Thursday, April 16, 2009

Central Banker Fun & Games…

In the never ending game called The Great American Rip-off, JPMorgan and CEO Jamie Dimon take the prize. Well, maybe a tie with Goldman Sucks, but it’s close. The latest ploy, the “Stress-Test,” is like a carrot hanging out in time at the end of a long stick. Oh boy, more details and a timeline. That must mean I should buy stocks and the debts of the banks, right?

Who, exactly, is fooled by this game? Not me. The banks themselves are as unhealthy as ever, if not more so. They are hiding trillions of dollars of debt that will never be serviced in addition to trillions more in all types of derivatives. The stress test and the conditions with it are meaningless if the testers agree to overlook the leverage created by the debt and derivatives. Thus, it is a show to attempt to convince unwitting people that everything is okay. Everyone involved simply pretends and looks the other way.

Why would they do that? Because this is where their money to get elected comes from, that’s why.
U.S. Aims to Release Bank Stress-Test Results May 4

By Craig Torres

April 16 (Bloomberg) -- The Federal Reserve and other regulators aim to release the results of stress tests on 19 of the biggest U.S. banks on May 4, a central bank official said.

Regulators also plan to publish a paper on their methods on April 24, according to the official. The May 4 results will include any plans for boosting capital to weather a deeper economic downturn, the person said.

Procedures for releasing information on specific firms, including whether the banks themselves or the supervisors will release the results, are still under discussion. The Securities and Exchange Commission, which sets rules for what publicly traded companies must disclose to investors about their financial condition, is involved in the talks, the person said.

The goal of publishing the stress-test methods is to bolster credibility of the assessments, which will expose weaker banks and may boost confidence in stronger ones.

“The more markers or sign posts you can put on the path, the more helpful it will be,” said R. Scott Siefers, managing director at Sandler O’Neill Partners L.P., a New York research firm specializing in bank stocks. “There are a lot of questions in investors’ minds.”

Two-Year Horizon
The Fed, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., and Office of Thrift Supervision are using the tests to determine whether the top 19 banks have enough capital to cover loan losses during the next two years if the economy shrinks, unemployment surges and housing prices keep declining.

While the tests are a central element of the administration’s financial-industry rescue, top U.S. Treasury officials aren’t participating in the reviews in order to maintain the independence of the regulators. The Treasury also won’t be a contributor to the white paper later this month.

The economy has worsened since the Treasury first announced the tests in February, raising questions about whether the baseline scenario regulators are applying to bank portfolios is rigorous enough.

Baseline Scenario
The baseline forecast projected a 2 percent economic contraction and an 8.4 percent jobless rate in 2009, followed by 2.1 percent growth and 8.8 percent unemployment in 2010.

An “alternative more adverse” scenario had a 3.3 percent contraction in 2009, accompanied by 8.9 percent unemployment, followed by 0.5 percent growth and 10.3 percent jobless in 2010.

“There is a sense that the worst case is becoming the base case,” said Siefers. “People are starting to view double-digit unemployment as a foregone conclusion.”

JPMorgan Chase & Co. today reported profit that beat analysts’ estimates, with first-quarter earnings dropping 10 percent to $2.14 billion. Citigroup Inc. is scheduled to report tomorrow. Bank of America Corp., Wells Fargo and Morgan Stanley are scheduled to announce results next week.

The tests are designed to mesh with the administration’s effort to remove distressed mortgage assets from banks’ balance sheets, which have hampered lending to consumers and businesses.

Toxic Debt
Officials aim to have the first purchases of the toxic assets by private investors financed by the government within weeks of the conclusion of the capital-need assessments.

JPMorgan Chief Executive Officer Jamie Dimon said today that his firm doesn’t expect to participate as either a buyer or seller in the Treasury’s Public-Private Investment Program, known as PPIP.

The Treasury plans to start PPIP “as soon as possible,” spokesman Andrew Williams said today. “We’ve been encouraged by the interest from both investors and financial institutions who wish to participate in creating a market for these legacy assets,” he said.

The Treasury estimates it has about $135 billion left in the financial-rescue fund enacted in October.

In their assessments, regulators will look at off-balance- sheet commitments, earnings projections, risks of the banks’ business activities and the composition and quality of their capital, according to the Treasury.

The exams will help provide a ranking of the financial health of “one institution relative to another,” Frederic Mishkin, a Columbia University economist and former Fed governor, said in a Bloomberg television interview. “That can be very useful if government then decides it needs to take steps to deal with weak institutions.”

Of course JPM won’t be a buyer or a seller in the PPIP. They will have their surrogate companies do all that, of which there are many.

For a refresher, please view the video found in the article How Geithner’s Plan Really Works…

It’s time to end the charade. The central banks should be broken up and the functions of the central bank returned to the people who rightly own those functions. The creation of our money supply and money system does not belong to them, they hold a false claim to it.

A Constitutional Amendment separating corporate money from the State is the ultimate long term solution.

Those solutions will never be implemented if our government officials listen to and are dependent upon central banker money to get elected and to stay in office.

Dimon Says He’s Eager to Repay ‘Scarlet Letter’ TARP

By Elizabeth Hester

April 16 (Bloomberg) -- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, who today reported first-quarter profit that beat analysts’ expectations, said his firm could repay U.S. government rescue funds “tomorrow.”

Dimon, calling money received through the Troubled Asset Relief Program “a scarlet letter” and “the TARP baby,” said on a conference call with reporters today that the New York- based bank is awaiting guidance from the U.S. Treasury Department. “We could pay it back tomorrow,” he said.

The 53-year-old CEO received $25 billion in U.S. government rescue funds last year. Dimon is among banking industry CEOs who have said pay limits imposed by lawmakers are pushing many employees to foreign or non-TARP firms.

Dimon said he was counting on the government being “equal” in allowing banks deemed healthy to repay the TARP money. “I don’t think any competitor should be allowed to pay it back faster than we do,” he said.

Dimon has fared better than most rivals in guiding the company through the financial crisis, taking $33.3 billion in writedowns, losses and credit provisions through the fourth quarter. That compares with $88.3 billion at New York-based Citigroup Inc. and $55.9 billion at Merrill Lynch & Co., now part of Bank of America Corp., the biggest U.S. bank.

‘Learned Our Lesson’
The bank, which bought about $34 billion in mortgage-backed and asset-backed securities in the quarter, doesn’t expect to participate as either a buyer or seller in the Treasury’s Public-Private Investment Program, known as PPIP. “We learned our lesson” about borrowing from the government, said Dimon, who expects PPIP to benefit the financial system as a whole.

The Treasury plans to start PPIP “as soon as possible,” spokesman Andrew Williams said in a statement today. “We’ve been encouraged by the interest from both investors and financial institutions who wish to participate in creating a market for these legacy assets,” he said.

Dimon has said previously that he’s eager to repay the government funds “as soon as is prudent.” Such a move would free the bank from compensation restrictions and other oversight that was tied to the bailout money. Goldman Sachs Group Inc. raised $5 billion this week in a share sale in order to help pay back the $10 billion it took from the government.

No Money Needed
“I don’t see why a company with that kind of capital would have to raise capital,” Dimon said on a call with analysts. “What Goldman did is what Goldman did. It has nothing to do with us.”

Dimon told reporters that the firm doesn’t need to raise capital to repay the funds, although he believes he could tap the public markets for money. “It may not be entirely up to us,” he said. “I don’t think we need it.”

Some analysts remain skeptical that banks will repay the funds any time soon. “It may be a back-half of 2009 event or probably into 2010, only because it sends the message of, ‘why is this bank OK, why can’t the other banks return the funds?’” William Fitzpatrick, an equity analyst at Optique Capital Management in Racine, Wisconsin, said in an interview on Bloomberg Television. The firm holds about 400,000 shares of JPMorgan.
JPMorgan’s Tier 1 capital ratio, which measures assets on a risk-adjusted basis, would be 9.2 percent excluding the TARP money, JPMorgan said in reporting earnings today. It’s now 11.3 percent including the government funds.

Dimon said the firm is awaiting the results of the government’s stress tests on the nation’s top 19 banks and hopes that it will be announced in a way that provides “clarity” to the market.

Necessary write downs have never been taken. JPM is the world’s largest holder of derivatives and one of the most highly leveraged institutions in history. The only success Dimon has had is in hiding the crap he possesses and in hiding the crap other businesses possessed as well. He is a sitting member of the New York Fed, clearly a position that should never be held by any central bank CEO, former, present, or future.

I’m sure that Mr. Dimon is looking forward to business as usual. While he may pay back the TARP, business the way it was will never come. Never ending credit growth cannot happen and growth will not remerge until the current debts are cleared. We are a long way from that as our government, now synonymous with the central banks, attempt to throw more credit (debt) upon the piles of already unserviceable debt we posses.

JPMorgan to Raise $3 Billion Without U.S. Backing

By John Detrixhe and Gabrielle Coppola

April 16 (Bloomberg) -- JPMorgan Chase & Co., the second- largest U.S. bank by assets, plans to sell $3 billion of debt without the backing of the U.S., according to a person familiar with the transaction.

The notes may price to yield 350 [3.5%] basis points more than similar-maturity Treasuries, said the person, who declined to be identified because terms aren’t set. A basis point is 0.01 percentage point.

JPMorgan last sold dollar debt without government backing on Aug. 14, issuing $1.6 billion of perpetual preferred securities, according to data compiled by Bloomberg. Preferred stock with characteristics of both debt and equity counts toward an issuer’s capital reserves.

The debt may be rated Aa3, the fourth-highest level of investment quality, by Moody’s Investors Service and A+, one level lower, by Standard & Poor’s, the person said.

The money held at these central banks is the problem. These people get their money into politics to influence the creation of laws and politicians directly. They use the power of taxation and of the printing press against the very people who are the United States of America. They use their money to manipulate markets and to create a blend of socialism that benefits only the very wealthy. Privatize the profits, socialize the losses.

Their credit is somebody else’s debt. That debt must be serviced with income which is ultimately the labor of the people. Their incomes cannot go up because they pit the people of America against the other workers of the world.

The people of America are slowly catching on. We have a long way to go, however, until all the light bulbs are lit. I am looking forward to that day.