Search Results for: JPMorgan

By Pam Martens and Russ Martens: November 16, 2023 ~ Yesterday, five U.S. Senators who are members of the Senate Banking Committee issued a letter to Gary Gensler, the Chair of the Securities and Exchange Commission (SEC), demanding that he issue a rule that would force publicly-traded companies to disclose the dollar amount of their lobbying expenditures as well as the issues they are lobbying for or against. The authors of the letter were: U.S. Senators Elizabeth Warren, (D-Mass.), Sherrod Brown  (D-Ohio), Jon Tester (D-Mont.), Tina Smith (D-Minn.), and John Fetterman (D-Pa.). Publicly-traded companies are already forced to disclose in SEC filings matters that are deemed material to the financial health of the company or that may be a source of reputational risk. It makes good sense that the investing public should also know if a public company is lobbying for an issue that is contrary to the values of the … Continue reading →

By Pam Martens and Russ Martens: November 14, 2023 ~ Today, the U.S. Senate Banking Committee will call federal banking regulators before it to testify at a hearing at 10 a.m. The underlying theme will be why these regulators were caught napping when the second, third, and fourth largest bank failures in U.S. history occurred in a span of seven weeks this past Spring and hear about the new plans of action to restore confidence in the U.S. banking system. One of the regulators testifying will be the soft-spoken Martin Gruenberg, Chairman of the Federal Deposit Insurance Corporation (FDIC), the federal agency that insures the deposits at federally-insured U.S. banks up to $250,000 per depositor, per bank, as long as the branch is located on U.S. soil. (Deposits at foreign branches of U.S. banks are not insured by the FDIC.) In his written remarks for today’s hearing (which were released early), … Continue reading →

By Pam Martens and Russ Martens: November 13, 2023 ~ Tomorrow, the Senate Banking Committee will hold a hearing to question federal banking regulators on what they are doing to restore public trust and financial stability to the U.S. banking system after the second, third and fourth largest bank failures in U.S. history occurred this Spring and caught regulators napping. One of the regulators scheduled to testify is Michael Hsu, the Acting Comptroller of the Office of the Comptroller of the Currency (OCC). Hsu undermined public trust in the U.S. banking system in May when he allowed JPMorgan Chase, the largest and riskiest bank in the United States, to become even larger and riskier through its purchase of the failed bank, First Republic Bank. At a July 12 Senate hearing, Senator Elizabeth Warren had this to say about Hsu’s conduct: “When First Republic Bank collapsed in April, the bank was ultimately … Continue reading →

By Pam Martens and Russ Martens: November 8, 2023 ~ Yesterday, the regulator of the Federal Home Loan Bank system, the Federal Housing Finance Agency (FHFA), released a report on its recommended changes going forward. The report was in response to the questionable conduct of the Federal Home Loan Banks in the leadup to the banking crisis this past spring. The core mission of the 11 regional Federal Home Loan Banks is to “provide liquidity to their members to support housing finance and community development through all economic cycles.” In short, the Federal Home Loan Banks are supposed to make it possible for banks to provide home mortgages to low-income folks. The banks that failed this spring were engaged in crypto (Silvergate and Signature Bank), providing loans to the super wealthy (First Republic Bank), and in the case of Silicon Valley Bank, it was more of a Wall Street IPO pipeline. … Continue reading →

By Pam Martens and Russ Martens: November 7, 2023 ~ On the first day of trading in January 2007 (the year prior to the Wall Street financial crisis in 2008 that saw century-old iconic financial firms explode one after another), Citigroup closed the trading day at $55.25. Yesterday, Citigroup’s common stock closed at an effective share price of $4.20. Citigroup did a 1-for-10 reverse stock split on May 9, 2011. That means that investors holding 100 shares of Citigroup back in January 2007 saw their position shrink to 10 shares after May 9, 2011. So yesterday’s closing price of $42.04 for Citigroup is effectively $4.20 for long-term shareholders, adjusting it for the reverse stock split. To put that in even starker terms, investors who have held onto this dog for almost 17 years have watched 92 percent of its share price vanish. More dire news on Citigroup came yesterday with a … Continue reading →

By Pam Martens and Russ Martens: November 3, 2023 ~ WeWork, the flexible-office-space company, is the quintessential proof that you can’t put lipstick on a pig forever. On Tuesday, the Wall Street Journal reported that WeWork “ is planning to file for bankruptcy as early as next week….” On October 5, the credit ratings agency Fitch downgraded WeWork’s long-term debt deeper into junk bond territory after WeWork elected to withhold interest payments on its debt that were due Oct. 2. Year-to-date, the publicly-traded stock of WeWork has lost 98 percent of its value. Its shares were trading for pennies in August on the New York Stock Exchange when the financial wizards at the company came up with the idea to do a 1-for-40 reverse stock split in early September to put a little lip gloss on the pig. Yesterday, the stock closed at $1.11, which would mean that it actually closed at … Continue reading →

By Pam Martens and Russ Martens: October 24, 2023 ~ Last Friday, the Federal Reserve published its Financial Stability Report, which takes a detailed look at U.S. financial stability through the second quarter of this year. Although the Fed does its best to put a rosy glow on the outlook, it’s not a pretty picture. We found the most disturbing sentence in the report to be the following: “Overall, estimated runnable money-like financial liabilities increased 3.4 percent to $20.3 trillion (75 percent of nominal GDP) over the past year.” Given that a handful of banks this past spring, with combined liabilities of less than $1 trillion, caused a full blown banking panic and bank runs, the Fed’s figure of $20.3 trillion of “runnable” money is not a comforting thought. The Fed elaborates as follows: “The banking industry maintained a high level of liquidity overall, but some banks continued to face funding pressures; meanwhile, structural vulnerabilities … Continue reading →

By Pam Martens and Russ Martens: October 12, 2023 ~ On Monday, Michael Barr, the Vice Chair for Supervision at the Federal Reserve, addressed a contentious issue in a speech before the American Bankers Association’s annual convention in Nashville. The topic was why federal banking regulators have proposed higher capital levels for the largest U.S. banks, those with assets over $100 billion. As we reported on September 20, there has been aggressive pushback on the proposal from large banks, their lobbyists and their trade associations. (Community banks are not impacted by the proposal.) During his speech, Barr put a staggering dollar figure on the destruction to the U.S. economy that could materialize from another major financial crisis. Barr said this: “Research suggests the costs of a financial crisis are sizable. While estimates vary widely, the cumulative loss in economic activity is consistently estimated to lie above 20 percent of annual GDP—and in … Continue reading →

By Pam Martens and Russ Martens: October 10, 2023 ~ An academic study released in April found that during the fastest pace of Fed interest rate hikes in 40 years, the majority of U.S. banks failed to hedge their interest rate risk. The study on hedging is titled: Limited Hedging and Gambling for Resurrection by U.S. Banks During the 2022 Monetary Tightening? Its authors are Erica Jiang, Assistant Professor of Finance and Business Economics at USC Marshall School of Business; Gregor Matvos, Chair in Finance at the Kellogg School of Management, Northwestern University; Tomasz Piskorski, Professor of Real Estate in the Finance Division at Columbia Business School; and Amit Seru, Professor of Finance at Stanford Graduate School of Business. Among the key findings of the study are the following: “Over three quarters of all reporting banks report no material use of interest rate swaps.” “Only 6% of aggregate assets in the U.S. banking system … Continue reading →

By Pam Martens and Russ Martens: October 9, 2023 ~ It took eight years of research to compile a data set of annual balance sheets of more than 11,000 commercial banks dating back to 1870 in 17 advanced economies. And in every country, the study arrived at the same finding: concentrating the banking system in the hands of five or less giant banks leads to financial instability and more severe financial crises. The bank balance sheets of the following countries were examined: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States. The 150-year banking study is titled: “Survival of the Biggest: Large Banks and Financial Crises.” Its authors are Matthew Baron of Cornell University; Moritz Schularick of the Kiel Institute for the World Economy and Sciences; and Kaspar Zimmermann of the Leibniz Institute for Financial Research SAFE. Other … Continue reading →