Report Student Borrowers Retreat from Home Buying
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Analysis White House Derivatives Tax Proposal Puts Wall Street in the Crosshairs
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Dimon Sees More Regulator Scrutiny After Whale Loss
JPMorgan Chase & Co., which is under regulatory orders to tighten internal controls following a record trading loss last year, will face more sanctions in the coming months, according to Chief Executive Officer Jamie Dimon, Bloomberg News reported yesterday. The bet on credit derivatives that lost more than $6.2 billion was "extremely embarrassing, opened us up to severe criticism, damaged our reputation and resulted in litigation and investigations that are still ongoing," Dimon said on Tuesday. "We received regulatory orders requiring improved performance in multiple areas, including mortgage foreclosures, anti-money laundering procedures and others. Unfortunately, we expect we will have more of these."
U.S. Appeals Court Rules that Victims of Madoff Fraud Cannot Sue SEC
Victims of Bernard Madoff's investment fraud have lost their bid to sue the U.S. Securities and Exchange Commission for negligence in failing to uncover the swindler's Ponzi scheme, Reuters reported yesterday. A federal appeals court in New York yesterday upheld the dismissal of lawsuits against the U.S. securities regulator brought by Madoff investors. The court said that the SEC's actions and "regrettable inaction" were protected by a law that shields federal agencies from liability. The Madoff case embarrassed the SEC, which had investigated the now-imprisoned money manager but failed to detect his fraud. The investor lawsuits relied heavily on a 2009 report by the SEC Inspector General's office, which outlined how the agency missed red flags and failed to follow up properly on leads that he was running a massive scam at his firm, Bernard L. Madoff Investment Securities LLC.
Mary Jo White Confirmed as SEC Chief
The Senate yesterday confirmed Mary Jo White to head the Securities and Exchange Commission, and she could be behind her desk at the agency as early today, the Washington Post reported today. The Senate approved White by unanimous consent, signaling that because she had strong bipartisan support, an official vote count was not necessary. White must now sign presidential appointment papers and get officially sworn in before she can take the reins from the current SEC chief, Elisse B. Walter. White, a former federal prosecutor who has spent the past decade as a white-collar attorney in New York, dazzled lawmakers from both parties with her credentials. For about 14 years, White focused on white-collar defense work at Debevoise & Plimpton in New York. She then spent 12 years as a federal prosecutor in New York — where she made a name for herself putting terrorists behind bars — before returning to Debevoise in 2002.
Lenders Are Warned on Risk
U.S. regulators yesterday warned about the dangers lurking in the booming market for loans to struggling companies, acting to combat concerns over emerging bubbles in parts of the financial sector, the Wall Street Journal reported today. The Federal Reserve and other banking regulators said that the controls and quality checks applied by lenders when extending leveraged loans have deteriorated. They also questioned whether some banks are doing enough to accurately gauge the risks of these practices. "Financial institutions unprepared for such stressful events and circumstances can suffer acute threats to their financial condition and viability," the regulators said. The warning came in the form of guidance, which lays out regulators' expectations for how banks should act. It said that regulators will closely monitor banks' underwriting of the loans, typically used to finance buyouts or acquisitions, as well as the ability of firms to manage their lending and withstand loan-related losses.
Senate Committee Approves White to Run SEC
The U.S. Senate Banking Committee approved Mary Jo White's nomination to lead the Securities and Exchange Commission on a bipartisan vote, clearing her way to become the first ex-prosecutor to lead the agency, Bloomberg News reported yesterday. The committee voted 21-1 yesterday to send White's nomination to the full Senate with unanimous support from the Republican members. The full Senate probably will vote this week on White's appointment. If approved, she would serve the remaining 14 months of a term vacated by Mary Schapiro, who stepped down as SEC chairman in December. The term runs through June 5, 2014.
Analysis Trading Hearings Put Focus Back on JPMorgans Chief
Jamie Dimon, the influential chief of JPMorgan Chase, watched from New York on Friday while in Washington, D.C., his top lieutenants were questioned by a Senate panel over a multibillion-dollar trading loss, the New York Times DealBook blog reported yesterday. An uncomfortable spotlight has swung back on Dimon all the same, as the hearing and the panel's report detailed his role in the trading blowup, potentially creating fresh challenges for a chief executive long praised for his risk-management prowess. The chairman and chief executive of the nation’s largest bank is unlikely to face a serious threat to his power at a time when he is reporting record profits. Two board members are concerned about the repercussions of Mr. Dimon’s statements on an earnings call last April, when he dismissed news reports about the trades as a "tempest in a teapot."
Senate Panel Says JPMorgan Misled Regulators and Investors Ignored Risks in Big Trades
A scathing Senate report said that JPMorgan Chase & Co. brushed off internal warnings and misled regulators and investors about the scope of losses on its "London whale" trades last year, the Wall Street Journal reported today. One risk gauge at the largest U.S. bank projected in February 2012 that the firm could lose $6.3 billion on the trades. But the warning was dismissed by a key risk manager as "garbage," according to the 301-page report by the Senate's Permanent Subcommittee on Investigations. The New York company's trading losses ultimately exceeded $6 billion. The report, the product of more than 50 interviews and a review of 90,000 documents, found that the bank ignored alarms triggered weeks and in some cases months before Chief Executive James Dimon dismissed concerns about them as a "tempest in a teapot" on an April 13, 2012, earnings conference call.
White Says Her SEC Would Be Tough on Wall Street
While she received a friendly reception during two hours of testimony, the Senate Banking Committee grilled Mary Jo White, the nominee for SEC chair, on her regulatory agenda, demanding that White create new rules for Wall Street that take aim at financial fraud, the New York Times DealBook blog reported today. Lawmakers argued that the agency, four years after the financial crisis, must confront a broad array of problems facing the public markets. White promised to tackle enforcement actions and unfinished regulation, but offered scant details on her plans. She did, however, signal a flexible approach to reforming money market funds, an approach that could draw scrutiny from investor advocates and liberal lawmakers.