Bountiful_Harvest
4日前
JPMorgan Chase, Goldman Sachs, Bank of America and Wells Fargo are considered GSIB's, Global Systemically Important Banks.
Meaning if any one of them fails it could create global financial instability.
Thank you @McSqueezyTheCow for creating this chart that details the risks that these big banks have taken and that too few are talking about.
Zoom in on his chart. Study the numbers . He "compares assets, derivates, credit exposure, interconnectedness, and more."
Saving Grace
5月前
$JPM trouble, juggling the books.
JPMorgan Chase & Co. Agrees To Pay $920 Million in Connection with Schemes to Defraud Precious Metals and U.S. Treasuries Markets
JPMorgan Chase & Co. (JPMorgan), a New York, New York-based global banking and financial services firm, has entered into a resolution with the Department of Justice to resolve criminal charges related to two distinct schemes to defraud: the first involving tens of thousands of episodes of unlawful trading in the markets for precious metals futures contracts, and the second involving thousands of episodes of unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.
JPMorgan entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the District of Connecticut charging the company with two counts of wire fraud. Under the terms of the DPA, JPMorgan will pay over $920 million in a criminal monetary penalty, criminal disgorgement, and victim compensation, with the criminal monetary penalty credited against payments made to the Commodity Futures Trading Commission (CFTC) under a separate agreement with the CFTC being announced today and with part of the criminal disgorgement credited against payments made to the Securities Exchange Commission (SEC) under a separate agreement with the SEC being announced today.
“For over eight years, traders on JP Morgan’s precious metals and U.S. Treasuries desks engaged in separate schemes to defraud other market participants that involved thousands of instances of unlawful trading meant to enhance profits and avoid losses,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “Today’s resolution — which includes a significant criminal monetary penalty, compensation for victims, and requires JP Morgan to disgorge its unlawful gains — reflects the nature and seriousness of the bank’s offenses and represents a milestone in the department’s ongoing efforts to ensure the integrity of public markets critical to our financial system.”
“JPMorgan engaged in two separate years-long market manipulation schemes,” said U.S. Attorney John H. Durham of the District of Connecticut. “Not only will the company pay a substantial financial penalty and return money to victims, but this agreement requires JPMorgan to self-report violations of the federal anti-fraud laws and cooperate in any future criminal investigations. I thank the FBI for its dedication in investigating these deceptive trading practices and other sophisticated financial crimes.”
“For nearly a decade, a significant number of JP Morgan traders and sales personnel openly disregarded U.S. laws that serve to protect against illegal activity in the marketplace,” said Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Today's deferred prosecution agreement, in which JP Morgan Chase and Co. agreed to pay nearly one billion dollars in penalties and victim compensation, is a stark reminder to others that allegations of this nature will be aggressively investigated and pursued.”
Prudent Capitalist
5月前
LMFAO! JPM reported very strong earnings yesterday: $41.9 Billion in revenue for Q1, up 9% over the year ago quarter, and topping analysts' estimates of $41.67 Billion. Net income of $13.4 Billion, a 6% increase over the comparable year ago quarter, and earnings per share of $4.44 vs. analysts' projection of $4.17 per share.
All stocks were down hard yesterday due to concern over Geopolitical events, specifically Iran's statement that it would launch attacks on Israel today or tomorrow. JPM up strongly over the past 6 months and year, and YTD.
tw0122
5月前
Just last year, JPM salacious activities with sex trafficker Jeffrey Epstein, to whom it doled out mountains of hard cash for more than a decade (which he then used to silence his underage victims and accomplices), generated news headlines around the world. The bank settled those charges last year, which had been brought in two civil lawsuits by his victims and by the Attorney General of the U.S. Virgin Islands, for a combined $365 million. (See JPMorgan’s Settlements Reach $365 Million Over Civil Claims It Banked Jeffrey Epstein’s Sex Trafficking of Minors; Criminal Charges Could Lie Ahead.)
On Thursday of last week, two of JPMorgan Chase Bank’s federal regulators fined the riskiest bank in the United States $348 million dollars for engaging in “unsafe and unsound banking practices” for failing to supervise “billions” of trades on at least 30 global trading venues.
The Office of the Comptroller of the Currency (OCC) fined JPMorgan Chase Bank $250 million while the Federal Reserve fined the bank $98.2 million. The OCC said the misconduct occurred since at least 2019. The Fed said the bank had engaged in the misconduct over the span of nine years, from 2014 to 2023.
The key outrage embedded in these charges – that mainstream media failed to point out in its coverage last week – is that this “trading” activity did not occur at the registered brokerage firm of JPMorgan, which has properly licensed traders and trading supervisors. It occurred at the federally-insured bank, which is not allowed to have licensed traders – because casino banking brings on bank runs, bank panics and giant scandals that undermine Americans’ confidence in federally-insured banks.
Under Jamie Dimon at the helm of this federally-insured bank, as both Chairman and CEO, JPMorgan Chase Bank has turned giant scandals into an art form. Its rap sheet reads like that of an organized crime family and includes an unprecedented five criminal felony charges.
Adding to the outrage over the mild slap on the wrist from these two regulators last week is that this federally-insured bank was previously charged with engaging in unsafe and unsound banking activities when it used depositors’ money from its federally-insured bank to engage in massive high-risk credit derivative trades in London in 2012 and lost $6.2 billion of depositors’ money. The case became infamously known as the London Whale scandal.
The OCC wrote as follows in its settlement document covering the London Whale matter in 2013:
“The credit derivatives trading activity constituted recklessly unsafe and unsound practices, was part of a pattern of misconduct and resulted in more than minimal loss, all within the meaning of 12 U.S.C. § 1818(i)(2)(B)”; and “The Bank failed to ensure that significant information related to the credit derivatives trading strategy and deficiencies identified in risk management systems and controls was provided in a timely and appropriate manner to OCC examiners.”
The Securities and Exchange Commission (SEC) also settled charges with the bank in the London Whale matter. The SEC focused on JPMorgan’s ineffective internal controls and failure to keep the Audit Committee of its Board informed in a timely manner as required under its own rules and under the Sarbanes-Oxley Act. The SEC also found the company violated securities laws by filing false information with the SEC: “As a result of its failure to maintain effective internal control over financial reporting as of March 31, 2012, and disclosure controls and procedures, and as a result of its filing of inaccurate reports with the Commission (specifically, the Form 8-K filed on April 13, 2012, and the Form 10-Q filed on May 10, 2012), JPMorgan violated Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 13a-11, 13a-13, and 13a-15 there under,” the SEC said in its settlement document.
At the time of the London Whale scandal, a woman named Ina Drew was in charge of the unit of the federally-insured bank that oversaw the derivatives trading in London. That unit of the bank was called the Chief Investment Office. (That unit was created after Jamie Dimon took the helm at the bank.)
Ina Drew testified about the matter before the U.S. Senate’s Permanent Subcommittee on Investigations on March 15, 2013. Drew told the hearing panel that beginning in 1999, she “oversaw the management of the Company’s core investment securities portfolio, the foreign-exchange hedging portfolio, the mortgage servicing rights (MSR) hedging book, and a series of other investment and hedging portfolios based in London, Hong Kong and other foreign cities.”
Drew told the Senate Subcommittee that the investment securities portfolio exceeded $500 billion during 2008 and 2009 and as of the first quarter of 2012 was $350 billion. But during the 13 years that Drew supervised massive amounts of securities trading, she had neither a securities license nor a principal’s license to supervise others who were trading securities.
At the time, we asked numerous Wall Street regulators to explain how this is possible at Wall Street mega banks. One regulator who spoke on background only told us that Drew could not hold a securities license because she worked for the federally-insured bank, not its broker-dealer (a/k/a brokerage firm). Only employees of broker-dealers are allowed to hold securities licenses. But apparently, not having a securities license does not stop one from supervising a $500 billion portfolio of securities that are, most assuredly, traded by someone.
It is a long-held requirement by U.S. securities regulators that if you are going to supervise persons holding a securities license, you must also hold the appropriate securities licenses yourself. Drew, without a license, was supervising traders in London who were registered with the Financial Services Authority (now Financial Conduct Authority).
In its 10-K (annual report) filing in February with the SEC, JPMorgan Chase indicated there is a third unnamed regulator that is currently investigating these billions of unsupervised trades. The bank said it was “also in advanced negotiations with a third U.S. regulator, but there is no assurance that such discussions will result in a resolution.”
That third regulator should closely examine what is going on in JPMorgan’s own Dark Pools, where the bank is preposterously allowed to trade large amounts of its own bank stock in its own Dark Pools. (See chart below as an example of what went on in the week of October 23, 2023.) Dark Pools are thinly regulated trading platforms inside the mega banks on Wall Street, and elsewhere, which lack the transparency of stock exchanges.
tw0122
5月前
Federal banking oversight agencies are in agreement: U.S. banks are facing a potential tsunami of problems with commercial real estate loans in the office space sector.
Last June 1, the Office of Financial Research (OFR), (the agency created under the Dodd-Frank financial reform legislation of 2010 to warn about financial stability risks), explained why the vacancy rate in office buildings is in dramatic contrast to the actual occupancy rate, and thus bodes poorly for the future demand for renewing office leases. OFR writes as follows:
“The health of the CRE [Commercial Real Estate] office sector is not only measured by the amount of space leased and rent paid today, but also by how much space will be required in the future. In addition to space available for sublease, we can estimate the amount of space currently occupied by employees by measuring card key swipes using the Kastle Back to Work Barometer.
“Unfortunately, future demand for office space appears weak. In addition to the growth of office space available for sublease, the amount of office space occupied by tenants remains stubbornly low…Although the current office vacancy rate is 16.4%, the average occupancy rate measured by the Kastle Back to Work Barometer is 49.8%. (Note that this represents a weekly average; daily occupancy varies). This implies a structural vacancy rate of 50.2%. Prior to the COVID-19 pandemic, office occupancy averaged close to 100%. This means that on average, firms are paying rent for twice as much space as their employees are currently using. If occupancy of existing office space remains low, current office tenants will probably renew their leases for less space—reducing office demand over time.”
The chart above accompanied the assessment. The same chart also made it into OFR’s 2023 annual report, which predicted office building demolitions were likely to occur for the less desirable office space. OFR wrote:
“High-quality space will likely outperform as the flight to quality continues, with high rents and low vacancy rates for best-in-class assets. However, second-generation space will struggle to backfill, with an increase in demolitions and conversions.”
A key entity that OFR keeps apprised of financial stability risks is the Financial Stability Oversight Council (F-SOC). It was also created under the Dodd-Frank financial reform legislation of 2010 to address the fact that financial regulators were wearing blinders when the 2008 financial crisis on Wall Street left the U.S. economy in tatters, with millions of Americans losing their jobs and their homes to foreclosure from tricked-up mortgages. F-SOC is chaired by the sitting U.S. Treasury Secretary and includes every federal banking and securities regulator. F-SOC wrote the following in its 2023 annual report:
“Commercial real estate (CRE) loans totaled almost $6 trillion as of the second quarter of 2023, and CRE represents a significant portion of the assets of many financial institutions. Banks hold a significant market share of CRE loans at 50 percent, with the rest held by various financial institutions such as insurance companies, holders of commercial mortgage-backed securities (CMBS), and debt funds. CRE is the largest loan category among almost one-half of U.S. banks, and more than one-quarter of U.S. banks have CRE loan portfolios that are large relative to the capital they hold.”
And this:
“The prices of office properties have deteriorated much more than those of other major property types in recent quarters, with an index of office property prices more than 30 percent below its pre-pandemic level as of September 2023.”
There is widespread agreement among federal banking regulators that commercial real estate in the office sector is a serious financial risk to banks. However, there is divergent opinion among two key regulators as to whether this risk is at the smaller banks or includes the largest banks — which pose an exponentially greater threat to financial stability.
On March 7, Fed Chair Jerome Powell appeared before the Senate Banking Committee to deliver his Semiannual Monetary Policy Report. In the Q&A that followed, Senator Catherine Cortez Masto (D-NV) raised the question with Powell about troubled real estate loans as a financial risk to banks.
Powell played down the real estate threat at the largest banks, stating: “There will be bank failures, but this is not the big banks. If you look at the very big banks, this is not a first order issue for any of the very large banks. It’s more smaller and medium size banks that have these issues.”
Powell might have his own agenda in playing down the risks to the mega banks on Wall Street. According to Senator Elizabeth Warren, who also sits on the Senate Banking Committee, Powell is leading the charge behind the scenes to overturn federal regulators’ proposal to require the largest banks to hold larger amounts of capital to prevent a replay of the taxpayer and Fed bailouts of these mega banks that occurred in 2008.
On the same day that Powell was testifying before the Senate Banking Committee, the Chair of the Federal Deposit Insurance Corporation (FDIC), Martin Gruenberg, was holding a press conference to release the FDIC’s latest quarterly “Banking Profile.” Gruenberg boldly revealed a serious real estate problem inside the largest banks, stating the following: (Go to 5 minutes and 12 seconds at this link.)
GRUENBERG: “The increase in noncurrent loan balances was greatest among CRE [Commercial Real Estate] loans and credit cards. Weak demand for office space has softened property values and higher interest rates are affecting credit quality and refinancing ability of office and other types of CRE loans. As a result, the noncurrent rate for nonowner occupied CRE loans is now at its highest level since first quarter of 2014, driven by portfolios at the largest banks.” (Bold emphasis added.)
According to the chart below and accompanying data provided in an Excel spreadsheet by the FDIC, past due loans on commercial real estate at the largest banks (those with more than $250 billion in assets) as of December 31 of last year are at 4.11 percent. That’s 1.66 percent higher than at the end of the fourth quarter of 2008 when banks were exploding all over Wall Street during the financial crisis. As the chart below indicates, commercial real estate problems quickly became a lot worse at the largest banks, with the past due rate reaching 7.97 by the end of the first quarter of 2010.
Past Due Loans on Commercial Real Estate
That 4.11 percent past due rate at the biggest banks on December 31, 2023 compares with a past due rate of 1.35 percent at banks with $10 billion to $250 billion in assets, according to the latest FDIC bank profile data. Banks with $1 billion to $10 billion in assets have a negligible past due rate of 0.64 percent.
According to a report at CommercialEdge, Central Business District (CBD) office buildings “have been hit the hardest by the changes.” They cite a Washington, D.C. 13-story building with ground-floor retail space that “sold for $18.2 million in 2023, down 70% from its 2017 price tag of $61.8 million.”
tw0122
5月前
Yesterday, American Banker released a report showing that five banks in the U.S. hold a combined half trillion dollars in commercial real estate (CRE) loans. It came as a big surprise to a lot of folks that the bank holding the largest amount of CRE loans is JPMorgan Chase – whose bank holding company is also exposed to $49 trillion in derivatives as of December 31, 2023 according to the Office of the Comptroller of the Currency. (See Table 14 at this link.)
JPMorgan Chase is already considered the riskiest bank in the U.S. according to its regulators.
American Banker reported the following CRE totals for the five banks: JPMorgan Chase, $173 billion; Wells Fargo, $139.65 billion; Bank of America, $82.8 billion; U.S. Bank, $55.66 billion; and PNC Bank, $48.89 billion.
Some of the same hubris and willful blindness that prevailed in the runup to the subprime mortgage crisis that blew up large financial institutions in 2008 is showing itself today in regard to commercial real estate loans at federally-insured banks.
On March 7, Federal Reserve Chairman Jerome Powell testified before the Senate Banking Committee as part of his Semiannual Monetary Policy Report to Congress. During his testimony, Powell downplayed concerns about the impact of commercial real estate loans at the largest banks. Powell stated: “There will be bank failures, but this is not the big banks. If you look at the very big banks, this is not a first order issue for any of the very large banks. It’s more smaller and medium size banks that have these issues.”
If CRE is not a problem at the largest banks, that’s because both the banks and the Fed believe that the Fed will always spring to the rescue with an emergency bailout program. In fact, the Fed has already created just such a program that’s waiting in the wings. It’s called the Standing Repo Facility (SRF). It has a lending capacity of $500 billion and can lend to both the federally-insured bank and its trading unit (primary dealer) – thus giving the so-called “universal banks” on Wall Street two bites at the bailout apple.
For a look at just how quickly the Fed can sluice money to Wall Street mega banks with few questions asked by Congress, check out the chart below. It shows the Fed’s emergency money spigot to the mega banks in the last quarter of 2019 – for a financial emergency at the banks which has yet to be explained to the American people.
Fed's Repo Loans to Largest Borrowers, Q4 2019, Adjusted for Term of Loan
To grasp how radically things have changed since 2008 when former Goldman Sachs veteran-turned Treasury Secretary Hank Paulson took a 3-page document to Congress and demanded a $700 billion taxpayer bailout for the banks (Troubled Asset Relief Program, TARP), let the full meaning of the chart above sink in. The Fed can now funnel trillions of dollars in cumulative loans to mega banks on Wall Street, report the names of the banks and amounts borrowed two years later, and get a complete news blackout from mainstream media. (Wall Street On Parade was the only media outlet to chart the details and report the names of the banks that got the trillions of dollars in loans in 2019.)
Powell might have his own agenda in playing down the risks to the mega banks on Wall Street. According to Senator Elizabeth Warren, who sits on the Senate Banking Committee, Powell is leading the charge behind the scenes to overturn federal regulators’ proposal to require the largest banks to hold larger amounts of capital to prevent a replay of the 2008 financial crisis.
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