia (now Wells Fargo), and Bank of America; therefore, these four banks received even more BILLIONS in handouts from taxpayers.

October 13, 2010

AP – JPMorgan Chase & Co. said Wednesday that its third-quarter profit jumped 23 percent because the banking giant was able to set aside less money to cover loan losses.

CEO Jamie Dimon did warn that loan losses are still high in both the mortgage and credit card portfolios, but they are no longer rising like they did during the recession. That enabled JPMorgan Chase to set aside $1.55 billion to cover losses in its retail financial services division, less than half the $3.99 billion in loss provisions recorded in the same period a year ago. Loan loss provisions in its credit-card business fell to $1.63 billion from $4.97 billion last year.

Dimon said the bank, the country's second-largest by assets and the first big bank to report quarterly results, expects losses in its credit-card division to fall in the next quarter.

The New York bank earned $4.42 billion, or $1.01 per share. It earned $3.59 billion, or 82 cents, during the same quarter last year.

The results came in well ahead of the 90 cents per share that analysts polled by Thomson Reuters were expecting. Shares rose 3 cents to $40.43 in morning trading Wednesday.

Profit in the investment bank, which has been a big strength for JPMorgan Chase in recent quarters, fell 33 percent. The drop was due mainly to lower fees from underwriting stock offerings.

Debt underwriting picked up sharply, however, as many companies took advantage of historically low interest rates to raise new cash through the bond market instead of through issuing new shares.

Income from trading currencies, bonds and other fixed-income products fell 38 percent during the quarter as interest rates remained low.

JPMorgan Chase and other major banks including Goldman Sachs Group Inc. posted huge trading profits last year as financial markets were recovering from the credit crisis, allowing them to offset losses from defaults on mortgages and credit cards.

Now that investment banking profit is slipping, a pickup in earnings from retail banking is helping JPMorgan Chase. Income from its retail banking division, which had the sharp decline in loan loss provisions, jumped to $907 million from just $7 million during the third quarter last year.

JPMorgan's credit card business earned $735 million in the third quarter after losing $700 million during the third quarter in 2009.

Even though JPMorgan Chase slashed its loss provisions during the quarter, it still holds reserves of 5.1 percent companywide to cover future losses, compared with 5.3 percent during the year-ago quarter.

Report Criticizes TARP Contracts to Fannie and Freddie

October 14, 2010

Reuters – The Treasury Department has relied heavily on private companies and troubled mortgage giants Fannie Mae and Freddie Mac to manage the $700 billion Wall Street bailout, a report released on Thursday said.

The report by the congressional panel overseeing the Troubled Asset Relief Program (TARP), said that the $437 million in Treasury contracts to Fannie Mae, Freddie Mac and private companies to manage critical aspects of the bailout program raised a number of concerns about public oversight and conflicts of interest.

"Treasury may be less likely to expedite meaningful reforms of Fannie Mae and Freddie Mac when it has employed them for combined arrangements of $240.5 million and when these firms agreed to provide their services at cost, receiving no profit from the deals," the report said.

The oversight panel is now headed by Senator Ted Kaufman who took the seat vacated by Elizabeth Warren, who left the panel to oversee the set up of the government's new Consumer Financial Protection Bureau.

When Fannie Mae and Freddie Mac were placed under government conservatorship in late 2008, officials blamed poor credit choices and bad risk management for their losses.

The Treasury contracts to Fannie Mae and Freddie Mac to manage the Treasury Department's foreclosure mitigation program have problems, the report said.

"Both Fannie Mae and Freddie Mac have a history of profound corporate mismanagement," it said. "Further, both companies have fallen short in aspects of their performance, as Fannie Mae recently made a significant data error in reporting on mortgage redefaults and Freddie Mac has had difficulty meeting its assigned deadlines."

Yet the Treasury Department is relying heavily on them, the report said.

"Fannie Mae alone currently has 600 employees working to fulfill its TARP commitments," the report said. "By comparison, Treasury has only 220 staffers working on all TARP programs combined."

Other contracts went to law firms, investment management firms and audit companies, the report said.

"The nature of these firms' relationship to the financial system inevitably gives rise to a wide range of potential conflict issues," the report said. "Treasury should develop an independent mechanism for monitoring conflicts that makes it less reliant on contractors and agents for information."

The report also found fault with Treasury's outreach to award contracts to small businesses.

"In one case, Treasury awarded a contract to a 'small disadvantaged business,' which in turn delegated roughly 80 percent of the contract to a 'large business,'" it said.

But Treasury failed to reach out to find qualified minority-owned businesses to participate in TARP contracts.

Treasury spokesman Mark Paustenbach defended the Treasury's use of outside contractors, who helped it act more quickly to stabilize financial markets during the financial crisis of late 2008 and early 2009.

"Treasury's demand for skills, resources and expertise was urgent and we quickly needed qualified assistance," he said in a statement. "At the same time, our contracting process remains open and transparent."

The authority to make new government investments in financial firms under TARP expired at the beginning of the month. The Treasury Department has said that what started out as a $700 billion program to stop a financial panic in the fall of 2008 will ultimately cost around $30 billion after selling off its stake in American International Group.