The $2 billion trading loss at JPMorgan (JPM) Chase & Co. has revived concern that its regulator, the Federal Reserve Bank of New York, is too cozy with Wall Street.
JPMorgan Chief Executive Officer Jamie Dimon is one of three bankers sitting on the board of the New York Fed, as required by law. While directors play no part in bank supervision, Elizabeth Warren, a Democrat running for U.S. Senate from Massachusetts, called for Dimon
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The CEO of JPMorgan Chase, which disclosed a $2 billion loss last week, said he was “dead wrong” when he dismissed concerns about the bank’s trading last month.
CEO Jamie Dimon said he did not know the extent of the problem when he said in April that the concerns were a “tempest in a teapot.” After the bank reported the trading loss, investors shaved almost 10 percent off the bank’s stock price.
“We made a terrible, egregious mistake,” Dimon said in an interview that aired Sunday on NBC’s “Meet the Press.” “There’s almost no excuse for it.”
The $2 billion loss came in the past six weeks. Dimon has said it came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank.
Dimon said the bank is open to inquiries from regulators. He has also promised, in an email to the bank’s employees and in a conference call with stock analysts, to get to the bottom of what happened and learn from the mistake.
Dimon told NBC that he supported giving the government the authority to dismantle a failing big bank and wipe out shareholder equity. But he stressed that JPMorgan, the largest bank in the United States, is “very strong.”
Lawmakers and critics of the banking industry have seized on the $2 billion loss to say that banks still take too much risk more than three years after the financial crisis.
A piece of the financial regulation known as the Volcker rule would prevent banks from certain kinds of trading for their own profit. Dimon has said the trading involved in the $2 billion loss would not have fallen under the rule.
Rep. Barney Frank, D-Mass., told ABC’s “This Week” that he hopes the final version of the Volcker rule will prevent the type of trading that led to the massive loss at JPMorgan.
Addressing public anger toward Wall Street, Dimon said he wants a more equitable society and does not mind paying higher taxes. But he said attacking all of business is “very counterproductive.”
U.K. consumer confidence dropped last month and may decline further after the economy slipped into a double-dip recession, according to Nationwide Building Society.
An index of sentiment fell to 44 from 53 in March, the Swindon, England-based customer-owned lender said in an e-mailed report today. A gauge of consumers
Stocks are closing slightly higher as investors weigh news of higher corporate profit against disappointing economic news.
The Dow Jones industrial average rose 24 points to 13,228 at the close Friday. The Standard & Poor’s 500 edged up three points to 1,403. The Nasdaq composite rose 19 points to 3,069.
Amazon jumped 16 percent after the online retailer reported a big increase in shipments.
The government reported U.S. economy grew at annual rate of 2.2 percent, below the 2.5 percent expected.
European stock markets rose as investors shrugged off a second downgrade this year by S&P of Spain’s debt. Spain also reported its unemployment rate rose to nearly 25 percent, its highest in 18 years.
Spain’s IBEX rose 1.7 percent, France’s CAC-40 1.1 percent and Germany’s DAX 0.9 percent.
Federal regulators are softening a plan to oversee companies that trade financial derivatives, the complex investments that played a central role in the 2008 financial crisis.
The rule defines which companies trading derivatives will be subject to a stricter regime created in the 2010 overhaul of financial laws. Most companies that deal derivatives will be exempt.
The Securities and Exchange Commission and Commodity Futures Trading Commission approved the rule unanimously in separate votes Wednesday. The rule says derivatives used by companies to offset their own risk will not attract scrutiny. The higher oversight standard would apply only to companies that sell $8 billion or more of the investment products annually.
Under an earlier proposal, companies that sold $100 million of certain derivatives would have faced tougher oversight.
Sales of previously owned U.S. houses held in February near an almost two-year high, adding to evidence the market that triggered the recession is firming.
Purchases dropped 0.9 percent to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated and the highest since May 2010, a report from National Association of Realtors showed today in Washington. The median price increased over the past year for the first time since November 2010.
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Oil prices rose to a fresh nine-month high near $109 a barrel Friday in Asia amid signs the U.S. economy is improving against a backdrop of elevated tensions in the Middle East over Iran’s nuclear program.
Benchmark crude for April delivery was up 75 cents to $108.58 per barrel midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.55 to settle at $107.83 in New York on Thursday.
Brent crude was up 50 cents at $124.22 per barrel in London.
The government said Thursday that the number of people seeking unemployment benefits last week was unchanged and that the four-week average was the lowest in four years.
Traders brushed off evidence that crude demand in the U.S. remains weak. The Energy Department’s Energy Information Administration said Thursday crude inventories rose 1.6 million barrels last week and that oil demand has dropped 6.7 percent from a year ago.
“The ability of crude to post new highs in the face of what appeared to be a bearish EIA report attests to the underlying strength of this price advance,” energy trader and consultant Ritterbusch and Associates said in a report. “The oil market has evolved into somewhat of a self perpetuating cycle in which new highs beget new buying that forces new highs.”
Crude has jumped from $96 earlier this month amid growing tension over Iran’s nuclear program and fears global crude supplies could be disrupted. Some analysts expect economic sanctions by the U.S. and Europe and countermeasures by Iran will help keep crude prices elevated this year.
“There is a relatively high and growing probability to a scenario in which there is no resolution in 2012, in which oil prices grind higher along with a gradual escalation of tension,” Barclays Capital said in a report.
In other energy trading, heating oil rose 0.1 cent to $3.29 per gallon and gasoline futures added 0.8 cent to $3.30 per gallon. Natural gas fell 3.2 cents to $2.59 per 1,000 cubic feet.
Millions of borrowers who suffered financial losses because their mortgage lenders played fast and loose while processing their foreclosures now have two ways of getting a payback.
They can tap the $26 billion settlement between the state attorneys general and the nation’s five biggest banks that was inked two weeks ago.
Foreclosure Fiasco
The other foreclosure settlement: Millions of homeowners eligible Foreclosures climbed in January What the foreclosure settlement means for you Mortgage deal could bring billions in relief Foreclosure deal has 40 states, but others balk
But there is also an earlier settlement that has been nearly forgotten — and that could lead to an even bigger payoff, in some cases.
As part of an enforcement action by federal authorities last April, 14 mortgage servicers, including Bank of America (, Fortune 500), Chase (, Fortune 500), Citibank (, Fortune 500), HSBC (), MetLife Bank (, Fortune 500), PNC Mortgage (, Fortune 500) and Wells Fargo (, Fortune 500), agreed to hire independent consultants to investigate foreclosure abuses and compensate those who suffered financial harm.
As a result of the program, up to 4.3 million mortgage borrowers who were foreclosed on in 2009 and 2010 will have a chance to request an independent review of how their foreclosure was handled.
So far, only 90,000 eligible homeowners have submitted claims, prompting the feds to extend the deadline for applications by three months to July 31.
The exact amount of money borrowers will receive has yet to be determined. But if a review finds that "financial injury" occurred — say a bank charged inappropriate fees or it went forward with a foreclosure without a valid claim to the property — a homeowner could be repaid in full for their losses.
Borrowers who were improperly charged even just a single fee could be repaid for it, according to Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency, one of the federal regulatory agencies that negotiated the agreement.
And borrowers who suffered much larger losses could be in line for much bigger repayments than promised by the AG’s settlement, which will pay up to $2,000 to the estimated 750,000 who lost their homes to foreclosure between 2008 and 2011.
The compensation could even repay the cost of regaining a wrongfully lost home if warranted by the facts of the case, according to Hubbard.
The Independent Foreclosure Review was sparked by the robo-signing scandal that exposed the bank’s treatment of borrowers in the foreclosure process. The lenders lost documents and recreated them, had low-level employees with no knowledge of what they were attesting to sign legal papers and bent the rules requiring them to halt foreclosures if borrowers sought mortgage modifications.
What the $26B foreclosure settlement means for you
Unlike the $26 billion settlement with the state attorneys general, borrowers didn’t have to lose their homes in order to receive compensation, according to Hubbard.
"It could be anyone who suffered financial loss because of errors made in the foreclosure process," he said.
Since the settlements are completely independent of one another, claimants can double-dip, filing for compensation under both settlements. (To seek compensation under the state attorneys general settlement, contact your lender or servicer and ask them to review your case).
To make a claim for the Independent Foreclosure Review, borrowers have to fill out a five-page form that identifies some examples of situations that may have led to financial injury. Borrowers do not have to provide documentation. That will be handled by an independent agency.
No reviews have been completed yet, according to Hubbard. And individual cases may take months to come to decision.
For more information on the forms, go to the website set up by the servicers. And for a full list of the mortgage services involved in the Independent Foreclosure Review, go to the Federal Reserve website
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